Macroeconomics-Final Exam ECON101-04 - Using the above figure, which of the graphs in Figure is consistent

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Macroeconomics-Final Exam ECON101-04

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1)

Using the above figure, which of the graphs in Figure is consistent with the long-run aggregate supply curve?

1)

_______

A)

Graph A

B)

Graph B

C)

Graph C

D)

Graph D

2)

In the above figure, what are the long-run equilibrium price level and real GDP?

2)

_______

A)

130 and 11.5

B)

120 and 11.5

C)

120 and 12

D)

130 and 12

3)

In the above figure, if the relevant aggregate demand curve is AD2, what type of gap exists and how large is it?

3)

_______

A)

inflationary gap of $500 billion

B)

recessionary gap of $500 billion

C)

recessionary gap of $1 trillion

D)

inflationary gap of $1 trillion

4)

Consider the above figure. If the aggregate demand went from AD2to AD3,our nation would have gone from

4)

_______

A)

a recessionary gap to full-employment real GDP.

B)

an inflationary gap to full-employment GDP.

C)

a recessionary gap to an inflationary gap.

D)

full-employment real GDP to an inflationary gap.

5)

A depreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

5)

_______

A)

increases, lowers

B)

lowers, increases

C)

increases, increases

D)

lowers, lowers

6)

Which of the following is false?

6)

_______

A)

MPC+ MPS= 1

B)

1- APC= APS

C)

APC+ APS= 1

D)

APC+ MPS= 1

7)

The level of autonomous consumption in the above table is

7)

_______

A)

$0.

B)

$9,000.

C)

$5,000.

D)

$1,000.

8)

In the above table, dissaving occurs at every level of income below

8)

_______

A)

$10,000.

B)

$8,000.

C)

$5,000.

D)

$7,000.

9)

In the above table, the marginal propensity to consume when disposable income changes from $5,000 to $6,000 is

9)

_______

A)

0.5.

B)

0.75.

C)

0.6.

D)

0.8.

10)

Consider the above figure. Autonomous consumption, in this scenario, is equal to

10)

______

A)

$60.

B)

$40.

C)

$30.

D)

$80.

11)

Consider the above figure. At an income of $60 we would expect saving to be equal to

11)

______

A)

$0.

B)

$10.

C)

$60.

D)

$40.

12)

The slope of the consumption function is the

12)

______

A)

APS.

B)

MPC.

C)

MPS.

D)

APC.

13)

The relationship between planned real investment spending and the interest rate is

13)

______

A)

direct.

B)

constant.

C)

inverse.

D)

highly volatile.

14)

In the above figure, if there is no real planned investment spending, no government spending, no taxes, and no net export spending, what is autonomous consumption?

14)

______

A)

$0.0 trillion

B)

$3.0 trillion

C)

$2.0 trillion

D)

$1.0 trillion

15)

When graphing the consumption function, we include a 45-degree reference line. What is true at the points at which the consumption function crosses this line?

15)

______

A)

Planned real saving is zero.

B)

Real GDP is zero.

C)

Real disposable income is zero.

D)

Planned real consumption spending is zero.

16)

In the above figure, the equilibrium level of real GDP is equal to

16)

______

A)

$2.0 trillion.

B)

$2.5 trillion.

C)

$3.0 trillion.

D)

$4.0 trillion.

17)

The larger the value of the MPS

17)

______

A)

the larger is the value of the MPC.

B)

the smaller is the value of the multiplier.

C)

the larger is the value of the multiplier.

D)

the larger is the value of autonomous consumption.

18)

How do increases in the price level affect the position of the C+ I+ G+ X curve and in turn the equilibrium level of real GDP?

18)

______

A)

The C+ I+ G+ X curve shifts up, thereby reducing the equilibrium level of real GDP.

B)

The C+ I+ G+ X curve shifts down, thereby increasing the equilibrium level of real GDP.

C)

The C+ I+ G+ X curve shifts up, thereby increasing the equilibrium level of real GDP.

D)

The C+ I+ G+ X curve shifts down, thereby reducing the equilibrium level of real GDP.

19)

The changing of government expenditures or taxes to achieve national economic goals is

19)

______

A)

recessionary fiscal policy.

B)

automatic fiscal policy.

C)

discretionary fiscal policy.

D)

inflationary fiscal policy.

20)

When the government cuts taxes or increases government spending

20)

______

A)

the aggregate demand curve shifts to the right.

B)

the long-run aggregate supply curve shifts to the left.

C)

the aggregate demand curve shifts to the left.

D)

the short-run aggregate supply curve shifts to the left.

21)

An increase in government spending without an accompanying increase in taxes

21)

______

A)

does not increase aggregate demand.

B)

would effectively eliminate an inflationary gap.

C)

requires additional government borrowing.

D)

causes investment spending to increase.

22)

If an increase in government spending causes an increase in government borrowing this could induce

22)

______

A)

an increase in interest rates but no effect on private domestic investment.

B)

an increase in interest rates which would cause private domestic investment to rise.

C)

a decrease in interest rates which would cause private domestic investment to rise.

D)

an increase in interest rates which would cause private domestic investment to fall.

23)

What do automatic stabilizers attempt to stabilize?

23)

______

A)

aggregate demand

B)

long-run aggregate supply

C)

exports

D)

imports

24)

The advantage of automatic stabilizers is that they

24)

______

A)

reduce the size of the net public debt.

B)

help to balance the budget.

C)

help reduce the inflation rate.

D)

reduce the fluctuations in the business cycle.

25)

The balanced-budget multiplier is equal to

25)

______

A)

1.

B)

the percentage increase in taxes.

C)

the percentage increase in government expenditures.

D)

the reciprocal of the increase in government expenditures.

26)

In Country Z, the government simultaneously increases its expenditures by $25 billion and increases taxes by $25 billion. If the MPS is equal to 0.2, the government's action ________ real GDP by ________.

26)

______

A)

increases; $25 billion

B)

has no effect on; $0

C)

increases; $125 billion

D)

increases; $100 billion

27)

When government spending exceeds tax revenues during a specific time period, this is known as a

27)

______

A)

government budget deficit.

B)

balanced budget.

C)

government budget surplus.

D)

public debt.

28)

Suppose that initially there is no public debt. Using the above table, the public debt over this four year period would have

28)

______

A)

decreased by $1,590.

B)

decreased by $100.

C)

increased by $215.

D)

increased by $1,375.

29)

To the extent that money serves as a medium of exchange

29)

______

A)

it reduces transaction costs.

B)

it eliminates the need for barter.

C)

it benefits both buyers and sellers.

D)

All of the above are correct.

30)

In a fiduciary monetary system,

30)

______

A)

coins get their value from the precious metals of which they are made.

B)

checking account balances do not have value, but paper currency does.

C)

paper currency does not have value, but balances in checking accounts do.

D)

money gets its value from the confidence that the public has in its acceptability.

31)

Based on the information in the above table, the value of M1 is

31)

______

A)

$3,100.

B)

$2,100.

C)

$1,700.

D)

$3,000.

32)

From an accounting point of view, a checking account should be considered part of a bank's

32)

______

A)

assets.

B)

reserves.

C)

liabilities.

D)

profits.

33)

Let us suppose that you apply for a loan with a bank. You tell the bank that you are going to remodel your kitchen, but after you get the loan you go to Las Vegas to gamble with the money. Your behavior is an example of

33)

______

A)

moral hazard.

B)

indirect credit allocation.

C)

direct credit allocation.

D)

adverse selection.

34)

Which one of the following is NOT a function of the Federal Reserve System?

34)

______

A)

determining the permissible size of the federal budget deficit

B)

supplying the economy with currency

C)

regulating the money supply

D)

providing a system for check clearing

35)

There is a strong correlation between money supply and

35)

______

A)

inflation rates.

B)

real GDP.

C)

nominal GDP.

D)

all of the above.

36)

Fractional reserve banking is a system in which

36)

______

A)

a fraction of banking services must be provided by depository institutions.

B)

depository institutions pay a fraction of advertised interest rates.

C)

the money supply is a set fraction of the U.S. gold reserves.

D)

depository institutions hold a fraction of total deposits in reserve.

37)

What are required reserves?

37)

______

A)

the amount of currency a bank must have on hand for customers who wish to take out short-term loans

B)

the amount of legal reserves a bank must have on hand to back its deposits

C)

the amount of gold a bank must have on hand to back its deposits

D)

the amount of government bonds a bank must have on hand to back its deposits

38)

Excess reserves are

38)

______

A)

transaction deposits× required reserve ratio.

B)

legal reserves- required reserves.

C)

legal reserves× required reserve ratio.

D)

required reserve ratio× transaction deposits.

39)

If a bank that satisfies its reserve requirement has legal reserves of $200,000, loans of $800,000, and no excess reserves then the required reserve ratio must be

39)

______

A)

15 percent.

B)

10 percent.

C)

20 percent.

D)

30 percent.

40)

When the Fed buys U.S. government securities on the open market,

40)

______

A)

the legal reserves of the banking system will fall below required reserves.

B)

the reserves of the banking system expand.

C)

the money supply contracts.

D)

the reserves of the banking system contract.

41)

Suppose that the required reserve ratio is 20 percent. A bank's customer deposits into her account $100,000 in funds from a check written on an account at another bank. The maximum potential increase in the money supply resulting from this transaction is equal to

41)

______

A)

$200,000.

B)

$20,000.

C)

$500,000.

D)

$0.

The balance sheet of Bank Z

The reserve requirement ratio is 8 percent.

42)

Using the above table, the excess reserves for this bank is

42)

______

A)

$360.

B)

$160.

C)

$200.

D)

$240.

43)

If a bond dealer sells a government bond to the Fed for $100,000, and the required reserve ratio is 10 percent, then the bank that receives a $100,000 deposit from the dealer can expand its loans by ________, and the money supply can increase by as much as ________.

43)

______

A)

$90,000; $1,000,000

B)

$90,000; $900,000

C)

$80,000; $800,000

D)

$10,000; $100,000

44)

The discount rate is the interest rate charged by

44)

______

A)

the Federal Reserve Bank for loans to the states.

B)

the Federal Reserve Bank for loans to private banks.

C)

the Federal Reserve Bank for loans to consumers.

D)

the Federal Reserve Bank for loans to the government.

45)

The federal funds rate is the interest rate charged by

45)

______

A)

the Federal Reserve Bank for loans to consumers.

B)

banks for loans to the Federal Reserve Bank.

C)

banks for loans to other banks.

D)

the Federal Reserve Bank for loans to the U.S. Treasury.

46)

All of the following tend to decrease the money supply EXCEPT

46)

______

A)

increasing the difference between the discount rate and the federal funds rate.

B)

an increasing the required reserve ratio.

C)

selling U.S. government securities.

D)

engaging in open market purchases.

47)

Assuming a 25 percent required reserve ratio, the potential money multiplier would be equal to

47)

______

A)

5.0.

B)

4.0.

C)

3.0.

D)

1.5.

48)

Due to the existence of the FDIC, banks

48)

______

A)

have not changed their behavior even with the existence of insurance.

B)

are no longer concerned about net worth.

C)

become more cautious in making loans.

D)

may make riskier loans knowing that their depositors are insured.

49)

Holding money as a medium of exchange to purchase goods and services and make payments is known as the

49)

______

A)

spending demand for money.

B)

transactions demand for money.

C)

asset demand for money.

D)

precautionary demand for money.

50)

The quantity of money demanded

50)

______

A)

varies directly with interest rates.

B)

varies inversely with interest rates.

C)

is unaffected by interest rates.

D)

None of the above are correct.

51)

When interest rates in the bond market go up

51)

______

A)

there is no impact on the price of existing bonds.

B)

the price of existing bonds goes down.

C)

the price of stocks goes up.

D)

the price of existing bonds goes up.

52)

In the real world, contractionary monetary policy would be used to

52)

______

A)

combat a recession.

B)

increase long-run aggregate supply.

C)

increase nominal GDP.

D)

reduce the rate of inflation.

53)

What effect does a contractionary monetary policy in the U.S. have on the foreign trade sector?

53)

______

A)

The higher value of the dollar will decrease exports and increase imports.

B)

The lower value of the dollar will decrease exports and increase imports.

C)

The lower value of the dollar will decrease imports and increase exports.

D)

The higher value of the dollar will decrease imports and increase exports.

54)

The equation of exchange is

54)

______

A)

V= PY.

B)

P= VY.

C)

Y= VP.

D)

None of the above are correct.

55)

If V is constant and Y is fixed, any change in M

55)

______

A)

leads to a larger change in P.

B)

leads to a smaller change in P.

C)

does not lead to change in P.

D)

leads to a proportionate change in P.

56)

The quantity theory of money and prices asserts that

56)

______

A)

increases in the money supply lead to an increase in the velocity of money.

B)

increases in the money supply will increase real GDP.

C)

increases in the money supply lead to a decrease in the velocity of money.

D)

increases in the money supply lead to inflation.

57)

According to the interest-rate-based transmission mechanism for monetary policy, an increase in the money supply will cause the

57)

______

A)

interest rates to fall, causing planned real investment spending to rise and leading to an increase in aggregate demand.

B)

interest rates to rise, causing planned real investment spending to rise and leading to a decrease in aggregate demand.

C)

interest rates to fall, causing planned real investment spending to rise and leading to a decrease in aggregate demand.

D)

interest rates to fall, causing planned real investment spending to fall and leading to an increase in aggregate demand.

58)

Which of the following is likely caused by the long-run impact of expansionary policy?

58)

______

A)

a decrease in unemployment

B)

an increase in the price level

C)

a decrease in the price level

D)

an increase in unemployment

59)

In the above figure, what does the line U represent?

59)

______

A)

nominal inflation rate of unemployment (NAIRU)

B)

the Phillips curve

C)

the Natural Rate of Unemployment (NARU)

D)

full inflation rate of unemployment

60)

The Phillips curve suggests a trade-off between

60)

______

A)

the rate of change in the price level and the unemployment rate.

B)

inflation rate and real GDP.

C)

discretionary or nondiscretionary economic policies.

D)

unemployment rates and marginal tax rates.

61)

In the above figure, if we start at and , and the money supply increases unexpectedly, what would be the short-run equilibrium even with rational expectations?

61)

______

A)

B)

C)

D)

62)

In the above figure, if we start at and , and the money supply increases unexpectedly, what would be the long-run equilibrium?

62)

______

A)

B)

C)

D)

63)

Costs that tend to deter firms from changing their prices in response to changes in the market equilibrium price are referred to as

63)

______

A)

burden costs.

B)

large menu costs.

C)

real menu costs.

D)

small menu costs.

64)

Population growth is more likely to contribute to economic growth when

64)

______

A)

technological progress is limited.

B)

economic freedom is present.

C)

capital accumulation is limited.

D)

the labor force participation rate does not increase.

65)

Economic freedom by its nature suggests

65)

______

A)

a lack of laws and regulations.

B)

economic anarchy.

C)

minimal government interference.

D)

zero government.

66)

Economic growth is measured by

66)

______

A)

the annual percentage change in nominal GDP.

B)

the annual percentage change in per capita nominal GDP.

C)

the annual percentage change in per capita real GDP.

D)

the annual percentage change in the unemployment rate.

67)

Suppose a country has a five percent annual growth in real GDP and a one percent growth in population, its per capita growth of real GDP is

67)

______

A)

two percent.

B)

four percent.

C)

five percent.

D)

six percent.

68)

Dead capital is most likely to exist when

68)

______

A)

there are restrictions on exports.

B)

property rights are well-defined.

C)

there are restrictions on imports.

D)

residents of a country face barriers to establishing legal ownership of resources.

69)

If you invest in a foreign company by buying 28 percent of its shares of stock, you have engaged in

69)

______

A)

moral hazard.

B)

adverse selection.

C)

foreign direct investment.

D)

portfolio investment.

Maximum Feasible Hourly Production Rates of Either

Product A or Product B Using All Available Resources

Product Country X Country Y

A 4 8

B 4 4

70)

Refer to the above table. If opportunity costs are constant, then the opportunity cost of producing good B in country X is __________, and the opportunity cost of producing good B in country Y is __________?

70)

______

A)

1 unit of A; 0.5 unit of B

B)

1 unit of A; 0.5 unit of A

C)

1 unit of A; 2 units of A

D)

1 unit of B; 2 units of A

71)

Which of the following is a true statement?

71)

______

A)

Everyone benefits from free trade.

B)

Free trade harms domestic producers of goods that face import competition.

C)

Exporters benefit from trade and importers do not.

D)

Consumers benefit from trade and producers do not.

72)

According to international trade theory

72)

______

A)

every country has a comparative advantage in something.

B)

less developed countries cannot trade successfully with developed countries.

C)

comparative advantage is based on absolute advantage.

D)

trade is based on absolute advantage.

73)

Which of the following is consistent with international trade theory?

73)

______

A)

A country should strive for comparative advantage in mfg.

B)

The United States needs trade restrictions to stay competitive.

C)

The standard of living within a country is a function of the economic strength of the economy and not of its relative position.

D)

The United States has been falling behind Europe and Japan because its economy is too open.

74)

Refer to the above figures. A tariff is placed on a foreign good. Which figure represents the situation in the domestic market for the foreign good?

74)

______

A)

Panel A

B)

Panel B

C)

Panel C

D)

Panel D

75)

When international trade is in balance,

75)

______

A)

the value of exports of goods equals the value of imports of goods.

B)

the value of exports of goods and services equals the value of imports of goods and services.

C)

the value of capital exports equals the value of capital imports.

D)

the value of all debit transactions equals the value of all credit transactions.

76)

The capital account is

76)

______

A)

a category of the balance of payments transactions that measures flows of real and financial assets.

B)

a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers.

C)

the reserve assets created by the International Monetary Fund for countries to use in settling international payment obligations.

D)

the price of one nation's currency in term of the currency of another country.

77)

Suppose the current account of a country is in balance. A new transaction occurs so that the current account is now in surplus. From this we know that

77)

______

A)

the balance of goods and services is now in surplus.

B)

the balance of trade is now in surplus.

C)

the government must make official reserve transactions.

D)

the capital account is now in deficit.

78)

Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand is known as

78)

______

A)

standard drawing rights.

B)

the foreign exchange market.

C)

the exchange rate.

D)

flexible exchange rates.

79)

If the foreign exchange rate is 70 cents for one yen, then

79)

______

A)

a house that costs 100,000 yen will cost $700,000.00.

B)

a car that costs 40,000 yen will cost $7,143.00.

C)

a clock that costs 500 yen will cost $350.00.

D)

a wine that costs 200 yen will cost $14.00.

80)

A hedge is

80)

______

A)

the possibility that changes in the value of a nation's currency will result in variations in the market value of assets.

B)

an exchange rate arrangement in which a country pegs the value of its currency to the exchange value.

C)

active management of a floating exchange rate on the part of a country's government.

D)

a financial strategy that reduces the change of suffering losses arising from foreign exchange risk.