Econ 202 Final Exam
The money market model is concerned with ______________________ and the loanable funds market model is concerned with _____________________
short-term nominal interest rates; long-term real interest rates
Increasing opportunity cost along the bowed-out production possibilities frontier occurs because
some factors of production are not equally suited to producing both goods or services
Which of the following functions of money would be violated if inflation were high?
store of value
The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because
the Federal Reserve can more quickly change monetary policy than the president and Congress can change fiscal policy
If cyclical unemployment is eliminated in the economy, then
the economy is considered to be at full employment
Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result,
the long-run aggregate supply curve will shift to the right
The terms of trade refers to
the ratio at which a country can trade its exports for imports from other countries
Frictional unemployment is the result of
the search process of matching workers with jobs
Which of the following is an example of discretionary fiscal policy?
the tax cuts passed by Congress in 2001 to combat the recession
Which of the following is considered contractionary fiscal policy?
Congress increases the income tax rate
If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
government purchases
Which of the following policies is designed specifically to directly promote technological changes in an economy?
government subsidization of research and development
Commodity money
has value independent of its use as money
The goals of the monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ___________________, it also can achieve the goal of _________________ simultaneously.
high employment; economic growth
Which of the following is an objective of fiscal policy?
high rates of economic growth
When the price level in the United States falls relative to the price level of other countries __________________ will fall, _________________ will rise, and _______________ will rise
imports; exports; net exports
If the U.S dollar decreases in value relative to other countries, how does this affect the aggregate demand curve?
This will shift the aggregate demand curve to the right
Which of the following best describes the "wealth effect"?
When the price level falls, the real value of household wealth rises
If a person withdraws $500 from his/her savings account and puts it into his/her checking account, then M1 will _________________ and M2 will ______________
increase; not change
Which of the following is NOT a function of the Federal Reserve System, or the "Fed"?
insuring deposits in the banking system
An advantage of the establishment survey over the household survey of the labor market is that the establishment survey
is based on actual payrolls, rather than on unverified answers
Cyclical unemployment is the result of
a slowdown in the economy
An equal increase in government purchases and taxes will cause
an increase in real GDP
An outward shift of a nation's production possibilities frontier can occur due to
an increase in the labor force
Productive efficiency is achieved when firms produce goods and services
at the lowest cost
If a person takes $100 from their wallet and puts it in his/her savings account, then M1will ___________ and M2 will _______________
decrease; not change
Economists assume that
optimal decisions are made at the margin
The short-run aggregate supply curve has a ___________________ slope because as price of ______________ rise, prices of _________________ rise more slowly.
positive; final goods & service; inputs
In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff. In response to this tariff, other countries _____________________ and international trade ________________________
raised their tariffs; collapsed
Which of the following is NOT an assumption made by the dynamic model of aggregate demand and aggregate supply?
Aggregate demand and potential GDP decrease continuously
What is the difference between foreign direct investment and foreign portfolio investment?
Individuals engage in portfolio investment, but only firms can engage in foreign direct investment
To examine how an individual's income has changed over time, it would be better to examine
Real income
A decrease in the price of complementary goods would be represented by a movement from
S1 to S2
The substitution bias in the consumer price index refers to the idea that consumers __________________ the quantity of products they buy in response to price, and the CPI does not reflect this and ___________________ the cost of the market basket
change; overestimates
Eliminating trade barriers does all of the following except
lowers income
Which of the following causes the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?
unemployed persons falsely report themselves to be actively looking for a job
