Macro Exam
Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between
1/2 and 2/3 of an HDTV per ton of paper
Using the rule of 72, determine how long it would take for real GDP to double if it grew at a constant growth rate of 4 percent
18 years
Goods and services sold to foreign buyers are
Exports
Which measurement is most useful for comparing the standard of living in different countries?
GDP per capita
A mechanism for fixing exchange rates is the
Gold standard
A rightward shift in aggregate demand will cause an increase in output and no change in the price level if aggregate supply is
Horizontal
The knowledge and skills possessed by the workforce is known as
Human Capital
The "pay or play" approach means that
If employers do not provide training activities, they must pay the government to do so.
Goods and services purchased from international sources are
Imports
The direct transfer of goods and services rather than cash is known as
In-kind transfers
Which of the following is true about income inequality?
Inequality tends to be greatest in the poorest countries
Generally speaking, a country whose currency depreciates will experience, as a result,
Inflationary pressure because the prices of imports rise
Economic growth
Is measured using real GDP
A country has a comparative advantage in a good if
It can produce a good at a lower opportunity cost relative to another country
Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production we can conclude that
Japan has a comparative advantage
A horizontal aggregate supply curve below the level of full employment is most consistent with which of the following views of the economy?
Keynesian
If trade is mutually beneficial, then increasing trade
Leads to increased output in export industries
Which of the following also occurs as the production possibilities curve shifts outward?
Long-run aggregate supply increases
An economy experiences economic growth whenever
Long-run real GDP rises
The natural rate of unemployment is the
Long-term rate determined by structural forces in labor and product markets
A progressive tax system
Means higher marginal tax rates at higher income levels
An aggregate supply curve that is always vertical is most consistent with which of the following views of the economy?
Monetarist
Which of the following groups believes that the velocity of money is constant in the long run?
Monetarists
The exchange rate is price of
One currency in terms of another
Which of the following is a monetary policy action?
Open market operations
Economists define economic growth in terms of changes in
Potential GDP
Supply-side tax cuts are designed to
Reduce marginal tax rates
Trade restrictions
Reduce the gains from trade for the country as a whole
Supply-side policy is designed to
Shift the production possibilities curve and shift the long-run aggregate supply curve to the right
When Americans buy Mercedes-Benz automobiles made in Germany, they are generating a
Supply of U.S. dollars and a demand for foreign currency
Monetarists believe that
The money supply should be expanded at a steady, predictable rate
Monetary policy tools include:
The reserve ratio and the discount rate
A country will not trade unless
The terms of trade are superior to domestic opportunities
A rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is
Upward-sloping to the right
A rightward shift in aggregate demand will cause an increase in the price level and no change in output if aggregate supply is
Vertical
Suppose a U.S. firm purchase some English china. The china costs 1,000 British pounds. At the exchange rate of $1.45 = 1 pound, the dollar price of the china is
$1,450
If one euro is equal to 0. 60 U.S. dollars, what would be the euro price of a car that cost $10,000
$16,667 euros
In a fixed exchange rate system
A country can eliminate a surplus of its currency by eliminating its protectionist barriers to trade
Structural unemployment is unemployment caused by
A mismatch between the skills of job seekers & requirements of available of jobs.
Over a given period of time, if imports are greater than exports, the result is
A trade deficit
Which of the following characterizes stagflation?
An increase in both unemployment and inflation
Suppose that today 1 British pound exchanges for $1.60. If next week 1 pound exchanges for $1.70, it is clear that
Both currencies have appreciated
Which of the following is an example of an automatic stabilizer?
Changes triggered by the economy & not by government decision makers.
Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVS or 200 DVD players. In terms of TV production we can conclude that
China has a comparative advantage
Monetarists believe that an increase in the money supply shifts the aggregate
Demand curve to the right
When foreigners come to the United States as tourists, they are generating a
Demand for U.S. dollars and a supply of a foreign currency
Ceteris Paribus; if Canadians decide they want to eat more U.S.-grown soybeans, this causes the _____ U.S. currency to _______
Demand for; increase
Fiscal policy includes
Discretionary government spending
The number of years it takes for GDP to double is found by
Dividing 72 by the growth rate
A supply-side policy to cure a recession might include
Elimination of the minimum wage
