04 Jun Final Review A person who studies macroeconomics encounters many differe
Question
Final Review
A person who studies macroeconomics encounters many different types of growth
rates. One of these growth rates of the value of a price index. This type of growth
rate is called an
a. economic growth rate
b. exchange rate
c. inflation rate
d. interest rate
A component of GDP that tends to change very drastically during economic
recessions, and is often responsible for most of the severity of a recession, is
a. Consumption
b. Investment
c. Government purchases
d. Exports
e. Imports
According to the National Bureau of Economic Research, the most recent U.S.
recession began near the end of 2007. Since the preceding recession ended near
the end of 2001, there were six years between these two recessions. Based on
economic data from the last 40 years, this interval between recessions is _______.
a. Much shorter than average
b. Fairly close to the average
c. Much longer than the average
d. A record: its the longest interval the US economy has had between
recessions
e. A record: its the shortest interval the US economy has had between
recessions
In the U.S economy, the demand for loanable funds comes mostly from _______,
who use these funds mostly to finance
a. Households, home purchases.
b. Firms, investment spending
c. Units of government, their budget deficits
d. Households, purchases of consumer durable goods
e. Firms, fringe benefits payments
A bank made a loan to a manufacturing firm, in dollars. The loan had a fixed
nominal interest rate of 5 percent. The average annual inflation rate over the term
of the loan turned out to be 2 percent. Which of the following statements about
this loan is correct?
a. Over the term of this loan, the purchasing power of a dollar fell at an
average rate of approximately 3% per year.
b. The average annual growth rate of the real value of the dollars repaid,
relative to the real value of the dollars lent, was approximately 3 percent
c. The real interest rate on the loan turned out to be approximately 7 %.
d. If the bank had expected the average annual inflation rate, over the loans
term, to turn out to be 3%, then it was disappointed with the loans
outcome.
6.
7.
8.
9.
e. If the firm had expected the real interest rate on the loan to be 2%, then it
was pleased with the loans outcome
In microeconomics, you learned that economists think of the main item that
adjusts to clear the market for any particular as the unit price of that good.
Economists often think of the levels of national saving and investment as being
determined in a single market. They think of the item that plays the role of the
unit price, in this market, as
a. The overall price level
b. The actual inflation rate
c. The nominal interest rate
d. The real interest rate
e. The exchange rate
In the foreign exchange market, the price of a U.S. dollar rises from .67 euros to .
75 euros. Other things equal, ______
a. The value of a European version of the consumer price index is likely to
fall.
b. European currency has appreciated against U.S currency.
c. Goods imported from Europe will become cheaper in the United States
d. The price of a euro, in dollars, has fallen from approximately 1.33 euros to
approximately 1.25 euros.
e. A U.S produced car that formerly cost 16,000 euros in Europe now costs
20,000 euros.
To calculate the value of the Consumer Price Index for a particular month, you
must calculate
a. The market value, using prices from that month, of a basket of goods and
services based on the composition of consumer spending during the
month.
b. The market value, using prices from that month, of a basket of goods and
services based on the composition of consumer spending during some
fixed base period.
c. The market value, using prices from a fixed base period, of a basket of
goods and services based on the composition of consumer spending during
the base period
d. Both a and c
e. Both b and c
If the government runs a budget deficit during a year, then
a. Public saving for the year is negative.
b. It must increase taxes, during the year, to raise the funds needed to cover
the deficit.
c. At the end of the year, the national debt will be equal to the amount of the
deficit.
d. Government consumptions spending exceeds government investment
spending by the amount of the deficit.
e. The money supply increases by the amount of the deficit.
10. In the modern U.S monetary system, the ______ is responsible for making
currency available to the public. This currency has value, and can be used make
payments, because_____
a. Federal Reserve System, the Fed will convert it into gold, at a fixed rate,
on demand.
b. Federal Reserve System, the Fed manages the supply of currency to limit
the amount in circulation.
c. U.S. Treasury Department, the Treasury will convert it into gold, at a fixed
rate, on demand.
d. US Treasury Department, the Treasury manages the supply of currency to
limit the amount in circulations
e. None of the items above is correct
11. If a county is running a trade deficit, then_____
a. The market value of its exports exceeds the market value of its imports.
b. Its domestic spending exceeds its domestic income
c. It is lending to other countries, or buying assets from foreigners, or give
foreign aid.
d. Its national saving exceeds its private investment.
e. All of the above items are correct.
12. The following list gives the values of a number of items form the National Income
and Product Accounts. What is the value of Gross Domestic Product (GDP)?
Exports
100
Private Saving 550
Private Investment
700
Consumptions 3000
Taxes (net of transfers)
250
Imports
300
Government Purchases
300
(consumption and investment)
a. 4000
b. 5200
c. 3800
d. 4350
e. 4100
13. When the US government calculates GDP using the total-spending approach,
household spending for college tuition is categorized as consumption spending.
Many economists argue that it really should be categorized as ________
spending, because
a. Investment, a college education increases a students human capital.
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