Question ECO372– Principles of Macroeconomics – Final Exam Study Guide 2013

05 Jun Question ECO372– Principles of Macroeconomics – Final Exam Study Guide 2013

Question
ECO372– Principles of Macroeconomics – Final Exam Study Guide 2013

1. The market where business sell goods and services to households and the government is called

a. goods market

b. factor market

c. capital market

d. money market

2. Real gross domestic product is best defined as

a. the market value of intermediate goods and services produced in an economy including exports

b. all goods and services produced in an economy, stated in prices in a given year and multiplied by quantity

c. the market value of all final goods and services produced in an economy stated in the prices of a given year

d. the market value of goods and services produced in an economy stated in current year prices

3. underemployment includes

a. who work off the books to avoid paying taxes

b. who are working part time or not using all their skills at a fulltime job

c. who are tired of looking for a job so they quit looking but still want one

d. whose skills are not in demand anymore

4. .The bureau of economic analysis is responsible for which of the following

a. setting interest rates

b. managing the money supply

c. calculating the US gross domestic product

d. paying unemployment benefits

5. The federal reserve provides which of the following data

a. federal funds rate

b. stock price of GE

c. bond yields of corporation

d. debt to GDP of Ireland

6. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should have

a. shifted the AD curve to the left

b. shifted the AD curve to the right

c. made the AD curve flatter

7. The largest source of household income is in the U.S. is obtained

a. stock dividends

b. wages and salaries

c. interest earnings

d. rental income

8. If the depreciation of a country’s currency increases it aggregate expenditures by 20, the AD curve will

a. shift right by more than 20

b. shift right by less than 20

c. shift right by exactly 20

d. not shift at all

9. Aggregate demand management policies are designed most directly to

a. minimize unemployment

b. minimize inflation

c. control the aggregate level of spending in the economy

d. prevent budget deficits or surpluses

10. Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model

a. an increase in government spending

b. an increase in taxes

c. a reduction in government spending

d. no change in taxes or government spending.

11. According to Keynes, market economies

A. never experience significant declines in aggregate demand

B. quickly recover after they experience a significant decline in aggregate demand

C. may recover slowly after they experience a significant decline in aggregate demand

D. are constantly experiencing significant declines in aggregate demand

12. The laissez-faire policy prescription to eliminate unemployment was to

A. eliminate labor unions and government policies that hold real wages too high

B. strengthen unions and government regulations protecting unions and workers

C. increase real wages so that people are encouraged to work

D. have government guarantee jobs for everyone

13. In the AS/AD model, an expansionary monetary policy has the greatest effect on the price level when it

A. increases both nominal and real income

B. increases real income but not nominal income

C. increases nominal income but not real income

D. doesn’t increase real or nominal income

14. The Federal funds rate

A. is always slightly higher than the discount rate

B. can never be close to zero

C. may sometimes have to be targeted at zero

D. is an intermediate target

15. What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1% to 1.25%?

A. Open-market operations

B. The discount rate

C. A change in reserve requirements

D. Margin requirements

16. If the Federal Reserve increases the required reserves, financial institutions will likely lend out

A. more than before, increasing the money supply

B. less than before, decreasing the money supply

C. more than before, decreasing the money supply

D. less than before, increasing the money supply

17. Suppose the money multiplier in the U.S. is 3. Suppose further that if the Federal Reserve changes the discount rate by 1 percentage point, banks change their reserves by 300. To increase the money supply by 2700 the Federal Reserve should

A. reduce the discount rate by 3 percentage points

B. reduce the discount rate by 10 percentage points

C. raise the discount rate by 3 percentage points

D. raise the discount rate by 10 percentage points

18. If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent. This policy would most likely

A. increase both the money multiplier and the money supply

B. increase the money multiplier but decrease the money supply

C. decrease the money multiplier but increase the money supply

D. decrease both the money multiplier and the money supply

19. A country can have a trade deficit as long as it can

A. purchase foreign assets

B. make loans to other countries