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Practice Econ 4

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Econ 101 Quiz on Practice Econ 4, created by mjheg on 06/05/2013.
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Quiz by mjheg, updated more than 1 year ago
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Created by mjheg over 11 years ago
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Question 1

Question
Which of the following rates does the Fed actually set?
Answer
  • the Federal Funds rate
  • the discount rate
  • the market interest rates
  • all of these rates

Question 2

Question
M1 includes
Answer
  • Currency, Checkable Deposits, Demand deposits
  • Currency, Federal Reserves, Checkable deposits
  • Checkable Deposits only
  • Currency, Checkable Deposits, Small time deposits

Question 3

Question
Why does so much U.S. currency circulate in other countries?
Answer
  • Several countries use the U.S. dollar as their official currency.
  • The U.S. dollar is frequently used in drug trafficking.
  • Dollars hold their value in unstable countries.
  • All of the above

Question 4

Question
In the United States, the amount of cash per capita is about $3,000. This figure
Answer
  • shows how much currency each American holds in their checking accounts.
  • misrepresents actual currency holdings in the United States because a lot of dollars are held outside the country.
  • accurately represents the size of the underground economy in the United States
  • shows how much the world depends on the U.S. monetary system.

Question 5

Question
The Federal Reserve's major tools to control the money supply are I. open market operations. II. discount rate lending and the term auction facility. III. required reserve ratio and payment of interest on reserves. IV. federal funds lending
Answer
  • I only
  • I, II
  • I, II, III
  • I, II, III, IV

Question 6

Question
The Federal Funds rate is the interest rate charged on a(n)
Answer
  • overnight loan from one bank to another.
  • low interest loan from the Federal Reserve to a bank.
  • loan from the Federal Reserve to a bank.
  • long-term loan from one bank to another.

Question 7

Question
Why is the SRAS curve steeper above its intersection with the Solow growth curve?
Answer
  • Wages are stickier in the upward direction.
  • Wages are less sticky in the upward direction
  • Lower inflation will lead to faster growth.
  • Employees become less motivated to work during times of unexpected inflation.

Question 8

Question
According to the quantity theory of money, an increase in money supply causes an increase in
Answer
  • prices
  • production
  • velocity of money
  • real GDP

Question 9

Question
The short-run aggregate supply curve shows a relationship between the real growth rate and the
Answer
  • actual inflation rate
  • expected inflation rate
  • long-run inflation rate
  • none of the above

Question 10

Question
How has the role of agricultural production changed in the Indian economy?
Answer
  • It is now only 1 percent of GDP.
  • It has fallen to about 20 percent of GDP due to economic diversification.
  • It has remained about 40 percent of GDP, but has doubled in yield.
  • It has become a greater part of GDP, due to technological advances.

Question 11

Question
Imagine that a government starts out with the budget surplus. If in the next period the government temporarily runs a budget deficit, what would you expect to happen to aggregate demand?
Answer
  • AD would increase
  • AD would decrease
  • AD would remain the same
  • AD would lie on the Solow growth curve

Question 12

Question
In the AD and SRAS model, changes in the growth rate of C, I, G, and NX tend to be changes in:
Answer
  • money velocity
  • money supply
  • prices
  • all of the above

Question 13

Question
The Solow growth rate is the rate of economic growth that occurs when
Answer
  • inflation is moderate
  • wages and prices are flexible
  • wages and prices are sticky
  • the money supply is growing

Question 14

Question
An increase in _______ will shift the SRAS curve
Answer
  • actual inflation, but not expected inflation
  • expected inflation, but not actual inflation
  • both expected and actual inflation
  • neither expected nor actual inflation

Question 15

Question
Suppose both the growth rate of the money supply and the velocity of money are fixed, then an increase in the growth rate of exports will cause
Answer
  • a shift of the dynamic AD curve to the right.
  • a shift of the dynamic AD curve to the left.
  • a downward movement along the dynamic AD curve.
  • an upward movement along the dynamic AD curve.

Question 16

Question
The aggregate demand curve shows all the combinations of ______ that are consistent with a specified rate of spending growth.
Answer
  • inflation and real GDP growth rates
  • employment rates and price levels
  • production shocks and flexible price
  • money velocity and money supply

Question 17

Question
n the basic AD and Solow growth curve model, shocks to aggregate demand always cause I. changes in real GDP. II. changes in inflation. III. changes in spending growth.
Answer
  • I only
  • I, II
  • II only
  • I, II, III

Question 18

Question
The Solow growth curve is represented by a vertical line at the Solow growth rate because I. it does not depend on the rate of inflation. II. there is an underlying assumption of strong money neutrality. III. it does not depend on the stock of factors of production
Answer
  • I only
  • I, II
  • I, III
  • I, II, III

Question 19

Question
Which of the following is a shock that could shift the Solow growth curve?
Answer
  • productivity shock
  • negative supply shock
  • real shock
  • all of the above

Question 20

Question
The average annual rate of growth of real GDP in the United States has fluctuated around ____ for the last 50 years.
Answer
  • 3%
  • 1%
  • 5%
  • -1%

Question 21

Question
What are some of the economic effects of a tariff?
Answer
  • Wealth is redistributed from wealthy nations to poor nations and taxes fall.
  • Unemployment and inflation rates both fall.
  • Capital and labor are used less efficiently.
  • Trade remains the same in the long run and GDP rises in the nation that enacts the tariff.

Question 22

Question
If wages are not as flexible as prices, an increase in money growth will lead to
Answer
  • an increase in inflation and a rise in real long-run GDP growth.
  • an increase in inflation but no rise in real short-run GDP growth.
  • an increase in inflation and firms profits.
  • no change in inflation, but a fall in firms' profits.

Question 23

Question
Politicians and especially the general public worry about recessions because of
Answer
  • unemployment
  • inflation
  • changes in the Solow Growth rate
  • All of the above

Question 24

Question
What factors triggered the Great Depression?
Answer
  • decreased consumer spending and tight monetary policy
  • decreased investment and increased inflation
  • decreased employment and increased money supply
  • decreased inflation and increased income taxes
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