1.
News
Story: Workers at a car-manufacturing plant in Flint, Michigan are laid off
because the economy is weak and GM cars aren't selling well. GM isn't sure when
the plant will reopen. What type of unemployment describes the workers' situation?
§ Frictional
unemployment
§ Structural
unemployment
§ Full
unemployment
§ Cyclical
unemployment
ECO 372 Final Questions and Answers ECO 372 Week 5 Final
Exam
2.
Globalization
that allows governments to pursue expansionary policies can be dangerous
because it can lead to:
§ A
reduction in the debt ceiling
§ Goods
price inflation
§ Asset
price inflation
§ Goods
price deflation
3.
Macroeconomics
is:
§ The
study of aggregate economic relationships.
§ An
analysis of economic reality that proceeds from the parts to the whole.
§ The
study of pricing policies of firms and the purchasing decisions of households.
§ The
study of individual choice and how that choice is influenced by economic
forces.
4.
Which
of the following types of unemployment is considered to be the most
controllable through demand-side macroeconomic policy?
§ Frictional
unemployment
§ Cyclical
unemployment
§ Structural
unemployment
§ Natural
unemployment
Answers To ECO 372 Week 5 Final
Exam
5.
If
banks hold excess reserves whereas before they did not, the money multiplier:
§ Will
become smaller
§ Will
become larger
§ Might
increase or might decrease
§ Will
be unaffected
6.
Using
the expenditure approach, gross domestic product equals:
§ The
sum of consumption, investment, government purchases, and net exports
§ Gross
national product minus net exports
§ The
sum of consumption, investment, and government purchases
§ Gross
national product
7.
How
do investment in technology and investment in capital differ?
§ They
have similar effects on output so they have no important differences from an
economic point of view.
§ They
have the same effects on output but investments in technology are much more
closely tied to the level of saving than investments in capital.
§ They
have different effects on output because of the positive externalities
associated with investments in capital.
§ They
have different effects on output because of the positive externalities associate
with investments in technology.
8.
The
interest rate is the price paid for use of a:
§ Real
asset.
§ Financial
liability.
§ Financial
asset.
§ Real
liability.
9.
If
the reserve requirement is 20 percent, and banks keep no excess reserves, an
increase in an initial inflow of $100 into the banking system will cause an
increase in the money supply of:
§ $50
§ $100
§ $500
§ $20
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10.
Suppose
farmers can use their land to grown either wheat or corn. The law of supply
predicts that an increase in the market price of wheat will cause:
§ Farmers
to substitute wheat for the production of corn.
§ Farmers
to raise the production of corn and wheat.
§ Farmers
to lower the production of corn and wheat.
§ Farmers
to substitute corn for the production of wheat.
11. according to Keynes, why might
deflation create problems for an economy?
§ In
expectation of increased spending, too many entrepreneurs would begin
businesses and most would fail.
§ The
cost of repricing goods would increase costs, and therefore reduce profits, for
businesses and they would cut production.
§ People
would drop out of unions because unions would become ineffective at keeping
wages of members high.
§ Consumers
might expect prices to fall further and cut back consumption now.
12.
When interest rates rise, people are:
§ More
likely to borrow, that is, purchase a financial asset.
§ More
likely to borrow, that is, sell a financial asset.
§ Less
likely to borrow, that is, sell a financial asset.
§ Less
likely to borrow, that is, purchase a financial asset.
13. according to the Classical growth
model, an economy that increases its saving will grow:
§ Quickly
since the increase in saving will permit greater investment.
§ Quickly
since the increase in saving will permit more rapid technological progress.
§ Slowly
because interest rates will fall, causing investment to decline.
§ Slowly
because consumption and aggregate demand will be reduced.
14. 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
reduction in government spending
§ An
increase in taxes
§ An
increase in government spending
§ No
change in taxes or government spending
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15.
Which of the following topics is best characterized as a macroeconomic
issue?
§ The
effect of a drought on the price of corn
§ The
decision by Apple to produce fewer Macintosh computers
§ The
effect of an increase in federal spending on the unemployment rate
§ The
choice a student makes in selecting college course
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16.
If income increases more rapidly than expected, then:
§ Estimates
of the target rate of employment are likely to increase.
§ The
budget is less likely to be in surplus.
§ Tax
revenues will be lower than expected.
§ Spending
on income-support programs will likely be lower than expected.
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17.
In which of the following situations is a budget surplus most likely to
occur?
§ When
fiscal policy is contractionary and the economy is expanding
§ When
fiscal policy is expansionary and the economy is contracting
§ When
fiscal policy is expansionary
§ When
the economy is contracting
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18. The largest expenditure component of
GDP is:
§ Government
spending
§ Net
exports
§ Investment
§ Consumption
19.
Which of the following is the path through which contractionary monetary
policy works?
§ Money
down implies interest rate up implies investment up implies income down.
§ Money
down implies interest rate down implies investment down implies income down.
§ Money
down implies interest rate up implies investment down implies income down.
§ Money
down implies interest rate down implies investment up implies income down.
20.
As a country develops economically, what changes usually take place in
the goods it exports?
§ There
is little change because comparative advantage does not change.
§ Exports
go from being diversified to being specialized in whatever the country finds to
its comparative advantage.
§ Services
and manufactured goods decline in importance and are replaced by raw materials
and agricultural products.
§ Raw
materials and agricultural products decline in importance and are replaced by
services and manufactured goods.
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21.
What would make foreigners want to buy more from the United States?
§ Higher
tariffs
§ Higher
interest rates in the United States
§ Inflation
in the United States
§ A
fall in the value of the dollar in the foreign exchange market
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22.
The depreciation of currency will:
§ Balance
a trade surplus.
§ Have
no impact on a country's comparative advantage.
§ Worsen
a country's comparative advantage.
§ Improve
a country's comparative advantage.
23.
The government of Crossland wants to influence its exchange rate. It
will do so by buying and selling:
§ Currencies
in its official reserves
§ Commodities
§ Goods
and services from the current account
§ Transfers
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24.
If a country wants to prevent its exchange rates from falling, it could:
§ Place
restrictions on imports
§ Pursue
easier monetary policy
§ Remove
any subsidies on exports
§ Remove
restrictions on imports
25.
Central banks are responsible for:
§ Both
monetary policy and fiscal policy
§ Monetary
policy but not fiscal policy
§ Neither
monetary policy nor fiscal policy
§ Fiscal
policy but not monetary policy
26.
Quotas and tariffs can:
§ Never
have the same effect on imports and import prices.
§ Have
the same effect on the price of domestically produced goods if they are set
appropriately.
§ Yield
the same amount of tax revenue if they are set appropriately.
§ Both
increase international trade by the same amount if set appropriately.
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27.
Between 2007 and 2009, the U.S. unemployment rate rose from under 5
percent to over 8 percent. A Keynesian economist would most likely blame this
increase in unemployment on:
§ An
increase in the minimum wage.
§ An
increase in the bargaining power of labor unions.
§ A
decline in the level of aggregate demand.
§ A
decline in aggregate supply.
28.
U.S. imports involve an:
§ Inflow
of foreign currency from foreigners to the U.S. economy
§ Inflow
of dollars from foreigners to the United States economy
§ Outflow
of foreign currency from the United States to foreigners
§ Outflow
of dollars from the United States to foreigners
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29.
The law of demand states that quantity demanded of a good is inversely
related to the price of that good. Therefore, as the price of a good goes:
§ Up,
the quantity demanded goes down.
§ Down,
the quantity demanded stays the same.
§ Up,
the quantity demanded also goes up.
§ Down,
the quantity demanded goes down.
30. according to Keynes, market
economies:
§ Never
experience significant declines in aggregate demand.
§ Are
constantly experiencing significant declines in aggregate demand.
§ May
recover slowly after they experience a significant decline in aggregate demand.
§ Quickly
recover after they experience a significant decline in aggregate demand.
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