final exam econ

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Suppose the reserve ratio is 20 percent, and bank's keep no excess reserves. If Will deposits $1,000 into his checking account, what is the maximum M1 can increase? (a) $5,000 (b) $2,000 (c) $1,000 (d) M1 does not change

(a) $5,000

Suppose the money multiplier is 5. What is the reserve ratio of holdings? (a) 0.2 (b) 5 (c) 50 (d) None of above

(a) 0.2

Suppose that Mexico and the United States can each produce 2 goods: shirts and computers. Both goods are produced using labor. It takes Mexico 4 units of labor to produce 1 shirt and 2 units of labor to produce 1 computer. It takes the United States 1 unit of labor to produce 1 shirt and 1 unit of labor to produce 1 computer. Both countries have 24 units of labor. What is the United States' opportunity cost of producing 1 shirt? (a) 1 computer (b) 2 computers (c) 3 computers (d) 4 computers

(a) 1 computer

In June 2015 which of the following securities was most risky? (a) 10 year Greek government bond (b) 20 year German government bond (c) 30 year United States government bond (d) Wal-Mart stock

(a) 10 year Greek government bond

. Trumpland has 100 people employed at a factory making hair pieces, 50 people that want a job there, 30 people that wanted a job there but gave up trying, 10 full time college students, 30 people in jail, and 15 members of the Trumpland Army. What is the size of the labour force and working age population? Hint full time college students are not available for productive work. (a) 150, 190 (b) 180, 180 (c) 190, 150 (d) 160, 160

(a) 150, 190

The world price of root beer is 3. The supply function for beer in Ireland is P=2Q and demand function is P=10-3Q where P = price and Q= Quantity, the equilibrium price is therefore 4. How much can a consumer buy root beer for Ireland, assuming no tariffs or protectionist policies? (a) 3 (b) 4 (c) 6 (d) Not enough information

(a) 3

You're on a trip to the country of Speagland from the United States, your home country. You go to the money exchanger and pay them $100 and get 400 Speagles (The local currency of Speagland) in return. What is the exchange rate? (a) 4 Speagles per Dollar (b) 4 Dollars per Speagle (c) 2 Speagles per Dollar (d) 2 Dollars per Speagle

(a) 4 Speagles per Dollar

The first income bracket is from $0 to $50.000, the second income bracket is from $50.000 and up. The marginal tax rate in the first bracket is 30%, and 40% in the second. John earns $100.000 a year. What is John's marginal tax rate? (a) 40% (b) 35% (c) 55% (d) 30%

(a) 40%

Suppose you own a stock portfolio with a mean return of 10% and a standard deviation of 5%. What would we expect 68% of stocks be between? (a) 5% and 15% (b) 10% and 15% (c) 10% and 20% (d) -15% and 25%

(a) 5% and 15%

If a country's GDP gets 8 times larger in 30 years, what is its annual growth rate during this period? (a) 7 percent (b) 8 percent (c) 10 percent (d) 15 percent

(a) 7 percent ???

Deflation is: (a) A decrease in prices; that is, a negative inflation rate. (b) A reduction in the rate of inflation. (c) An increase in prices. (d) An increase in the rate of inflation.

(a) A decrease in prices; that is, a negative inflation rate.

Imagine the following tax code. First $10,000 are exempted from taxes, and a tax rate of 20% on every additional dollar earned. This tax system is an example of: (a) A progressive tax system (b) A regressive tax system (c) A flat tax (d) A balanced government budget

(a) A progressive tax system

Which of the following is the definition of the alternative minimum tax? (a) A separate income tax code to prevent the rich from not paying income taxes (b) Stockholders' share of profits (c) The difference between the purchase price of an asset and its selling price (d) A higher tax rate on people with higher incomes

(a) A separate income tax code to prevent the rich from not paying income taxes

Suppose that there is a positive AD shock. What happens in the AS-AD framework? (a) AD curve shifts right (b) AD curve shifts left (c) SRAS curve shifts left (d) AS curve shifts left

(a) AD curve shifts right

Which of the following was NOT a policy mistake during the Great Depression? (a) An active monetary policy interjecting itself into the economic crisis (b) Businesses were encourage to not to invest and to maintain monopolies/cartels (c) Subsidies to farmers to kill animals and to not produce crops (d) Increased tariffs and trade protection

(a) An active monetary policy interjecting itself into the economic crisis

The U.S. dollar is a safe haven currency. In the summer of 2014, many Greeks started purchasing dollars because they worried the Euro was too risky, in theory what should happen to the dollar? (a) Appreciate (b) Depreciate (c) No effect (d) Dollarisation

(a) Appreciate

A speculative bubble is when: (a) Assets are priced much higher than is warranted by the profitability of the assets. (b) assets are priced much lower than is warranted by the profitability of the assets. (c) assets prices are high and profits are even higher. (d) market manipulation by dominant hedge funds bids up the market prices of assets.

(a) Assets are priced much higher than is warranted by the profitability of the assets.

Suppose the Bank of England greatly expands the money supply. What will happen to the balance of trade and the value of the pound in the short run? (a) Balance of trade increases, pound depreciates (b) Balance of trade decreases, pound appreciates (c) Balance of trade increases, pound appreciates (d) Balance of trade decreases, pound depreciates

(a) Balance of trade increases, pound depreciates

What is the definition of rational ignorance? (a) Being uninformed because the costs of being informed are greater than the benefits (b) Having an IQ below 8 (c) Benefits of being informed are greater than the costs (d) None of the above

(a) Being uninformed because the costs of being informed are greater than the benefits

Technology and trade: (a) Both destroy jobs in the short run but increase the standard of living in the long run. (b) Both create jobs in the short run but decrease the standard of living in the long run. (c) Cannot continue to increase forever. (d) All of the above

(a) Both destroy jobs in the short run but increase the standard of living in the long run.

Which of the following actions of a central bank would increase the monetary base? (a) Buying bonds (b) Selling bonds (c) Increasing the reserve ratio (d) Decreasing the reserve ratio

(a) Buying bonds

Typically When the Fed wants to lower interest rates it does which of the following? (a) Buys bonds (b) Sells bonds (c) Taxes savings (d) Increases purchases of government assets

(a) Buys bonds

The largest trade partner of the US over the last 50 years is: (a) Canada (b) China (c) UK (d) Italy

(a) Canada

When BMW, a German car company, decides to build a new factory in the US, The products made in the new factory will be sold exclusively in the US. What happens to the US balance of payments? (a) Capital account increases, current account decreases. (b) Capital account increases, current account increases. (c) Capital account decrease, current account decrease. (d) Capital account decrease, current account increases.

(a) Capital account increases, current account decreases.

Which asset would you classify as being most liquid? (a) Checkable deposits (b) Small-time deposits (c) A home (d) Gold bullion

(a) Checkable deposits

CPI is based on a basket goods representative to (a) Consumers (b) The whole country (c) Producers (d) None of the above

(a) Consumers

Suppose two countries have an identical production function that displays diminishing returns to capital. Country A has a capital level of 5 and country B has a capital level of 10. Which country will have the higher marginal product of capital? (a) Country A (b) Country B (c) They will have equal marginal product of capital (d) Not enough information

(a) Country A

When the Fed chooses its policy what is a tradeoff it faces (a) Credibility vs Flexibility (b) Bond price vs Stock price (c) Output vs Unemployment (d) Inflation vs Expenditure

(a) Credibility vs Flexibility

In the case of a severe negative shock to aggregate demand, to avoid high inflation the central bank should: (a) Decrease the rate of growth of the money supply (b) Increase the rate of growth of the money supply (c) Decrease the required reserve ratio (d) Do nothing

(a) Decrease the rate of growth of the money supply

When an unemployed worker decides to stop looking for work, what happens to the unemployment rate and the labor force participation rate? (a) Decrease, Decrease (b) Increase, Decrease (c) Decrease, Increase (d) Increase, Increase

(a) Decrease, Decrease

When industries are limited by the size of the domestic market, opening trade to the world markets will likely lead to _________ and _________ real GDP per capita in the domestic country. (a) Economies of scale; increase (b) Economies of scale; decrease (c) Diseconomies of scale; increase (d) Diseconomies of scale; decrease

(a) Economies of scale; increase

Which of the following is not a tool of the Fed to control money supply? (a) Enforcing regulations (b) Open market operations (c) Discount lending (d) Reserve requirements

(a) Enforcing regulations

Which of the following is the overnight lending rate from one major bank to another? (a) Federal Funds rate (b) Discount rate (c) Reserve rate (d) Interest rate

(a) Federal Funds rate

Suppose the United States abolishes an import tariff. What do you expect to happen? (a)Government Surplus decreases (b)Consumer Surplus decreases (c)Producer Surplus increases (d)Government Surplus increases

(a) Government Surplus decreases

Countries with higher investment rates typically have: (a) Higher steady state levels of capital (b) Lower amounts of depreciation in steady state (c) Lower steady state levels of capital (d) Higher consumption rates

(a) Higher steady state levels of capital

Which of the following is the highest share of federal tax revenue in 2013? (a) Income Taxes including Corporate (b) Social Security Taxes (c) Real Estate Taxes (d) Business and Other Revenue

(a) Income Taxes including Corporate

If the U.S. dollar is a safe haven currency and global risk increases, what does this do to the value of the dollar? (a) Increase (b) Decrease (c) No effect (d) All of the above

(a) Increase

In theory when the Fed decreases the interest rate on excess reserves, what happens to the money supply? (a) Increase (b) Decrease (c) No effect (d) All of the above

(a) Increase

When the Fed uses Open Market Operations to increase the money supply, what would you expect to happen to the US trade balance? (a) Increase (b) Decrease (c) No effect (d) All of the above

(a) Increase

Janet Yellen wants to increase the short term equilibrium output and interest rate. In order to realize these increases, what can she do? (a) Increase the money supply (b) Decrease the money supply (c) Increase government spending (d) Decrease government spending

(a) Increase the money supply

In the long run, the change in the growth rate of the money supply affects (a) Inflation rate only (b) Real output growth only (c) Both of the above (d) None of the above

(a) Inflation rate only

If exports are less than imports, the trade balance (a) Is in deficit (b) Is in surplus (c) Is balanced (d) Cannot be determined from this information alone

(a) Is in deficit

Which of the following is counted as GDP of the United States? (a) Lichen, a Chinese wrestler, lives in the United States and buys a laptop at Target (b) Samuel, an Argentian PhD student, lives in the United States and tutors American students for cash which he doesn't declare to the tax authorities (c) Salim, a Costa Rican professor, lives in Mexico and teaches economics to American foreign exchange students (d) John, a United States citizen, lives in Turkey and starts a school in its capital city of Ankara

(a) Lichen, a Chinese wrestler, lives in the United States and buys a laptop at Target

Checkable deposits, i.e. deposits you can write checks on or access with a debit card, are not included in which of the following (a) MB, the monetary base (b) M1 (c) M2 (d) All of the above

(a) MB, the monetary base

Which of the following is predicted to increase in U.S. government spending the most after 2010? (a) Medicare and medicaid (b) Social security (c) Defense (d) Education

(a) Medicare and medicaid

When a country promises to convert 3 units of the local currency into 1 dollar forever what type of exchange rate system is this? (a) Pegged exchange rate (b) Dirty pegged exchange rate (c) Dollarization (d) Floating exchange rate

(a) Pegged exchange rate

A current problem for the social security system is (a) People living longer and a declining birth rate (b) Increased contributions from higher taxes (c) Overall health of the population is increasing whilst medicare costs are decreasing (d) None of the above

(a) People living longer and a declining birth rate

Which of the following is an advantage of GDP as a measure of growth? (a) Permits the adding up different goods and services to make sense (b) Allows us to assess informal labor conditions (c) Gives a good indication of income distribution (d) Includes such externalities as pollution or leisure

(a) Permits the adding up different goods and services to make sense

Which of the following is not a supply shifter? (a) Population (b) Changes in the price of inputs (c) Technological innovation (d) Entry and exit of firms

(a) Population

In general, across countries, the level of life satisfaction and the Real GDP per capital are? (a) Positively correlated (b) Negatively correlated (c) No correlation (d) Irrelevant

(a) Positively correlated

Suppose the government imposes a maximum interest rate of 10% for payday loan. This is an example of a _______ and this may lead to a _______ of loans. (a) Price ceiling, shortage (b) Price floor, shortage (c) Price ceiling, surplus (d) Price floor, surplus

(a) Price ceiling, shortage

During the Great Depression there was a strong negative shock to the economy. According to some economists, what could have the government done to mitigate the depression (a) Print money to move the AD curve to the right (b) Increase taxes to to move the LRAS curve to the left (c) Reduce government spending to move the AD curve to the left (d) Increase the price of oil to move to LRAS to the left

(a) Print money to move the AD curve to the right

Higher marginal tax rates on individuals with higher incomes is called: (a) Progressive taxes (b) Regressive taxes (c) A flat tax (d) Lump sum taxation

(a) Progressive taxes

Stocks do which of the following: (a) Provide an idea of how well firms are run (b) Help refinance debt (c) Have all the same risk across issuers (d) Pay a fixed rate of return

(a) Provide an idea of how well firms are run

The relationship between the share of children in the labor force and a country's real per-capita GDP is? (a) Strong and negative (b) Strong and positive (c) Weakly positive (d) They're unrelated

(a) Strong and negative

What is the correlation between the incumbent party's performance in an election and economic performance in the US over the last 100 years? (a) Strong and positive (b) Strong and negative (c) Weak and positive (d) Weak and negative

(a) Strong and positive

What is the correlation between the incumbent party's performance in an election and recent economic performance in the US over the last 100 years? (a) Strong and positive (b) Strong and negative (c) Weak and positive (d) Weak and negative

(a) Strong and positive

When the Fed buys government bonds, then (a) The aggregate demand curve shifts right (b) The aggregate demand curve shifts left (c) The aggregate supply curve shifts right (d) The aggregate supply curve shifts left

(a) The aggregate demand curve shifts right

The production possibilities frontier shows: (a) The combinations of outputs a country can produce given its resources and productivity. (b) The combinations of inputs that a country has given its outputs and productivity. (c) The combinations of outputs and resources that a country possesses given its productivity. (d) The maximum level of a country's productivity given its resources and outputs.

(a) The combinations of outputs a country can produce given its resources and productivity.

Suppose a country was in normal times in 2005, a recession in 2010 which of the following best describes the makeup of unemployment in 2005 and 2010? (a) The fraction of unemployed who were frictionally unemployed was higher in 2005 than 2010 (b) The fraction of unemployed who were structurally unemployed was lower in 2010 than 2005 (c) The fraction unemployed who were frictionally unemployed remained unchanged (d) The fraction of unemployed who were structurally unemployed remained unchanged

(a) The fraction of unemployed who were frictionally unemployed was higher in 2005 than 2010

In theory, in the long run which of the following policies would increase unemployment in an economy? (a) The government enacts laws granting unions stronger protections and legal rights (b) The government reduces unemployment benefits for those who have been working long-term (c) The government sets up a retraining and search program for unemployed (d) The government reduces the minimum wage

(a) The government enacts laws granting unions stronger protections and legal rights

Suppose that the money growth rate increases. What is the effect on the short run equilibrium growth and inflation rate? (a) The growth rate increases, the inflation rate increases (b) The growth rate decreases, the inflation rate decreases (c) The growth rate increases, the inflation rate decreases (d) The growth rate decreases, the inflation rate increases

(a) The growth rate increases, the inflation rate increases

Which of the following is true? (a) The maximum change in money supply equals the change deposits multiplied by the money multiplier (b) OMO directly influences the interest rate through the sale of stocks (c) When the Federal Reserve Bank buys bonds the interest rate increases (d) None of the above

(a) The maximum change in money supply equals the change deposits multiplied by the money multiplier

Suppose a famous basketball player, Lebron James, hires a high school student to paint his house. Which of the following is most likely TRUE? (a) The opportunity cost of painting a house is higher for Lebron James than for the high school student. (b) The opportunity cost of painting a house is lower for Lebron James than for the high school student. (c) The opportunity cost of painting a house is the same for Lebron James as for the high school student. (d) The opportunity cost of painting a house is zero for Lebron James and is negative for the high school student.

(a) The opportunity cost of painting a house is higher for Lebron James than for the high school student.

You go home for summer vacation and see your very British uncle David visiting. He proclaims that trade deals reduce jobs in America. To counter his argument you tell him: (a) Trade moves jobs to industries that export in large quantities (b) Wages decrease due to comparative advantage (c) Consumers pay higher prices (d) National security will be jeopardized

(a) Trade moves jobs to industries that export in large quantities

Which of the following affects Purchasing Power Parity? (a) Transportation costs (b) The Law of One Price (c) Bananas (d) All of the above

(a) Transportation costs

The European Central Bank (European Version of the Federal Reserve) engages in Open Market Operations to expand the money supply. What happens in the exchange rate market? (a) Value of the Euro appreciates (b) Value of the Euro depreciates (c) Value of the Euro remains unchanged (d) None of the above

(a) Value of the Euro appreciates

Dollarization occurs: (a) When a foreign country uses U.S. Dollars as its currency. (b) When a currency exchange rate with the U.S. Dollar is determined by market forces. (c) When a central bank promises to convert its currency at a fixed rate with U.S. Dollars. (d) None of the above.

(a) When a foreign country uses U.S. Dollars as its currency.

Protectionism is the economic policy of restraining trade though quotas, tariffs, or other regulations that burden consumers. (a) domestic (b) foreign (c) inefficient (d) monopoly

(a) domestic

Ideas are not rivalrous, meaning that: (a) many people can benefit from an idea at the same time. (b) only one person can benefit from an idea at a time. (c) most ideas are generated by the government. (d) no one can benefit from an idea.

(a) many people can benefit from an idea at the same time.

Suppose the government imposes a maximum wage of $10,000,000 a year for CEOs. This is an example of a and conventional economic wisdom predicts that this may lead to a of CEOs. (a) price ceiling, shortage (b) price ceiling, surplus (c) price floor, shortage (d) A good idea, surplus

(a) price ceiling, shortage

Real GDP measures the: (a) value of total production linked to prices of a single year (b) general upward drift in prices (c) total profits earned by all businesses valued using prices from a single year (d) changes in the prices of output measured in dollars

(a) value of total production linked to prices of a single year

The reserve requirement for banks is 10%, the change in the money supply is $100 mln. What is the change in deposits? (a) $100 mln (b) $10 mln (c) $1 mln (d) $0.1 mln

(b) $10 mln

Suppose a country exports $200 of goods , imports $100, has investments abroad of $50 with an annual return of 10% and receives $100 in foreign aid. What is the value of its current account? (a) $405 surplus (b) $205 surplus (c) $195 surplus (d) $5 surplus

(b) $205 surplus

Suppose a college student needs 5 hours to finish the homework, and she earns $10 per hour if working at a fast food restaurant. Assume that she makes 20 hamburgers each hour, what is the opportunity cost of the homework for her? (a) $10 (b) $50 (c) 20 hamburgers (d) 100 hamburgers

(b) $50

Suppose the marginal tax rate is 0.1 on the first $1000 and 0.2 for any additional Dollar of income. John and Jane earn $1000 and $2000 respectively. The average tax rate is. (a) 0.1 for John, 0.2 for Jane. (b) 0.1 for John, 0.15 for Jane. (c) 0.15 for John, 0.2 for Jane. (d) 0.15 for John, 0.15 for Jane.

(b) 0.1 for John, 0.15 for Jane.

Suppose that you live in France. In France donuts cost 4 euros and in England donuts cost 8 pounds. The exchange rate is 1 pound = 2 euros. For every french donut how many English donuts can I buy? (a) 4 (b) 0.25 (c) 8 (d) 0.5

(b) 0.25

Foreign aid is roughly what percentage of US government spending (a) 10% (b) 1% (c) 30% (d) 5%

(b) 1%

800 individuals are unemployed, 7200 are employed, 2000 are institutionalized. What is the unemployment rate? (a) 5% (b) 10% (c) 12,5% (d) 15%

(b) 10% (800/(7200+800))

U.S. federal government revenue and spending are approximately what percent of GDP? (a) 2 percent (b) 18 percent (c) 50 percent (d) 75 percent

(b) 18 percent

Suppose Jim makes $100,000 and pays 10 percent in taxes on his first $20,000 of income, 30 percent on his next $80,000 of income. What is his average tax rate? (a) 10% (b) 26% (c) 23% (d) 30%

(b) 26% ???

Disinflation is: (a) An increase in the average level of prices. (b) A decrease in the average level of prices. (c) A reduction in the inflation rate. (d) An increase in the minimum level of prices.

(b) A decrease in the average level of prices. (b) A decrease in the average level of prices.

Which of the following would cause the demand for hot dog buns to increase? (a) A fall in the price of hot dog buns (b) A fall in the price of hot dogs (c) A rise in the price of hot dogs (d) A rise in the price of hot dog buns

(b) A fall in the price of hot dogs

Suppose the government imposes an import tariff of $100 on every foreign produced laptop. This leads to: (a) An increase in foreign producer surplus (b) An increase in domestic producer surplus (c) An increase in domestic consumer surplus (d) An increase in the economy's welfare

(b) An increase in domestic producer surplus

Money is best defined as: (a) Anything that has a high nominal value (b) Anything that is a widely accepted means of payment (c) Only the amount we spend in a given period (d) The total amount of fixed assets we own

(b) Anything that is a widely accepted means of payment

Which of the following directly keep their bank account at the US Federal Reserve (a) The public (b) Banks (c) Janet Yellen (d) The president

(b) Banks

The real interest rate is 3%, inflation is 2%. If inflation was expected to be 1%, who benefits and who loses? (a) Borrowers benefit, lenders benefit (b) Borrowers benefit, lenders lose (c) Borrowers hurt, lenders benefit (d) Borrowers hurt, lenders hurt

(b) Borrowers benefit, lenders lose

Which of the following is not a demand shifter? (a) Income (b) Changes in the price of inputs (c) Expectations (d) Tastes

(b) Changes in the price of inputs

Which situation is NOT a consequence of price signals being difficult to interpret because of inflation? (a) Resources flow more slowly to profitable uses (b) Consumers respond to real prices instead of to nominal prices (c) Resources are wasted in activities that appear profitable but in fact are not (d) Entrepreneurs are less quick to respond to real opportunities

(b) Consumers respond to real prices instead of to nominal prices

Which of the following is an example of how Social Security works? (a) Each person has a specific bank account which is accrues interest to pay out when they're older (b) Current young people pay for current old people (c) A bond annuity that pays a coupon rate based on the purchase price accumulate while younger (d) A welfare system to distribute taxes from lower income individuals to higher income individuals

(b) Current young people pay for current old people

Which of the following is true. (a) Social security benefits are becoming more generous in the US (b) Debt is a stock. Deficit is a flow (c) Debt over GDP ratio is at it's highest in 100 years (d) All of the above

(b) Debt is a stock. Deficit is a flow

If the U.S. increases the market value of its imports, holding all else constant, what happens to U.S GDP? (a) Increase (b) Decrease (c) Unchanged (d) Not enough information

(b) Decrease

Following an negative aggregate demand shock, which of the following policies would NOT return the economy to its original equilibrium (before the AD shock)? (a) Increase the money supply (b) Decrease the money supply (c) Increase government spending (d) Increase menu costs

(b) Decrease the money supply

Suppose in 2000, the price level in both Great Britain and U.S. are 100 while in 2001 the price level in Great Britain changes to be 120 and the price level in U.S. changes to be 110. We assume that the nominal exchange rate remain constant in these two years. Then what happens to the U.S. real exchange rate from 2000 to 2001? (a) Increases (b) Decreases (c) Stays the same (d) Not enough information

(b) Decreases

Which of the following is the overnight lending rate when bank's borrow from the FED? (a) Federal Funds rate (b) Discount rate (c) Reserve rate (d) Interest rate

(b) Discount rate

Due to a devaluation of the Euro against the Dollar, the United States buys more European products. How does this affect net exports in the respective economies? (a) European exports increase, the United States' consumption spending increases (b) European exports increase, the United States' imports increase (c) European consumption spending decreases, the United States consumption spending increases (d) None of the above

(b) European exports increase, the United States' imports increase

Which of the following is true about economic growth? (a) There is little variation between the wealth of different countries (b) Everyone used to be poor (c) The US has always been a rich nation (d) Countries can only grow

(b) Everyone used to be poor

The interest rate, which is the overnight rate for loans between banks, that the Fed targets through its open market operations (OMOs) is: (a) Discount Rate (b) Fed Funds Rate (c) FOMC rate (d) M2 rate

(b) Fed Funds Rate

Which of the following is not in the capital account. (a) Foreign direct investment. (b) Foreign financial aid. (c) Portfolio investment. (d) None of the above.

(b) Foreign financial aid.

What is the change in national debt equal to? (a) Tax Revenue - Government Expenditures (b) Government Expenditures + Interest on National Debt - Tax Revenue (c) Government Expenditures - Tax Revenue (d) Government Expenditures + Interest on National Debt

(b) Government Expenditures + Interest on National Debt - Tax Revenue

After a negative real shock, the Fed faces a trade off between? (a) High inflation and high growth (b) High inflation and low growth (c) Low inflation and low growth (d) Low inflation and high growth

(b) High inflation and low growth

Financial assets with higher average returns are associated with? (a) Lower risk (b) Higher risk (c) Zero risk (d) There is no relationship between asset return and that assets risk

(b) Higher risk

You live in Boroskistan which sells ice cream for $4.00 a cone but has trade barriers. The world price of ice cream is $3.00 a cone. Suppose Borokistan makes a trade agreement with the larger country of Pheland. What would happen in Boroskistan? (a) Imports decrease, prices decrease (b) Imports increase, prices decrease (c) Imports decrease, prices increase (d) Imports increase, prices increase

(b) Imports increase, prices decrease

Suppose the price of oil increases. What do you expect to happen to demand for solar energy, a substitute?

(b) Increase

In the case of a severe negative shock to aggregate demand, the central bank should: (a) Decrease the rate of growth of the money supply to control inflation. (b) Increase the rate of growth of the money supply to restore spending growth. (c) Decrease the rate of growth of the price level to keep real growth high. (d) Do nothing.

(b) Increase the rate of growth of the money supply to restore spending growth.

Diminishing returns to capital implies: (a) Increases in the capital stock eventually decrease output (b) Increases in the capital stock increase output by ever smaller amounts (c) Capital produces fewer goods as it ages (d) New ideas are not as useful as old ideas

(b) Increases in the capital stock increase output by ever smaller amounts

The U.S. Federal government raises the majority of its tax revenue via: (a) Social Security and Medicare taxes (b) Individual and corporate income taxes (c) Death taxes (d) Excise taxes

(b) Individual and corporate income taxes

An increase in the average level of prices is defined as: (a) Deflation (b) Inflation (c) Hyperinflation (d) Disinflation

(b) Inflation

The Fed decreases the money growth rate today. What do you expect to happen to U.S. output and inflation in the long run? (a) Inflation increases, output increases (b) Inflation decreases, output is unaffected (c) Inflation increases, output is unaffected (d) Inflation decreases, output decreases

(b) Inflation decreases, output is unaffected

What is the role of the World Bank? (a) It negotiates trade agreements between member nations. (b) It lends money for specific projects, such as roads and dams, in developing countries. (c) It is an international lender of last resort. (d) It establishes fixed, or pegged, exchange rates between member nations.

(b) It lends money for specific projects, such as roads and dams, in developing countries.

When expected inflation is higher than actual inflation, who benefits between the borrower and the lender? (a) Borrower (b) Lender (c) Each agent is made better off (d) Not enough information

(b) Lender

According to the theory of comparative advantage, the reason real wages are lower in China than in the United States is: (a) The higher cost of living in the United States. (b) Lower productivity of labour in China. (c) The lower opportunity cost to work in China. (d) More trade restrictions in the United States.

(b) Lower productivity of labour in China.

Which of the following first described inflation as a monetary phenomenon? (a) Janet Yellen (b) Milton Friedman (c) Franco Modigliani (d) John Keynes

(b) Milton Friedman

US Social Security is run on what basis (a) Pay-for-play basis (b) Pay-as-you-go basis (c) Buy-and-hold basis (d) Plug-and-play basis

(b) Pay-as-you-go basis

Which demographic group has the highest labor force participation rate? (a) People aged 16-19 years old (b) People aged 25-54 years old (c) People over the age of 65 years old (d) People aged 0-15 years old

(b) People aged 25-54 years old

A noted trend in America's presidential elections is that the incumbent wins when: (a) The inflation rate in the year of the election is high (b) Personal disposable income is growing. (c) The occurrence of rational ignorance is low among voters (d) The incumbent's political party has been in power for many consecutive terms

(b) Personal disposable income is growing.

Minimum wage laws are an example of? (a) Price Ceiling (b) Price Floor (c) Retraining programme (d) Expansionary monetary policy

(b) Price Floor

Which of the following can be TRUE when a tariff increases? (a) Consumer surplus increases (b) Producer surplus increases (c) The market price decreases (d) The quantity produced domestically decreases

(b) Producer surplus increases

Holding everything else constant, an increase in the growth rate of the money supply will cause the aggregate demand curve to: (a) Shift inward (b) Shift outward (c) Not shift at all (d) Shift randomly

(b) Shift outward

What is the natural unemployment rate? (a) Structural and Cyclical Unemployment rates (b) Structural and Frictional Unemployment rates (c) Frictional and Cyclical Unemployment rates (d) Frictional, Cyclical, and Structural Unemployment rates

(b) Structural and Frictional Unemployment rates

Which of the following are NOT an outcome of a binding price ceiling?

(b) Surplus of the good

A tariff is a: (a) Tax credit for domestic exports. (b) Tax on imports. (c) Temporary grant of monopoly rights. (d) Renewable subsidy to the energy industry.

(b) Tax on imports.

Which of the following is true about the US balance of payments over the last 20 years? (a) The US runs a capital account deficit and current account surplus (b) The US runs a capital account surplus and current account deficit (c) The US runs a capital account deficit and current account deficit (d) The US runs a capital account surplus and current account surplus

(b) The US runs a capital account surplus and current account deficit

The percentage of noninstitutionalized civilian adults who are either working or looking for work is: (a) The employment rate (b) The labor force participation rate (c) The unemployment rate (d) The underemployment rate

(b) The labor force participation rate

Nominal GDP increased by 5%, and the velocity of money decreased by 1%, what change has occured in the money supply? (a) The price level increased by 6% (b) The money supply increased by 6% (c) Real output increased by 6% (d) Too little information

(b) The money supply increased by 6%

What is the median voter theorem? (a) The median voter should decide elections for optimal economic growth (b) The preferred point of the median voter will beat any other policy in a majority rule election. (c) The preferred point of the median voter will coincide with that of the majority of the population (d) The median voter's policy is closest to that of the majority

(b) The preferred point of the median voter will beat any other policy in a majority rule election.

The desire to have goods and services sooner rather than later is called: (a) Risk preference. (b) Time preference. (c) Inflation preference. (d) liquidity preference.

(b) Time preference.

Which of the following is included in the monetary base? (a) Checking deposits (b) Total reserves (c) Savings deposits (d) All of the above

(b) Total reserves

When the government starts to borrow, which of the following is not true in the market for loanable funds? (a) Total savings increase (b) Total savings decrease (c) Private borrowing decreases (d) Total borrowing increases

(b) Total savings decrease

If all part-time workers who want to work full-time, suddenly get a full-time job, what happens to the unemployment rate? What happens to the underemployment rate? (a) Unemployment Rate decreases. Underemployment rate decreases. (b) Unemployment Rate stays the same. Underemployment rate decreases. (c) Unemployment Rate decreases. Underemployment rate stays the same. (d) Unemployment Rate stays the same. Underemployment rate stays the same.

(b) Unemployment Rate stays the same. Underemployment rate decreases.

When consumers fear that the economy is not doing well, what kind of shock has hit the economy? (a) Real (b) Velocity (c) Permanent (d) All of the above

(b) Velocity

The long run neutrality of money is illustrated by which of the following components of the AS-AD model? (a) Upward sloping SRAS (b) Vertical LRAS (c) Downward Sloping AD (d) Stickiness of Wages

(b) Vertical LRAS

Which of the following scenarios is an example of a capital gains tax? (a) Your employer pays 10% of your wages in taxes every month (b) You pay a tax on the difference in price you pay for the house you bought for $100,000 and sold for $120,000 (c) You buy a cantaloupe from Florida at the grocery store and pay a 5% tax (d) A relative dies and you pay a tax on your inheritance of $5,000

(b) You pay a tax on the difference in price you pay for the house you bought for $100,000 and sold for $120,000

Protectionism is the economic policy of restraining trade though quotas, tariffs, or other regulations that heavily burden producers. (a) domestic (b) foreign (c) inefficient (d) monopoly

(b) foreign

Fill in the blanks "If the level of technological knowledge increases in a country then the steady state level of capital_________ The steady level of output _________" (a) doesn't change; increases. (b) increases; increases. (c) unchanged; doesn't change. (d) increases; doesn't change.

(b) increases; increases.

According to the quantity theory of money, if the money supply doubles (a) real income doubles (b) price level doubles (c) price level halves (d) real income halves

(b) price level doubles

Suppose Will, a poorly paid but charming graduate student, makes $20,000 and paid an average tax rate of 15% in 2014. How much did he pay in taxes? (a) $1,000 (b) $2,000 (c) $3,000 (d) $4,000

The following data comes from Trumpland during 2015.Trumpland exports $100 of goods, imports $200, has investments abroad of $100 with an annual return of 5% and receives $50 in foreign aid. What is the value of Trumpland's current account? (a) $450 surplus (b) $155 deficit (c) $45 deficit (d) $90 surplus

Suppose a bottle of wine in France costs 10 euros and the price of the same bottle of wine is $20 in the United States, and $1 buys 2 euros. What is the real exchange rate? (a) 1 bottle of French wine buys 1 bottle of US wine (b) 1 bottle of French wine buys 0.5 bottles of US wine (c) 1 bottle of French wine buys 0.25 bottles of US wine (d) 1 bottle of French wine buys 0.125 bottles of US wine

Suppose the minimum reserve ratio is 10 percent. If Job deposits 100 dollars in the bank what is the most the money supply could increase by? (a) 10 dollars (b) 100 dollars (c) 1000 dollars (d) 10000 dollars

Suppose your rate of return on a mutual fund is 7%, but you pay 2% in fees. How many years will it take for the money you have invested to double in size? (a) 10 years (b) 12 years (c) 14 years (d) 15 years

Then natural rate of unemployment is 5%, the structural rate of unemployment is 2%. What is the frictional unemployment rate?

Using the information in the above question, what marginal tax rate does Jim face? (a) 10 percent (b) 20 percent (c) 30 percent (d) 17 percent

The CPI in 2007 was 120 and in 2008 it was 125, the inflation rate is (a) 5% (b) 2.6% (c) 4.2% (d) 25%

Suppose there are 50 working in the country of Serdarnia, 50 people looking for work, 10 people in the military, and 20 students studying full time at the university. What is Serdarnia's unemployment rate? (a) 10% (b) 25% (c) 50% (d) 100%

Which of the following does NOT decrease the unemployment rate. (a) An unemployed worker finds a job (b) An unemployed worker stops looking for work (c) A discouraged worker starts looking for work (d) An unemployed worker gets a part time job, but wanted a full time job

Which of the following is most likely a violation of the Law of One Price? (a) A haircut in India is cheaper than in the United States (b) A London apartment is more expensive than a Minneapolis condo (c) A student in the US delivering a US laptop bought by a European friend first bought in the US (d) None of the above

Which of the following is true. (a) A flat marginal tax rate, implies an increasing average tax rate (b) A tax credit of $100 that benefits every individual makes the tax system more regressive (c) A tax of $100 levied on every individual is regressive. (d) None of the above

Which of the following is NOT a factor that determines patterns of trade? (a) Comparative Advantage (b) Opportunity costs (c) Absolute Advantage (d) Specialization

A sophisticated IOU that documents who owes how much interest and principal payments must be made is a(n): (a) Certificate of deposit (b) Equity (c) Bond (d) Share of stock

The primary purpose of the AD-AS model is to explain: (a) The steady-state output (b) Trends in output (c) Business cycle fluctuations (d) long-term economic growth

Who is the largest trade partner of the US? (a) England (b) Mexico (c) Canada (d) Japan

Which of the following is FALSE about economic growth? (a) All countries used to be poor (b) There is large variation in wealth and economic growth around the world (c) Countries can only experience growth with the discovery of natural resources (d) Institutions are key to understanding economic growth

Developed countries tend to be experiencing (a) Catch up growth (b) Decreases in real GDP per capita (c) Cutting edge growth (d) Decreases in nominal GDP per capita

Suppose the Federal Reserve pursues an expansionary monetary policy. What are the expected consequences? (a) Demand for bonds increases, interest rates increase (b) Demand for bonds decreases, interest rates increase (c) Demand for bonds increases, interest rates decrease (d) Demand for bonds decreases, interest rates decrease

Which of the following is not an effect of price floors: (a) Surpluses (b) Misallocation of resources (c) Efficient improvement in service quality (d) Lost gains from trade

Which of the following shifts only the supply curve in the market for a single good ie NOT AS-AD model? (a) Tastes (b) Taxes (c) Entry and exit costs (d) Expectations

Protectionism is the economic policy of restraining trade through quotas, tariffs, or other regulations that heavily burden producers. (a) Monopoly (b) Inefficient (c) Foreign (d) Domestic

Which of the following is NOT a way the Federal Reserve controls the money supply? (a) Discount rate lending (b) Open market operations (c) Government spending (d) Paying interest on bank reserves held at the Fed

If there is no change in technological growth, depreciation or investment rates In the long run what does the Solow model predict? (a) Growth will continue forever (b) Growth will decrease (c) Growth is 0 (d) None of the above

What is the definition of the law of one price? (a) when a foreign country uses the U.S. as its Currency. (b) Rate at which goods and services of one country can be exchanged for the goods and services of another (c) Identical goods should sell for about the same price throughout the world (d) None of the above

Which of the following are consequences of protectionism? (a) Increased welfare (b) Reduced deadweight lost (c) Increased wasted resources (d) None of the above

Suppose an economy experiences a large negative real shock. The Fed tackles the output problem. What do is it intensify by doing so (a) Unemployment problem (b) Output growth problem (c) Inflation problem (d) All of the above

What of the following comparative statements is FALSE? (a) Benefit replacement ratios are higher in Europe than in the United States (b) Minimum wages are higher in Europe compared to the United States (c) Labor unions in the United States are stronger than European labor unions (d) The effect on unions on the labor market is similar to the effect of minimum wages

The Federal Reserve decides to decrease the money growth rate for the United States economy. What happens to the long-run real output level of the United States? (a) Long-run real output increases (b) Long-run real output decreases (c) Long-run real output is unchanged (d) Long-run real output is zero

The Capital Account. (a) Measures changes in domestic ownership of foreign assets, physical or financial. (b) Measures changes in domestic ownership of domestic assets, physical or financial. (c) Measures changes in foreign ownership of domestic assets, physical or financial. (d) None of the above.

Which of the following does the Fed control directly (a) M1 (b) M2 (c) Monetary base (d) All of the above

The factor of increase in the money supply that occurs with each dollar of increase in reserves is called the: (a) Reserve ratio (b) Open market operation (c) Money multiplier (d) Fractional reserve banking

pt) 6. According to comparative advantage, what ultimately determines wages?

Suppose the price of a bread was $0.50 in 1960 $1.50 in 2015. Between 1960 and 2015, the total inflation of all goods in that time was 10%. Is the real price of bread in 2015 higher or lower than the real price of bread in 1960? (a) Real price of bread is higher in 1960 (b) Real price of bread is the same (c) Real price of bread is lower in 1960 (d) Not enough information

Which of the following is true. (a) The US Federal tax system is regressive (b) Social security benefits are paid using funds each individual has accumulated over their lifetime (c) Sales taxes on food and clothes are regressive (d) All of the above

The following are all economic benefits of specialization except (a) Specialization allows people to capture the benefits of returns to scale (b) Specialization allows people to focus on the production of goods in which they have a comparative advantage (c) Specialization allows people to focus on the production of goods in which they have an absolute advantage (d) Specialization allows people to focus their attention on becoming experts in narrower fields, which increases combined human knowledge

What is the correlation between wealth and the infant survival rate? (a) Strong negative (b) Weak positive (c) Strong positive (d) Weak negative

Which of the following is the definition of natural rate of unemployment? (a) Frictional + cyclical (b) Cyclical + structural (c) Structural + Frictional (d) Frictional + Structural + Cyclical

Suppose the economy is suffering from a negative real shock (e.g. oil price increases), what is the dilemma facing by the Fed in response to the shock? (a) The Fed has to buy government bond if it wants to increase money supply (b) The Fed has to print a lot of money in order to increase money supply (c) The Fed will increase the inflation to a further extent if it wants to stabilize the real output growth (d) There will be positive inflation and negative real output growth

Who directly determines the stance of monetary policy by controlling open market policy? (a) US Congress (b) US senate (c) The Federal Open Market Committee (d) None of the above

The fact that the majority of stock mutual funds cannot outperform the stock market averages is consistent with: (a) The no free lunch principle. (b) The risk-return trade-off principle. (c) The efficient markets hypothesis. (d) The active trading hypothesis.

Systemic risk is present when: (a) A bank or other financial institution acts recklessly, hoping that the Fed and regulators will later bail them out (b) The U.S. government defaults on Treasury securities (c) The failure of one financial institution will bring down other institutions as well (d) The Fed increases the money supply when it should decrease it

Which of the following scenarios is an example of trade protectionism? (a) Congress passing a free trade agreement between the United States and Canada (b) Firms building new factories in Ohio and in Bangladesh (c) The government passing a law banning importation of goods labeled in French (d) The development of a new technology allowing quicker communication across borders

In theory, in the long run which of the following policies would decrease unemployment in an economy? (a) The government enacts laws granting unions stronger protections and legal rights (b) The government increase unemployment benefits for those who have been working long-term (c) The government sets up a retraining and search program for unemployed (d) The government increases the minimum wage

Which of the following is NOT included in M1? (a) Currency outstanding (b) Checkable deposits (c) Total reserves at the Fed (d) None of the above

What is the shape of the supply of loanable funds? Why? (a) Upward sloping, lower interest encourages more saving (b) Downward sloping, lower interest encourages more saving (c) Upward sloping, higher interest encourages more saving (d) Downward sloping, higher interest encourages more saving

Which of the following increases net investment in the economy? (a) You purchase 200 shares of existing IBM stock (b) You sell 200 shares of existing IBM stock (c) You buy 200 shares of stock in a new internet company through an IPO (d) All of the above

If the growth rate of the money supply increases, then the nominal interest rate that banks offer to consumers (a) doesn't change (b) decreases (c) increases (d) increases only if it is unexpected

When the Fed raises the minimum reserve ratio, then (a) the money supply will increase for sure (b) the money supply will decrease for sure (c) the money supply may decrease (d) the money supply may increase

Suppose Trevor finds $100 under his mattress, the money multiplier in the economy is 10. What is the maximum increase in the money supply? (a) $10 (b) $1 (c) $100 (d) $1000

(d) $1000

Suppose you are given $500 by the Federal Reserve and the reserve ratio is 10%. What is the most the money supply will increase in the economy? (a) $500 (b) $600 (c) $1,000 (d) $5,000

(d) $5,000

Suppose that you live in France. In France donuts cost 8 euros and in England donuts cost 8 pounds. The exchange rate is 1 pound = 2 euros. For every french donut how many English donuts can you buy? (a) 2 (b) 1 (c) 4 (d) 0.5

(d) 0.5

Citizens of a Speagland pay 10 percent tax on their first 20 thousand speagles (the currency of Speagland) of income, and 20 percent on their next 80 thousands speagles of income. Will a citizen of Speagland makes 40 thousand dollars, what is his marginal tax rate? (a) 10 percent (b) 15 percent (c) 17 percent (d) 20 percent

(d) 20 percent

Suppose you plan to graduate college in 4 years, then go to law school for an additional 3 years. You invest 1,000 dollars on your first day of college, what rate of return will you need to obtain each year to have 4,000 dollars when you finish law school. (a) 7 percent (b) 10 percent (c) 14 percent (d) 20 percent

(d) 20 percent

Suppose $1 buys 2 euros. Which of the following is a violation of the Law of One Price? (a) Toothbrush costs $1 in the United States, 2 euros in France (b) Toothbrush costs $0.50 in the United States, 1 euro in France (c) A haircut costs $15 in the United States, 30 euros in France (d) A laundry machine costs $800 in the United States, 1500 euros in France

(d) A laundry machine costs $800 in the United States, 1500 euros in France

Which of the following is an example of structural unemployment. (a) A school bus driver not working in the summer. (b) A factory worker losing his job during a recession. (c) A chemistry PhD working as a Uber driver. (d) A payphone repair man who is out of work, who refuses to learn about cell phones

(d) A payphone repair man who is out of work, who refuses to learn about cell phones

The social security in the U.S. (a) Runs on a pay as you go basis (b) Net benefits are declining over time (c) Favors females compared to males (d) All of the above

(d) All of the above

What makes up the capital account? (a) Foreign Direct Investment (b) Portfolio Investment (c) Other investment (d) All of the above

(d) All of the above

Which of the following is an example of a monetary rule? (a) Increasing the money supply during a recession to keep Mv constant (b) Keeping the money supply (growth) constant during a recession (c) Buying bonds to stimulate aggregate demand (d) All of the above

(d) All of the above

Which of the following is true? (a) When the Federal Reserve Bank acts to limit systemic risk it creates long-run incentive problems (b) It is very hard to predict with accuracy the consequences of monetary policy (c) When liabilities are greater than assets a bank is insolvent (d) All of the above

(d) All of the above

Which of the following is true. (a) Most economists believe that the trade deficit per se is not a problem. (b) A trade deficit might indicate or signal a problem of low savings. (c) Many governments hold dollars as means of saving and enjoying liquidity (d) All of the above.

(d) All of the above.

For most of recorded human history, long-run economic growth was: (a) Much higher than it has been in recent decades. (b) The same as it is today. (c) The highest during the Dark Ages. (d) Almost nonexistent.

(d) Almost nonexistent.

When FORD, a US car company, decides to build a new factory in Japan, what happens to the US balance of payments? (a) Capital account increases, current account decreases. (b) Capital account increases, current account increases. (c) Capital account decrease, current account decrease. (d) Capital account decrease, current account increases.

(d) Capital account decrease, current account increases.

Will is institutionalized, David is a discouraged worker, Kip is a bus driver with a PhD in Economics, and Carter was fired last week. Which of these four is counted as unemployed? (a) David, Job and Carter (b) Will, David and Carter (c) David and Carter (d) Carter

(d) Carter

In the 1960s Korean people became more thrifty and saved more, given our framework what should happen to Korean consumption and interest rates (a) Consumption rate increases, interest rate decreases (b) Consumption rate decreases, interest rate increases (c) Consumption rate increases, interest rate decreases (d) Consumption rate decreases, interest rate decreases

(d) Consumption rate decreases, interest rate decreases

Conditional convergence refers to the tendency for: (a) Poorer countries to grow faster than richer countries, but only if they receive sufficient foreign investment. (b) Richer countries to grow faster than poorer countries given similar steady-state capital stocks, so the poor countries never catch up with the rich countries. (c) Poorer countries to grow faster than richer countries given similar steady-state capital stocks, but the poor countries will never catch up with the rich countries. (d) Countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.

(d) Countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.

Conditional convergence refers to the tendency for: (a) Poorer countries will grow faster than richer countries, but only if they receive sufficient foreign investment. (b) Richer countries will grow faster than poorer countries given similar steady-state capital stocks, so the poor countries never catch up with the rich countries. (c) Poorer countries will grow faster than richer countries given similar steady-state capital stocks, but the poor countries will never catch up with the rich countries. (d) Countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.

(d) Countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.

A monetary policy is when it is expected that a central bank will stick with its policy (a) Inflationary (b) Discretionary (c) Sticky (d) Credible

(d) Credible

An unemployed person is one who: (a) Stays at home and is not looking for work. (b) Works for a job that pays less than he or she expected. (c) Is not willing to work even though he or she is able to. (d) Does not have a job but is actively looking for one.

(d) Does not have a job but is actively looking for one.

You live in Kaplania which produces and sells tea for $2.00 per teabag but has trade barriers restricting both the inflow and outflow of tea from Kaplania. The world price of tea is $3.00 per teabag. Suppose Kaplania makes a trade agreement with the larger country of Pheland. What would happen in Kaplania? (a) Exports decrease, prices decrease (b) Exports increase, prices decrease (c) Exports decrease, prices increase (d) Exports increase, prices increase

(d) Exports increase, prices increase

An investment tax credit offered during a recession is most likely to be temporary so that: (a) It is more easily funded through spending cuts (b) Government revenues are not reduced (c) It does not disrupt the supply of savings (d) Firms have an incentive to invest quickly

(d) Firms have an incentive to invest quickly

Which of the following is NOT a primary source of federal taxes? (a) Social Security Taxes (b) Corporate Taxes (c) Income Taxes (d) Import Taxes

(d) Import Taxes

Savings is: (a) The purchase of new capital goods. (b) The purchase of new consumption goods. (c) Income that is not spent on capital goods. (d) Income that is not spent on consumption goods.

(d) Income that is not spent on consumption goods.

Over the past 10,000 years, growth in per capita world GDP has been: (a) Varied, but generally fallen (b) Flat (c) Decreasing (d) Increasing

(d) Increasing

Which of the following does NOT occur when the government increases its borrowing? (a) There is less total savings in the economy (b) There is less private borrowing in the economy (c) There is less consumption in the economy (d) Interest rates are low

(d) Interest rates are low

Which of the following will increase both the equilibrium interest rate and quantity in loanable fund market? (a) Consumers become less thrifty (b) Consumers become more thrifty (c) Investors become less optimistic about future (d) Investors become more optimistic about future

(d) Investors become more optimistic about future

Which of the following is NOT a weakness of GDP when using it to analyse an economy? (a) It does not measure inequality (b) It does not factor in environmental costs (c) It does not factor in the underground economy (d) It does not count intermediate goods

(d) It does not count intermediate goods

When banks take on too much risk with the hope that the Fed will eventually bail them out, is an example of . (a) Systemic risk (b) Liquidity risk (c) A solvency crisis (d) Moral hazard

(d) Moral hazard

When banks take on too much risk with the hope that the Fed will eventually bail them out, this an example of. (a) Systemic risk (b) Liquidity risk (c) A solvency crisis (d) Moral hazard

(d) Moral hazard

With respect to real output, in the long run, money is: (a) Expansionary (b) Velocity (c) Temporary (d) Neutral

(d) Neutral

What is the difference between a nominal and real GDP? (a) Nominal GDP has been adjusted for changes in prices whereas real GDP has not been adjusted (b) Economists are interested in nominal GDP instead of real GDP (c) Journalists are interested real GDP instead of nominal GDP (d) Nominal GDP has not been adjusted for changes in prices whereas real GDP has been adjusted

(d) Nominal GDP has not been adjusted for changes in prices whereas real GDP has been adjusted

Suppose the United States produces computers below the world price and adds a tariff on computer imports. (a) Exports will increase (b) Imports will increase (c) Tariff revenue will increase (d) None of the above

(d) None of the above

Which of the following is NOT a factor of production? (a) Human Capital (b) Labour (c) Physical Capital (d) None of the above

(d) None of the above

Which of the following is true? (a) The Federal Reserve Bank fully controls the outstanding stock of M2. (b) The Federal Reserve Bank determines the reserve ratio of every other bank (c) The Federal Reserve Bank usually performs an open market operations by changing the discount rate (d) None of the above.

(d) None of the above.

Money supply = 10, v= 5 , Y = 3 what is inflation? (a) 10/3 (b) 5 (c) 50/3 (d) Not enough information

(d) Not enough information

Differences in wages across countries primarily reflects differences in: (a) Minimum working age laws. (b) Import tariffs. (c) Taxes. (d) Productivity

(d) Productivity.

If the Federal Reserve starts targeting nominal GDP growth of 5 percent per year, which of the following scenarios achieve this goal? (a) Real GDP growth = 5 percent & GDP Deflator growth = 10 percent (b) Real GDP growth = 3 percent & GDP Deflator growth = -2 percent (c) Real GDP Growth = 5 percent & GDP Deflator growth = 5 percent (d) Real GDP Growth = 0 percent & GDP Deflator growth = 5 percent

(d) Real GDP Growth = 0 percent & GDP Deflator growth = 5 percent

The real exchange rate is: (a) An increase in the price of one currency in terms of another currency. (b) A decrease in the price of a currency in terms of another currency. (c) The rate at which you can exchange one currency for another. (d) The rate at which you can exchange the goods and services of one country for the goods and services of another.

(d) The rate at which you can exchange the goods and services of one country for the goods and services of another.

What is public choice? (a) When the benefits of being informed are less than the costs of becoming informed. (b) A good incentive system aligns self-interest with the social interest. (c) Voters will often make decisions based on low-quality, unreliable, or biased information (d) The study of political behavior using the tools of economics.

(d) The study of political behavior using the tools of economics.

6. What is the current account? (a) The sum of the balance of trade and net transfer payments (b) The sum of balance of trade and the net income on capital held abroad (c) The sum of net transfer payments and balance of trade and foreign direct investment (d) The sum of net transfer payments, balance of trade, and net income on capital held abroad

(d) The sum of net transfer payments, balance of trade, and net income on capital held abroad

Primarily Aggregate demand is NOT affected by (a) shocks to the economy such as changes in the value of the stock market (b) government policy such as changes in taxes and government expenditures (c) changes in money supply by the central bank (d) changes in worker's expectation on inflation

(d) changes in worker's expectation on inflation

Suppose in 2000, the nominal exchange rate between Great Britain and U.S. is £1 = $3 (Great Britain Pound: £), then which of following implies depreciation in U.S. dollars (relative to Great British Pounds) from 2000 to 2001? (a) £1 = $1 in 2001 (b) £1 = $2 in 2001 (c) £1 = $3 in 2001 (d) £1 = $4 in 2001

(d) £1 = $4 in 2001

Which of the following countries is an example of a growth disaster?

Argentina

Countries growing slower as they approach their steady state level of capital is due to:

Diminishing marginal returns to capital

What characteristic determines the inclusion of an asset in M1 or M2 (a) Return (b) Yield (c) Liquidity (d) None of the above

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