Study Guide for Final Exam - Econ 203 PDF
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This document contains a study guide for a final exam in economics, covering topics such as opportunity cost, unemployment, and production.
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**Study Guide for Final Exam ** **Econ 203** +-----------------------------------------------------------------------+ | 1. The overriding reason why households and societies face many | | decisions is that | |...
**Study Guide for Final Exam ** **Econ 203** +-----------------------------------------------------------------------+ | 1. The overriding reason why households and societies face many | | decisions is that | | | | --- ----- ----------------------------------------- | | a. resources are scarce. | | b. goods and services are not scarce. | | c. incomes fluctuate with business cycles. | | d. people, by nature, tend to disagree. | | --- ----- ----------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 2. Jose has one evening in which to prepare for two exams and can | | employ one of two possible strategies: | | | | ------------------------ ---------------------------------- ------- | | ---------------------------- | | [Strategy] [Score in Economics] [Score | | in Statistics] | | A 94 79 | | B 77 90 | | ------------------------ ---------------------------------- ------- | | ---------------------------- | | | | The opportunity cost of receiving a 90 on the statistics exam is | | \_\_\_\_\_\_\_\_\_\_\_ points on the economics exam. | | | | --- ----- ---- | | a. 79 | | b. 17 | | c. 11 | | d. 90 | | --- ----- ---- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Figure 2** | | | | | | | | | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 3. **Refer to Figure 2**. Unemployment could cause this economy to | | produce at which point(s)? | | | | --- ----- ----------------- | | a. G | | b. K | | c. F and J | | d. F, I, H, and J | | --- ----- ----------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 4. **Refer to Figure 2**. The opportunity cost of this economy moving | | from point I to point H is | | | | --- ----- ------------------------------- | | a. 120 pillows. | | b. 120 blankets. | | c. 120 blankets and 120 pillows. | | d. 200 blankets. | | --- ----- ------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Exhibit 2** | | | |  | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 5. Refer to **Exhibit 2**. Which graph depicts a technological | | breakthrough and/or an increase in one of the factors of production | | that affects only the production of good X? | | | | --- ----- ----- | | a. (1) | | b. (2) | | c. (3) | | d. (4) | | --- ----- ----- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 6. According to the law of demand, an increase in the price of a good | | will | | | | --- ----- ----------------------------- | | a. increase demand. | | b. decrease demand. | | c. increase quantity demanded. | | d. decrease quantity demanded. | | --- ----- ----------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 7. According to the law of supply, a decrease in the price of ice | | cream would lead to | | | | --- ----- ------------------------------------------------- | | a. an increased supply of ice cream. | | b. a decreased supply of ice cream. | | c. a decrease in quantity supplied of ice cream. | | d. an increase in quantity supplied of ice cream. | | --- ----- ------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Table 4** | | | | ------- ----------- ----------- | | Price Quantity\ Quantity\ | | Demanded Supplied | | | | \$10 10 60 | | | | \$8 20 45 | | | | \$6 30 30 | | | | \$4 40 15 | | | | \$2 50 0 | | ------- ----------- ----------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 8. **Refer to Table 4**. If the price were \$4, a | | | | --- ----- --------------------------------------------------------- | | -------- | | a. surplus of 15 units would exist, and price would tend to | | fall. | | b. shortage of 25 units would exist, and price would tend to | | rise. | | c. surplus of 25 units would exist, and price would tend to | | fall. | | d. shortage of 40 units would exist, and price would tend to | | rise. | | --- ----- --------------------------------------------------------- | | -------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 9. **Refer to Table 4**. If the price were \$8, a | | | | --- ----- --------------------------------------------------------- | | -------- | | a. shortage of 20 units would exist, and price would tend to | | rise. | | b. surplus of 25 units would exist, and price would tend to | | fall. | | c. shortage of 25 units would exist, and price would tend to | | rise. | | d. surplus of 45 units would exist, and price would tend to | | fall. | | --- ----- --------------------------------------------------------- | | -------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 10. How would a decrease in the price of the feed grains used to feed | | cattle affect the market for beef? | | | | --- ----- --------------------------------------- | | a. Price increases, quantity increases. | | b. Price increases, quantity decreases. | | c. Price decreases, quantity increases. | | d. Price decreases, quantity decreases. | | --- ----- --------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 11. A painter pays \$500 for paint he uses to repaint a house. He | | then presents a bill for \$1200 that covers his time and expenses to | | the homeowner. How much do these transactions add to GDP? | | | | --- ----- -------- | | a. \$500 | | b. \$700 | | c. \$1200 | | d. \$1700 | | --- ----- -------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 12. A U.S. publisher purchases new computers that were manufactured | | in the U.S. This purchase makes | | | | --- ----- --------------------------------------------------------- | | -------------------------- | | a. a positive contribution both to investment and to GDP. | | b. a positive contribution both to consumption and to GDP. | | c. a positive contribution to GDP, but it does not affect in | | vestment or consumption. | | d. a positive contribution to investment, but it does not af | | fect GDP. | | --- ----- --------------------------------------------------------- | | -------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 13. In the economy of Talikastan, last year\'s consumption was | | \$3000, exports were \$1200, GDP was \$8000, government purchases | | were \$1200, and imports were \$600. What was Talikastan's investment | | last year? | | | | --- ----- -------- | | a. \$3200 | | b. \$5600 | | c. \$2000 | | d. \$4400 | | --- ----- -------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Table 24\ | | **A country produces only meat and potatoes in the quantities and | | prices listed below. Use Year 1 as the base year. | | | | | | | | | | | | +------------+------------+------------+------------+------------+ | | | **Year** | **Price | **Quantity | **Price | **Quantity | | | | | of** | of | of** | of** | | | | | | Potatoes** | | | | | | | **Potatoes | | **Meat** | **Meat** | | | | | ** | | | | | | +------------+------------+------------+------------+------------+ | | | Year 1 | \$2.00 | 10 | \$20 | 6 | | | | **(Base | | | | | | | | Yr.)** | | | | | | | +------------+------------+------------+------------+------------+ | | | Year 2 | \$2.50 | 15 | \$22 | 7 | | | +------------+------------+------------+------------+------------+ | | | Year 3 | \$3.50 | 20 | \$25 | 8 | | | +------------+------------+------------+------------+------------+ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 14. **Refer to Table 24**. Between Year 2 - Year 3 the economy grew | | | | | | | | --- ----- ------- | | a. 8.5%. | | b. 15%. | | c. 17.6% | | d. 20% | | --- ----- ------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 15. The information for 2008 in millions in the table below was | | reported by the World Bank. Based on this information, which list | | below contains the correct ordering of real GDP per person from | | highest to lowest? | | | | | | | | ------------- ------------------------ -------------------------- - | | --------------- | | **Country** **Real GDP (in US\$)** **Nominal GDP(in US\$)** * | | *Population** | | Germany 2,091,573 3,649,493 8 | | 2.11 | | Japan 5,166,281 4,910,839 1 | | 27.70 | | U.S. 11,513,872 14,093,309 3 | | 04.06 | | ------------- ------------------------ -------------------------- - | | --------------- | | | | | | | | | | | | --- ----- ------------------------------- | | a. Japan, Germany, United States | | b. Japan, United States, Germany | | c. Germany, United States, Japan | | d. United States, Japan, Germany | | --- ----- ------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 16. If the consumer price index rises from 110 to 140, the typical | | family | | | | --- ----- --------------------------------------------------------- | | ----------- | | a. has to spend more dollars to maintain the same standard o | | f living. | | b. can spend fewer dollars to maintain the same standard of | | living. | | c. finds that its standard of living is not affected. | | d. can offset the effects of rising prices by saving more. | | --- ----- --------------------------------------------------------- | | ----------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Table 25.** The table below applies to an economy with only two | | goods --- hamburgers and hot dogs. The fixed basket consists of 4 | | hamburgers and 8 hot dogs. The base year is Year 1. | | | | | | | | +---------------------+---------------------+---------------------+ | | | **Year** | **Price of** | **Price of** | | | | | | | | | | | **Hamburgers** | **Hot Dogs** | | | +---------------------+---------------------+---------------------+ | | | Year 1 **(Base | \$5.00 | \$2.50 | | | | Yr.)** | | | | | +---------------------+---------------------+---------------------+ | | | Year 2 | 6.00 | 4.00 | | | +---------------------+---------------------+---------------------+ | | | Year 3 | 6.50 | 5.00 | | | +---------------------+---------------------+---------------------+ | | | | | | | | | | | | | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 17. **Refer to Table 25**. The economy's inflation rate between Year | | 2 - Year 3 is about | | | | --- ----- --------- | | a. 17.9 %. | | b. 17.0 %. | | c. 19.0 %. | | d. 7.5 %. | | --- ----- --------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 18. Art is offered a job in Des Moines, where the CPI is 60, and a | | job in New York, where the CPI is 125. Art\'s job offer in Des Moines | | is for \$48,000. How much does the New York job have to pay in order | | for the two salaries to represent the same purchasing power? | | | | --- ----- ----------- | | a. \$23,040 | | b. \$52,000 | | c. \$79,200 | | d. \$100,000 | | --- ----- ----------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 19. Sam\'s income was \$50,000 in year 1 and \$55,600 in year 2. The | | CPI was 114 in year 1 and 124 in year 2. What was the approximate | | percentage change in Sam\'s purchasing power between the two years? | | | | --- ----- ---------- | | a. -- 2.2 % | | b. \+ 3.4 % | | c. -- 1.7 % | | d. \+ 2.2 % | | --- ----- ---------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 20. Carrie deposits \$1,000 in a savings account that pays an annual | | interest rate of 5 percent. Over the course of a year, the inflation | | rate is 1.7 percent. At the end of the year, Carrie has | | | | --- ----- --------------------------------------------------------- | | ------------------ | | a. \$17 more in his account, and his purchasing power has in | | creased by \$10. | | b. \$30 more in his account, and his purchasing power has in | | creased by \$50. | | c. \$40 more in his account, and his purchasing power has in | | creased by \$33. | | d. \$50 more in his account, and his purchasing power has in | | creased by \$33. | | --- ----- --------------------------------------------------------- | | ------------------ | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 21. Josh is a full-time college student who is not working or looking | | for a job. The Bureau of Labor Statistics counts Josh as | | | | --- ----- -------------------------------------------- | | a. unemployed and in the labor force. | | b. unemployed but not in the labor force. | | c. in the labor force but not unemployed. | | d. neither in the labor force nor unemployed. | | --- ----- -------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 22. In 2014, the Italian adult non-institutionalized population was | | 38.8 million, the labor force was 25.4 million, and the number of | | people employed was 22 million. According to these numbers, the | | Italian labor-force participation rate and unemployment rate were | | about | | | | --- ----- ----------------- | | a. 65.5% and 13.4% | | b. 65.5% and 8.8% | | c. 56.7% and 13.4% | | d. 56.7% and 8.8% | | --- ----- ----------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Table 29**\ | | Below is data about the labor market in the state of Northwoods. | | | | ---------- ----------------------- ----------------------- | | **Wage** **Quantity Demanded** **Quantity Supplied** | | \$10 80,000 120,000 | | \$9 90,000 110,000 | | \$8 100,000 100,000 | | \$7 110,000 90,000 | | \$6 120,000 80,000 | | ---------- ----------------------- ----------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 23. **Refer to Table 29.** If the state government imposed a minimum | | wage of \$9, how many people would be unemployed? | | | | --- ----- -------- | | a. 0 | | b. 10,000 | | c. 20,000 | | d. 40,000 | | --- ----- -------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 24. Skyline Chili wants to finance the purchase of new equipment for | | its restaurants. The firm has limited internal funds, so Skyline | | likely will | | | | --- ----- --------------------------------------------------------- | | - | | a. demand funds from the financial system by buying bonds. | | b. demand funds from the financial system by selling bonds. | | c. supply funds to the financial system by buying bonds. | | d. supply funds to the financial system by selling bonds. | | --- ----- --------------------------------------------------------- | | - | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 25. Larry buys stock in A to Z Express Company. Curly Corporation | | builds a new factory. Whose transaction would be an act of investment | | in the language of macroeconomics? | | | | --- ----- ----------------------------------------- | | a. only Larry's | | b. only Curly Corporation's | | c. Larry's and Curly Corporation's | | d. neither Larry's nor Curly Corporation's | | --- ----- ----------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 26. A larger budget deficit | | | | --- ----- -------------------------------------------------- | | a. raises the interest rate and investment. | | b. reduces the interest rate and investment. | | c. raises the interest rate and reduces investment. | | d. reduces the interest rate and raises investment. | | --- ----- -------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Exhibit 28** | | | | ---------- ------------------------ ----------------------- ------- | | -------------------- | | **Bond** **Face Value of Bond** **Price of the Bond** **Annua | | l Coupon Payment** | | C \$1,000 \$1,200 \$250 | | ---------- ------------------------ ----------------------- ------- | | -------------------- | | | | | | | | | | | | | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 27. Refer to **Exhibit 28**. The yield on bond C is approximately | | | | --- ----- --------------- | | a. 25.0 percent. | | b. 20.8 percent. | | c. 2.5 percent. | | d. 100 percent. | | --- ----- --------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 28. According to the rule of 70, if the interest rate is 5 percent, | | how long will it take for the value of a savings account to double? | | | | --- ----- ----------------- | | a. about 3.5 years | | b. about 6.3 years | | c. about 12 years | | d. about 14 years | | --- ----- ----------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 29. Suppose you put \$500 into a bank account today. Interest is paid | | annually and the annual interest rate is 8 percent. The future value | | of the \$500 after 2 years is | | | | --- ----- ----------- | | a. \$428.67. | | b. \$470.00. | | c. \$580.00. | | d. \$583.20. | | --- ----- ----------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 30. A formalwear shop will earn a net income of \$1,500 per year on a | | tuxedo. The tuxedo is expected to last for two years, after which it | | will be worn out and worthless. If the interest rate is 10 percent | | (0.10) per year, what is the present value of a new tuxedo to the | | shop? | | | | --- ----- ------------ | | a. \$148.76 | | b. \$2,955.30 | | c. \$2,955.59 | | d. \$2.603.31 | | --- ----- ------------ | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 31. You saved \$500 in currency in your piggy bank to purchase a new | | laptop. The \$500 you kept in your piggy bank illustrates money's | | function as a \_\_\_\_\_\_\_. The laptop's price is posted as \$500. | | The \$500 price illustrates money's function as a \_\_\_\_\_. You use | | the \$500 to purchase the laptop. This transaction illustrates | | money's function as a \_\_\_\_\_\_. | | | | --- ----- ----------------------------------------------------- | | a. store of value, medium of exchange, unit of account | | b. store of value, unit of account, medium of exchange | | c. medium of exchange, unit of account, store of value | | d. medium of exchange, store of value, unit of account | | --- ----- ----------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 32. At the Federal Reserve, the nation's \_\_\_\_\_ made by the | | Federal Open Market Committee, which meets \_\_\_\_\_. | | | | --- ----- --------------------------------------------------------- | | - | | a. monetary and fiscal policies are; about every six weeks. | | b. monetary and fiscal policies are; twice a year. | | c. monetary policy is; about every six weeks. | | d. monetary policy is; twice a year. | | --- ----- --------------------------------------------------------- | | - | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | **Table 30** | | | | --------------------------- ------------- ---------- ---------- | | **Bank of Pleasantville** | | | | Assets Liabilities | | Reserves \$3,000 Deposits \$50,000 | | Loans 47,000 | | --------------------------- ------------- ---------- ---------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 33. **Refer to Table 30**. If the Fed's reserve requirement is 5 | | percent, then what quantity of excess reserves does the Bank of | | Pleasantville now hold? | | | | --- ----- --------- | | a. \$500 | | b. \$250 | | c. \$2,000 | | d. \$3,600 | | --- ----- --------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 34. If the reserve ratio is 5 percent, banks do not hold excess | | reserves, and people do not hold currency, then when the Fed | | purchases \$20 million worth of government bonds, bank reserves | | | | --- ----- --------------------------------------------------------- | | ----------------------------- | | a. increase by \$20 million and the money supply eventually | | increases by \$400 million. | | b. decrease by \$20 million and the money supply eventually | | decreases by \$400 million. | | c. increase by \$20 million and the money supply eventually | | increases by \$100 million. | | d. decrease by \$20 million and the money supply eventually | | decreases by \$100 million. | | --- ----- --------------------------------------------------------- | | ----------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 35. The Federal Deposit Insurance Corporation | | | | --- ----- --------------------------------------------------------- | | --------------------- | | a. protects depositors in the event of bank failures. | | b. has become insolvent in recent years due to a large numbe | | r of bank failures. | | c. is part of the Federal Reserve System. | | d. in practice has seldom been of much use. | | --- ----- --------------------------------------------------------- | | --------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 36. If the public decides to hold more currency and fewer deposits in | | banks, bank reserves | | | | --- ----- ----------------------------------------------------- | | a. decrease and the money supply eventually decreases. | | b. decrease but the money supply does not change. | | c. increase and the money supply eventually increases. | | d. increase but the money supply does not change. | | --- ----- ----------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 37. Suppose each good costs \$5 per unit and Megan\'s hourly wage is | | \$40 and hour. The value of Megan\'s real wage is \_\_\_\_\_, and if | | the price of goods rises, to maintain the real value of her wage she | | needs to get paid \_\_\_\_\_. | | | | --- ----- --------------------------------- | | a. \$40; more dollars | | b. 8 units of goods; more dollars | | c. \$40; fewer dollars | | d. 8 units of goods; fewer dollars | | --- ----- --------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 38. Based on the quantity equation, if *M* = 100, *V* = 3, and *Y* = | | 150, then *P* = | | | | --- ----- ------ | | a. 1. | | b. 1.5. | | c. 2. | | d. 4.5. | | --- ----- ------ | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 39. If when the money supply changes, real output and velocity do not | | change, then a 2 percent increase in the money supply | | | | --- ----- --------------------------------------------------- | | a. decreases the price level by 2 percent. | | b. decreases the price level by less than 2 percent. | | c. increases the price level by less than 2 percent. | | d. increases the price level by 2 percent. | | --- ----- --------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 40. Jennifer took out a fixed-interest-rate loan at 6%. She expected | | inflation to be 3%, but instead it turned out to be 5%. The real | | interest rate she paid is \_\_\_\_\_ and the real value of the loan | | is \_\_\_\_\_ than she had expected. | | | | --- ----- ------------ | | a. 3%; higher | | b. 3%; lower | | c. 1%; higher | | d. 1%; lower | | --- ----- ------------ | +-----------------------------------------------------------------------+ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **Pessimism\ **Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +-----------------------------------------------------------------------+ | 41. **Refer to Pessimism.** Which curve shifts and in which | | direction? | | | | --- ----- -------------------------------- | | a. aggregate demand shifts right | | b. aggregate demand shifts left | | c. aggregate supply shifts right. | | d. aggregate supply shifts left. | | --- ----- -------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 42. **Refer to Pessimism.** In the short run what happens to the | | price level and real GDP? | | | | --- ----- ------------------------------------------- | | a. Both the price level and real GDP rise. | | b. Both the price level and real GDP fall. | | c. The price level rises and real GDP falls. | | d. The price level falls and real GDP rises. | | --- ----- ------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 43. **Refer to Pessimism.** What happens to the expected price level | | and what's the result for wage bargaining? | | | | --- ----- --------------------------------------------------------- | | -------------- | | a. The expected price level rises. Bargains are struck for h | | igher wages. | | b. The expected price level rises. Bargains are struck for l | | ower wages. | | c. The expected price level falls. Bargains are struck for h | | igher wages. | | d. The expected price level falls. Bargains are struck for l | | ower wages. | | --- ----- --------------------------------------------------------- | | -------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 44. **Refer to Pessimism.** In the long run, the change in price | | expectations created by pessimism shifts | | | | --- ----- ----------------------------------- | | a. long-run aggregate supply right. | | b. long-run aggregate supply left. | | c. short-run aggregate supply right. | | d. short-run aggregate supply left. | | --- ----- ----------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 45. **Refer to Pessimism.** How is the new long-run equilibrium | | different from the original one? | | | | --- ----- ---------------------------------------------------- | | a. both price and real GDP are higher. | | b. both price and real GDP are lower. | | c. the price level is the same and GDP is lower. | | d. the price level is lower and real GDP is the same. | | --- ----- ---------------------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 46. Suppose there were a large decline in net exports. If the Fed | | wanted to stabilize output, it could | | | | --- ----- ------------------------------------- | | a. buy bonds to raise interest rates. | | b. buy bonds to lower interest rates. | | c. sell bonds to raise interest rates. | | d. sell bonds to lower interest rates. | | --- ----- ------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 47. In the short run, a decrease in the money supply causes interest | | rates to | | | | --- ----- ------------------------------------------------ | | a. increase, and aggregate demand to shift right. | | b. increase, and aggregate demand to shift left. | | c. decrease, and aggregate demand to shift right. | | d. decrease, and aggregate demand to shift left. | | --- ----- ------------------------------------------------ | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 48. The term *crowding-out effect* refers to | | | | --- ----- --------------------------------------------------------- | | --------------------------------------------------------------------- | | ----------------------- | | a. the reduction in aggregate supply that results when a mon | | etary expansion causes the interest rate to decrease. | | b. the reduction in aggregate demand that results when a mon | | etary expansion causes the interest rate to decrease. | | c. the reduction in aggregate demand that results when a fis | | cal expansion causes the interest rate to increase. | | d. the reduction in aggregate demand that results when a dec | | rease in government spending or an increase in taxes causes the inter | | est rate to increase. | | --- ----- --------------------------------------------------------- | | --------------------------------------------------------------------- | | ----------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 49. Suppose that the *MPC* is 0.7, and there are no crowding-out | | effects. If government expenditures increase by \$30 billion, then | | aggregate demand | | | | --- ----- ------------------------------------- | | a. shifts rightward by \$100 billion. | | b. shifts rightward by \$51 billion. | | c. shifts rightward by \$170 billion. | | d. shifts rightward by \$72.8 billion. | | --- ----- ------------------------------------- | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | 50. Automatic stabilizers | | | | --- ----- --------------------------------------------------------- | | --------------------------------------------------------------------- | | --------------------------- | | a. increase the problems that lags cause in using fiscal pol | | icy as a stabilization tool. | | b. are changes in taxes or government spending that increase | | aggregate demand without requiring policy makers to act when the eco | | nomy goes into recession. | | c. are changes in taxes or government spending that policy m | | akers quickly agree to when the economy goes into recession. | | d. All of the above are correct. | | --- ----- --------------------------------------------------------- | | --------------------------------------------------------------------- | | --------------------------- | +-----------------------------------------------------------------------+ **[Answer Key]** ------ 1. a ------ ------ 2. b ------ ------ 3. b ------ ------ 4. b ------ ------ 5. c ------ ------ 6. d ------ ------ 7. c ------ ------ 8. b ------ ------ 9. b ------ ------- 10. c ------- ------- 11. c ------- ------- 12. a ------- ------- 13. a ------- ------- 14. c ------- ------- 15. b ------- ------- 16. a ------- ------- 17. a ------- ------- 18. d ------- ------- 19. d ------- ------- 20. d ------- ------- 21. d ------- ------- 22. a ------- ------- 23. c ------- ------- 24. b ------- ------- 25. b ------- ------- 26. c ------- ------- 27. b ------- ------- 28. d ------- ------- 29. d ------- ------- 30. d ------- ------- 31. b ------- ------- 32. c ------- ------- 33. a ------- ------- 34. a ------- ------- 35. a ------- ------- 36. a ------- ------- 37. b ------- ------- 38. c ------- ------- 39. d ------- ------- 40. d ------- ------- 41. b ------- ------- 42. b ------- ------- 43. d ------- ------- 44. c ------- ------- 45. d ------- ------- 46. b ------- ------- 47. b ------- ------- 48. c ------- ------- 49. a ------- ------- 50. b -------
