Macroeconomics Final Exam

The multiplier effect is exemplified by the multiplied impact on a. the money supply of a given increase in government purchases. b. tax revenues of a given increase in government purchases. c. investment of a given increase in interest rates. d. aggregate demand of a given increase in government purchases.

aggregate demand of a given increase in government purchases.

Liquidity refers to a. the relation between the price and interest rate of an asset. b. the risk of an asset relative to its selling price. c. the ease with which an asset is converted into a medium of exchange (money). d. the sensitivity of investment spending to changes in the interest rate.

the ease with which an asset is converted into a medium of exchange (money).

Which of the following is not a determinant of the long-run level of real GDP? a. the price level b. the supply of labor c. available natural resources d. available technology

the price level

Which of the following is included in the aggregate demand for goods and services? a. consumption demand b. investment demand c. net exports d. All of the above are correct.

All of the above are correct.

During recessions which type of spending falls? a. consumption and investment b. investment but not consumption c. consumption but not investment d. neither consumption nor investment

consumption and investment

2. Net capital outflow equals the difference between a country's a. income and expenditure. b. investment and saving. c. buying of foreign goods and services and sales of goods and services abroad. d. purchases of foreign assets and sales of domestic assets abroad.

d. purchases of foreign assets and sales of domestic assets abroad.

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as a. e(P*/P). b. e(P/P*). c. e + P*/P. d. e - P/P*.

e(P/P*).

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same a. it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow. b. it takes fewer dollars to build the factory. By itself building the factory decreases U.S. net capital outflow. c. it takes more dollars to build the factory. By itself building the factory increases U.S. net capital outflow. d. it takes more dollars to build the factory. By itself building the factory decreases U.S. net capital outflow.

it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow.

hich of the following sequences best explains the negative slope of the aggregate-demand curve? a. price level demand for money equilibrium interest rate quantity of goods and services demanded b. price level demand for money equilibrium interest rate quantity of goods and services demanded c. price level demand for money equilibrium interest rate quantity of goods and services demanded d. price level equilibrium interest rate demand for money quantity of goods and services demanded

price level demand for money equilibrium interest rate quantity of goods and services demanded

Which of the following is an example of U.S. foreign direct investment? a. A U.S. based mutual fund buys stock in Eastern European companies. b. A U.S. citizen builds and operates a coffee shop in the Netherlands. c. A Swiss bank buys a U.S. government bond. d. A German tractor factory opens a plant in Waterloo, Iowa.

A U.S. citizen builds and operates a coffee shop in the Netherlands.

U.S. exports are $400 billion, U.S. imports are $900 billion. Which of the following are consistent with the level of net exports? a. The U.S has a trade surplus. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. b. The U.S. has a trade surplus. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. assets. c. The U.S has a trade deficit. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. d. The U.S. has a trade deficit. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. asset.

The U.S. has a trade deficit. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. asset.

If U.S. residents purchase $500 billion of foreign assets and foreigners purchase $1300 billion of U.S. assets, a. U.S. net capital outflow is $800 billion; capital is flowing into the U.S. b. U.S. net capital outflow is $800 billion; capital is flowing out of the U.S. c. U.S. net capital outflow is -$800 billion; capital is flowing into the U.S. d. U.S. net capital outflow is -$800 billion; capital is flowing out of the U.S.

U.S. net capital outflow is -$800 billion; capital is flowing into the U.S.

The law of one price states that a. a good must sell at the price fixed by law. b. a good must sell at the same price at all locations. c. a good cannot sell for a price greater than the legal price ceiling. d. nominal exchange rates will not vary.

a good must sell at the same price at all locations.

The multiplier effect a. and the crowding-out effect both amplify the effects of an increase in government expenditures. b. and the crowding-out effect both diminish the effects of an increase in government expenditures. c. diminishes the effects of an increase in government expenditures, while the crowding-out effect amplifies the effects. d. amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.

amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports a. increase and U.S. net capital outflow decreases. b. decrease and U.S. net capital outflow increases. c. and U.S. net capital outflow both increase. d. and U.S. net capital outflow both decrease.

and U.S. net capital outflow both decrease.

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have a. both positive net exports and positive net capital outflow. b. both negative net exports and negative net capital outflow. c. positive net exports and negative net capital outflow. d. negative net exports and positive net capital outflow.

both negative net exports and negative net capital outflow.

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the a. multiplier effect. b. crowding-out effect. c. accelerator effect. d. Ricardian equivalence effect.

crowding-out effect.

. A firm in China sells toys to a U.S. department store chain. Other things the same, these sales a. increase U.S. net exports and decrease Chinese net exports. b. decrease U.S. net exports and increase Chinese net exports. c. increase U.S. and Chinese net exports. d. decrease U.S. and Chinese net exports.

decrease U.S. net exports and increase Chinese net exports.

The marginal propensity to consume (MPC) is defined as the fraction of a. extra income that a household consumes rather than saves. b. extra income that a household either consumes or saves. c. total income that a household consumes rather than saves. d. total income that a household either consumes or saves.

extra income that a household consumes rather than saves.

Other things the same, when the price level falls, interest rates a. rise, so firms increase investment. b. rise, so firms decrease investment. c. fall, so firms increase investment. d. fall, so firms decrease investment.

fall, so firms increase investment.

Fiscal policy refers to the idea that aggregate demand is affected by changes in a. the money supply. b. government spending and taxes. c. trade policy. d. All of the above are correct.

government spending and taxes.

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales a. increase U.S. net exports and has no effect on Mexican net exports. b. increase U.S. net exports and decrease Mexican net exports. c. decrease U.S. net exports and have no effect on Mexican net exports. d. decrease U.S. net exports and increase Mexican net exports.

increase U.S. net exports and decrease Mexican net exports.

If a country has a trade deficit a. it has positive net exports and positive net capital outflow. b. it has positive net exports and negative net capital outflow. c. it has negative net exports and positive net capital outflow. d. it has negative net exports and negative net capital outflow.

it has negative net exports and negative net capital outflow

. Other things the same, an increase in the price level makes consumers feel a. less wealthy, so the quantity of goods and services demanded falls. b. less wealthy, so the quantity of goods and services demanded rises. c. more wealthy, so the quantity of goods and services demanded rises. d. more wealthy, so the quantity of goods and services demanded falls.

less wealthy, so the quantity of goods and services demanded falls.

The classical model is appropriate for analysis of the economy in the a. long run, since evidence indicates that money is not neutral in the long run. b. long run, since real and nominal variables are essentially determined separately in the long run. c. short run, provided money is not neutral. d. short run, provided real and nominal variables are highly intertwined.

long run, since real and nominal variables are essentially determined separately in the long run.

Other things the same, a decrease in the price level makes consumers feel a. less wealthy, so the quantity of goods and services demanded falls. b. less wealthy, so the quantity of goods and services demanded rises. c. more wealthy, so the quantity of goods and services demanded rises. d. more wealthy, so the quantity of goods and services demanded falls.

more wealthy, so the quantity of goods and services demanded rises.

Which of the following sequences best explains the negative slope of the aggregate-demand curve? a. price level demand for money equilibrium interest rate quantity of goods and services demanded b. price level demand for money equilibrium interest rate quantity of goods and services demanded c. price level demand for money equilibrium interest rate quantity of goods and services demanded d. price level equilibrium interest rate demand for money quantity of goods and services demanded

price level demand for money equilibrium interest rate quantity of goods and services demanded

If the real exchange rate between the U.S. and Argentina is 1, then a. purchasing-power parity holds, and 1 U.S. dollar buys 1 Argentinean bolivar. b. purchasing power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina. c. purchasing power parity does not hold, but 1 U.S. dollar buys 1 Argentinean bolivar. d. purchasing power parity does not hold, but the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

purchasing power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

The aggregate-demand curve shows the a. quantity of labor and other inputs that firms want to buy at each price level. b. quantity of labor and other inputs that firms want to buy at each inflation rate. c. quantity of domestically produced goods and services that households want to buy at each price level. d. quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Stagflation exists when prices a. and output rise. b. rise and output falls. c. fall and output rises. d. and output fall.

rise and output falls.

As the price level rises, the exchange rate a. falls, so exports rise and imports fall. b. falls, so exports fall and imports rise. c. rises, so exports rise and imports fall. d. rises, so exports fall and imports rise.

rises, so exports fall and imports rise.

1. Net exports measures the difference between a country's a. income and expenditures. b. sale of goods and services abroad and purchase of foreign goods and services. c. sale of domestic assets abroad and purchase of foreign assets. d. All of the above are correct.

sale of goods and services abroad and purchase of foreign goods and services.

Most economists use the aggregate demand and aggregate supply model primarily to analyze a. short-run fluctuations in the economy. b. the effects of macroeconomic policy on the prices of individual goods. c. the long-run effects of international trade policies. d. productivity and economic growth.

short-run fluctuations in the economy.

When the yen gets "stronger" relative to the dollar, a. the U.S. trade deficit with Japan will rise. b. the U.S. trade deficit with Japan will fall. c. the U.S. trade deficit with Japan will be unchanged. d. None of the above necessarily happens.

the U.S. trade deficit with Japan will fall.

If you are vacationing in France and the dollar depreciates relative to the euro, then a. the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros. b. the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros. c. the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros. d. the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros.

the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros.

Using the liquidity-preference model, when the Federal Reserve increases the money supply, a. the equilibrium interest rate decreases. b. the aggregate-demand curve shifts to the left. c. the quantity of goods and services demanded is unchanged for a given price level. d. the long-run aggregate-supply curve shifts to the right.

the equilibrium interest rate decreases.

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift a. the long-run aggregate-supply curve to the right. b. the long-run aggregate-supply curve to the left. c. the aggregate-demand curve to the left. d. None of the above is correct.

the long-run aggregate-supply curve to the right.

The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates a. the multiplier effect. b. the crowding-out effect. c. the Fisher effect. d. the wealth effect.

the multiplier effect.

The aggregate supply curve is upward sloping in a. the short and long run. b. neither the short nor long run. c. the long run, but not the short run. d. the short run, but not the long run.

the short run, but not the long run.

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of short-run aggregate supply. b. the slope of long-run aggregate supply. c. the slope of the aggregate-demand curve. d. everything that makes the aggregate-demand curve shift.

the slope of the aggregate-demand curve.

The long-run aggregate supply curve shifts left if a. the capital stock increases. b. there is a natural disaster. c. the government removes some environmental regulations that limit production methods. d. None of the above is correct.

there is a natural disaster.

During some year a country had exports of $50 billion, imports of $35 billion, and purchased $30 billion of foreign assets. What was the value of domestic assets purchased by foreigners? a. $35 billion b. $20 billion c. $15 billion d. $5 billion

$15 billion

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports? a. $175 million b. $75 million c. $25 million d. -$25 million

$25 million

The multiplier for changes in government spending is calculated as a. MPC. b. 1 - MPC. c. 1/MPC. d. 1/(1 - MPC).

1/(1 - MPC).

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate? a. 4/2.4 pints of Irish beer per pint of Australian beer b. 3/3.2 pint of Irish beer per pint of Australian beer c. 3.2/3 pints of Irish beer per pint of Australian beer d. 2.4/4 pints of Irish beer per pint of Australian beer

3.2/3 pints of Irish beer per pint of Australian beer

Which of the following is an example of U.S. foreign portfolio investment? a. Disney builds a new amusement park near Barcelona, Spain. b. A U.S. citizen buys bonds issued by the British government. c. A Dutch hotel chain opens a new hotel in the United States. d. A citizen of Singapore buys a bond issued by a U.S. corporation.

A U.S. citizen buys bonds issued by the British government.

The long-run aggregate supply curve shifts right if a. immigration from abroad increases. b. the capital stock increases. c. technology advances. d. All of the above are correct.

All of the above are correct.

the long-run aggregate supply curve a. is vertical. b. is a graphical representation of the classical dichotomy. c. indicates monetary neutrality in the long run. d. All of the above are correct.

All of the above are correct.

Suppose the current equilibrium interest rate is r1. Which of the following events would cause the equilibrium interest rate to increase? a. The Federal Reserve increases the money supply. b. Money demand increases. c. The price level decreases. d. All of the above are correct.

Money demand increases.