Macroeconomics Final
If the required reserve ratio is 10 percent, actual reserves are $10 million, and currency in circulation is equal to $20 million, M will at most be equal to
$120 million
If the marginal propensity to consume is 0.75 then a $100 increase in investment will result in a maximum increase in equilibrium real gross domestic product of
$400.00
Assume that marginal propensity to consume is 0.8 and that the government taxes all income at a constant rate of 30 percent, if gross income increases by $100, consumption will initially increase by
$56
Assume a closed economy with marginal propensity to consume of 0.80. (Table thing with Disposable income and Consumption)- Dissaving occurs when disposable income is
$620
Assume a closed economy with marginal propensity to consume of 0.80. (Table thing with Disposable income and Consumption)- The marginal propensity to save in this economy is
0.2
Which of the following policies, if appropriately sized, would provide expansion during a recession with the smallest change in interest rates
A decrease in taxes and an open-market purchase of government securities by the central bank
The graph above shows two aggregate demand curves, AD1 and AD2, and an aggregate supply curve, AS. The shift in the aggregate demand curve could be caused by
A decrease in the money supply
Suppose that country a is experiencing high inflation relative to country b, which is enjoying steady growth with a stable price level. Which of the following would occur in the foreign exchange market
A depreciation of Country A's currency
Frictional unemployment occurs when which of the following happens
A worker voluntarily quits a job to search for a better one
If the value of the United States dollar increases on the foreign exchange market, which of the following is most likely to occur in the short run?
Aggregate demand will decrease
Which of the following will most likely cause an increase in real output in the long run
An increase in immigration from abroad
An increase in the price level will most likely cause which of the following
An increase in the demand for money
A rightward shift of the short run Phillips curve is most likely due to
An increase in the expected rate of inflation
An increase in which of the following will most likely increase productivity
Capital stock
An increase in spending in an economy will cause a multiplied increase in Gross Domestic Product
Consumption increases as income increases
Of the following, the most liquid asset is
Currency
An increase in the government spending will affect the demand for money and the nominal interest rates in which of the following ways
DM- increase i-increase
Assume that the reserve requirement for demand deposits is 20%, that banks hold no excess reserves, and that the public holds no currency. If the central bank sells $10,000 worth of government securities to commercial banks, the total money supply will
Decrease by $50,000
Which of the following will lead to a depreciation of a nation's currency
Decreased real interest rates in the nation compared with the rest of the world
The main benefit of free trade between two countries is that
Each country can consume beyond its constraints of resources and productivity
The natural rate of unemployment can be defined as the
Economy's long-run equilibrium rate of unemployment
If unemployed workers become discouraged and give up trying to find work, the number of workers employed and the unemployment rate would change in which of the following ways?
Employed- no change Unemployment rate- decrease
Which of the following is LEAST likely to promote economic growth?
Increase in consumption of non durable products
If the economy is in a severe recession, which of the following policy actions is most appropriate
Increasing both the money supply and government spending
For an economy that is operating inside its production possibilities curve, which of the following is true?
It can increase the production of both goods
Which of the following is true of the opportunity cost of holding cash
It increases as the interest rate rises
Which of the following is true of the Phillips curve?
It is downward sloping in the short run, but is vertical in the long run
An increase in which of the following would most likely lead to an increase in the Aggregate supply
Labor-force participation rate
On the graph above, stagflation will be caused by a
Leftward shift in the short run aggregate supply curve only
If the central bank raises the required reserve ratio, the money multiplier and the money supply will change in which of the following ways
MM- decrease. MS- decrease
The diagram above shows three production possibilities curves. If the current PPC is PPC1, which of the following changes indicates a recession?
Movement from point Y to point Z
Following a decrease in the real interest rate, there is an increase in financial capital outflows from Country A. The increase in capital outflows will most likely have which of the following effects on Country A's net exports and aggregate demand?
Net Exports- increase Aggregate Demand- Increase
The short run aggregate supply curve would be vertical if
Nominal wages adjust immediately to changes in the price level
Assume that the aggregate supply curve is upward sloping. If both aggregate supply and aggregate demand increase, what will happen to the equilibrium output and price level?
Output- increase Price level- indeterminate
The consumer price index is criticized for
Overstating the tried burden of inflation bc it does not recognize consumers' ability to substitute goods and services as price change
Increases in the real per capital income of a country are most closely associated with increases in which of the following
Productivity
In the short run, government deficit spending will most likely
Raise nominal interest rates
If wages and prices are perfectly flexible and inflation is correctly anticipated, then an expansionary monetary policy will affect the real output and price level in which of the following ways?
Real output- not change Price level- increase
According to the graph above and starting with equilibrium point R, which of the following shifts identifies the short run and the long run impact of the a demand pull inflation
SR- R to M. LR-R to N
Inflation occurs when there is a sustained increase in which of the following
The average price level
Assume that Country A exports one bushel of wheat in exchange for 2.5 bushels of corn from country B. If the terms of trade are beneficial to both countries, which of the following must be true
The cost of producing a bushel of wheat in Country A is less than 2.5 bushels of corn
Potential gross domestic product will decrease under which of the following conditions?
The country's annual depreciation is greater than its annual gross investment
If the production technology of a good improves and at the same time the number of consumers willing and able to buy the good in the market increases, which of the following will definitely occur?
The equilibrium quantity will increase.
In the circular flow diagram of a market economy, which of the following supplies a factor of production
The household sector
Country A's growth rate in per capital GDP has been consistently higher than that of country B. Which of the following factors can account for these differences in the per capita GDP growth rates
The labor force of country A is becoming more skilled than the labor force of country B
If the velocity of money is constant and the aggregate supply curve is vertical, a doubling of the money supply would likely result in a doubling of
The price level
Which of the following will cause an increase in aggregate demand
a decrease in income taxes
If wages are sticky, which of the following policies will be the most effective in raising real gross domestic product to the full employment level?
an increase in government spending
Public policy that generates an unexpected increase in consumer prices will inflict short run costs on all of the following EXCEPT
borrowers
Which of the following actions by the federal reserve of the United States increases the money supply
buying government bonds on the open market
The purchase of United States government bonds by Japanese investors will be included in Japan's
financial account (formerly called capital account)
If a contractionary fiscal policy is followed by an expansionary monetary policy, nominal interest rate and employment would most likely be affected in which of the following ways in the short run?
i- decrease employment- indeterminate
A contraction of the money supply will most likely change the nominal interest rate and aggregate demand in which of the following ways in the short run
i- increase, AD-decrease
Assume that the public holds part of its money in cash and the rest in checking accounts. If the central bank lowers the reserve requirement from 16 percent to 8 percent, the money supply will
increase by less than double
In the long run, an increase in aggregate demand due to an expansion in the money supply will increase
nominal output and the price level
As a component of aggregate demand, investment refers to the
purchase of new equipment and additional inventories
An increase in the international value of the US dollar will most likely benefit
retired US citizens living overseas on their social security checks
If aggregate demand is growing faster than long run aggregate supply, the Federal reserve is most likely to
sell securities on the open market
Which of the following is the most fundamental issue that economics addresses
the use of scarce resources
Rational expectations theory suggests that people
use all available information in forming their expectations about future inflation