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Economics Final

Description

a review for the final of principles of macroeconomics I
jrholland
Quiz by jrholland, updated more than 1 year ago
jrholland
Created by jrholland about 10 years ago
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Resource summary

Question 1

Question
Which of the following is not included in M1?
Answer
  • a $5 bill in your wallet
  • $100 in your checking account
  • $500 in your savings account
  • The $5 bill in your wallet and $500 in your savings account
  • All of the choices

Question 2

Question
Which of the following does the Federal Reserve not do?
Answer
  • it controls the supply of money
  • it acts as a lender of last resort to banks
  • it makes loans to any qualified business that requests one
  • it tries to ensure the health of the banking system
  • none of the choices

Question 3

Question
A bank's reserve ratio is 6.5% and the bank has 1,950 in reserve. Its deposits amount to . . .
Answer
  • $62.25
  • $126.75
  • $22,500
  • $30,000
  • $126.75 and $22,500 added together

Question 4

Question
Wealth is redistributed from debtors to creditors when inflation was expected to be . . .
Answer
  • high and it turns out to be high
  • low and it turns out to be low
  • low and it turns out to be high
  • high and it turns out to be low
  • none of the choices

Question 5

Question
If US residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate . . .
Answer
  • and the quantity of dollars traded rises
  • rises and the quantity of dollars traded falls
  • falls and the quantity of dollars traded rises
  • and the quantity of dollars traded falls
  • none of the choices

Question 6

Question
When a country experiences capital flight, its . . .
Answer
  • net capital outflow increases and its real exchange rate rises
  • net capital outflow increases and its real exchange rate falls
  • net capital outflow decreases and its real exchange rate rises
  • net capital outflow decreases and its real exchange rate falls
  • none of the choices

Question 7

Question
In an open-economy, GDP equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is the national savings?
Answer
  • $0
  • $500 billion
  • $650 billion
  • $975 billion
  • none of the choices

Question 8

Question
If the Canadian nominal exchange rate does not change, but prices rise faster in Canada than in all other countries, then the Canadian real exchange rate . . .
Answer
  • does not change
  • rises
  • declines
  • rises and declines
  • none of the choices

Question 9

Question
Which of the following is an example of US foreign portfolio investment?
Answer
  • Paulo, a German citizen, buys stocks in a US computer company
  • Nohora, a citizen of Columbia, opens a fish and chips restaurant in the US
  • Dawit, a US citizen, buys bonds issued by a Japanese bank
  • Yoseph, a US citizen, opens a country-western tavern in New Zealand
  • all of the choices

Question 10

Question
Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?
Answer
  • the demand for loanable funds shift right
  • the demand for loanable funds shift left
  • the supply for loanable funds shift right
  • the supply for loanable funds shift left
  • the demand for loanable funds shift left and the supply for loanable funds shift right

Question 11

Question
Which of the following is not included in GDP?
Answer
  • carrots grown in your garden and eaten by your family
  • carrots purchased at a farmer's market and eaten by your family
  • carrots purchased at a grocery store and eaten by your family
  • carrots grown in your garden and eaten by your family and carrots purchased at a farmer's market and eaten by your family
  • none of the choices

Question 12

Question
Which of the following is correct?
Answer
  • nominal GDP never equals real GDP
  • nominal GDP always equals real GDP
  • nominal GDP equals real GDP in the base year
  • nominal GDP equals real GDP in all years but the base year
  • all of the choices

Question 13

Question
When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?
Answer
  • the quantity of the goods and services purchased
  • the price of the goods and services
  • the goods and services making up the basket
  • the quantity of the goods and services purchased and the goods and services making up the basket
  • all of the choices

Question 14

Question
Frederick earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Frederick's 2001 salary in 2006 dollars is . . .
Answer
  • $25,000
  • $33,333.33
  • $44,250
  • $75,000
  • none of the choices

Question 15

Question
Which of the following items plays a role in determining productivity?
Answer
  • physical capital
  • natural resources
  • technological know-how
  • physical capital and technological know-how
  • all of the choices

Question 16

Question
The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis . . .
Answer
  • is positive and gets steeper as capital per worker rises
  • is positive and gets flatter as capital per worker rises
  • is negative and gets steeper as capital per worker rises
  • is negative and gets flatter as capital per worker rises
  • none of the choices

Question 17

Question
The economy's two most important financial markets are . . .
Answer
  • the investment market and the savings market
  • the bond market and the stock market
  • banks and the stock market
  • financial markets and financial institutions
  • all of the choices

Question 18

Question
Suppose a close economy had public savings of $3 trillion and private savings of $2 trillion. What are the national saving and investment for this country?
Answer
  • $5 trillion; $5 trillion
  • $ 5 trillion; $2 trillion
  • $1 trillion; $5 trillion
  • $1 trillion; $2 trillion
  • none of the above

Question 19

Question
If the interest rate is 7.5%, then what is the present value of $4,000 to be received in 6 years?
Answer
  • $2,420.68
  • $2,591.85
  • $2,996.33
  • $3,040.63
  • none of the above

Question 20

Question
JoEllen puts a greater proportion of her portfolio into government bonds. JoEllen's action . . .
Answer
  • increases both risk and the average rate of return
  • decreases both risk and the average rate of return
  • increases risk but decreases the average rate of return
  • decreases risk but increases the average rate of return
  • all of the choices

Question 21

Question
Unemployment data are collected . . .
Answer
  • from unemployment insurance claims
  • through a regular survey of about 60,000 households
  • through a regular survey of about 20,000 firms
  • from unemployment claims and through a regular survey of about 60,000 households
  • all of the choices

Question 22

Question
The labor-force participation rate is computed as . . .
Answer
  • (employed/adult population) x 100
  • (employed/labor force) x 100
  • (labor force/adult population) x 100
  • (adult population/labor force) x 100
  • none of the choices

Question 23

Question
Suppose some country had an adult population of about 50 million, a labor force participation rate of 60%, and an unemployment rate of 5%. How many people were employed?
Answer
  • 1.5 million
  • 28.5 million
  • 30 million
  • 47.5 million
  • none of the choices

Question 24

Question
If you deposit $900 into an account for two years and the interest rate is 4%, how much do you have at the end of the two years?
Answer
  • $972
  • $973.44
  • $974.19
  • $966.50
  • none of the choices

Question 25

Question
Two of the economy's most important financial intermediaries are . . .
Answer
  • suppliers of funds and demanders of funds
  • banks and the bond markets
  • the stock market and the bond market
  • banks and mutual funds
  • none of the choices

Question 26

Question
Suppose that in a close economy GDP is equal to $11,000, taxes are equal to $2,500, consumption equals $7,000, and government purchases equals $3,000. What are private savings and public savings?
Answer
  • $1,500; $-500
  • $1,500; $500
  • $1,000; $-500
  • $1,000; $500
  • none of the choices

Question 27

Question
The key determinate of the standard of living in a country is . . .
Answer
  • the amounts of goods and services produced from each hour of a worker's time
  • the total amount of goods and services produced within the country
  • the total amount of its physical capital
  • its growth rate of GDP
  • all of the choices

Question 28

Question
The consumer price index is used to . . .
Answer
  • convert nominal GDP into real GDP
  • turn dollar figures into meaningful measures of purchasing power
  • characterize the types of goods and services that consumers purchase
  • measure the quantity of goods and services that the economy produces
  • none of the choices

Question 29

Question
The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?
Answer
  • 5.7%
  • 6.0%
  • 7.2%
  • 27.2%
  • none of the choices

Question 30

Question
Tyree, a US citizen, works only in Germany. The value of Tyree's production is included in . . .
Answer
  • US GDP and German GDP
  • US GDP and German GNP
  • US GNP and German GDP
  • US GNP and German GNP
  • all of the choices

Question 31

Question
Which of the following is an example of US foreign direct investment?
Answer
  • A Swedish car manufacturer opens a plant in Tennessee
  • A Dutch citizen buys shares of stock in a US company
  • A US based restaurant chain opens new restaurants in China
  • A US citizen buys stock in companies located in Japan
  • All of the above

Question 32

Question
A US firm opens a factory that produces camping equipment in Estonia
Answer
  • This increases US net capital outflow and decreases Estonian net capital outflow
  • This decreases US net capital outflow and increases Estonian net capital outflow
  • This increases US net capital outflow
  • This increases Estonian net capital outflow
  • None of the choices

Question 33

Question
The inflation tax . . .
Answer
  • transfers wealth from the government to households
  • is the increase in income taxes due to lack of indexation
  • is a tax on everyone who holds money
  • transfers wealth from the government to households and is the increase in income taxes due to lack of indexation
  • all of the choices

Question 34

Question
The real interest rate is 8% and the nominal interest rate is 10.5%. Is there inflation or deflation? What is the inflation or deflation rate?
Answer
  • deflation; 2.5%
  • deflation; 20.5%
  • inflation; 2.5%
  • inflation; 20.5%
  • none of the choices

Question 35

Question
The federal funds rate is the . . .
Answer
  • percentage of face value that the Federal Reserve is willing to pay for Treasury Securities
  • percentage of deposits that banks must hold as reserves
  • interest rate at which the Federal Reserve makes short term loans to banks
  • interest rate at which banks lend reserves to each other overnight
  • all of the choices

Question 36

Question
Which of the following lists two things that both decrease the money supply?
Answer
  • Make open market purchases, raise the reserve requirements
  • make open market purchases, lower the reserve requirements
  • make open market sales, raise the reserve requirements
  • make open market sales, lower the reserve requirements
  • none of the choices

Question 37

Question
A debit card is more similar to a credit card than to a check.
Answer
  • True
  • False

Question 38

Question
If the Fed buys bonds in the open market, the money supply decreases.
Answer
  • True
  • False

Question 39

Question
Suppose the nominal interest rate is 5%, the tax rate on interest income is 30%, and the after-tax real interest rate is 0.8%. Then the rate of inflation is 2.7%.
Answer
  • True
  • False

Question 40

Question
If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.
Answer
  • True
  • False

Question 41

Question
When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.
Answer
  • True
  • False

Question 42

Question
Purchasing power parity says that nominal exchange rate must equal the real exchange rate.
Answer
  • True
  • False

Question 43

Question
US GDP includes estimates of the value of items that are produced and consumed at home such as house work and car maintenance.
Answer
  • True
  • False

Question 44

Question
If exports are $500, GDP is $8,000, government purchases are $1,200, imports are $700, and investment is $800, then consumption is $6,200.
Answer
  • True
  • False

Question 45

Question
The contents of the basket of goods and services used to compute the CPI changes every month.
Answer
  • True
  • False

Question 46

Question
If nominal interest rate is 5% and the inflation rate is 2%, then the real interest rate is 7%.
Answer
  • True
  • False

Question 47

Question
Like physical capital, human capital is a produced factor of production.
Answer
  • True
  • False

Question 48

Question
A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.
Answer
  • True
  • False

Question 49

Question
When economists refer to investment, they mean the purchasing of stocks and bonds and other types of savings.
Answer
  • True
  • False

Question 50

Question
To state that national saving is equal to investment, for a close economy, is to state an accounting identity.
Answer
  • True
  • False

Question 51

Question
The sale of either stocks or bonds to raise money is known as equity financing.
Answer
  • True
  • False

Question 52

Question
If GDP deflator in 2006 was 160 and the GDP deflator in 2007 was 180, then the inflation rate in 2007 was 12.5%.
Answer
  • True
  • False

Question 53

Question
For an economy as a whole, income must exceed expenditure.
Answer
  • True
  • False

Question 54

Question
Expenditures by households on education are included in the consumption component of GDP.
Answer
  • True
  • False

Question 55

Question
If the GDP deflator in 2004 was 150 and the GDP deflator in 2005 was 120, then the inflation rate in 2005 was 25%.
Answer
  • True
  • False

Question 56

Question
Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
Answer
  • True
  • False

Question 57

Question
The goal of the CPI is to gauge how much incomes must rise to maintain a constant standard of living.
Answer
  • True
  • False

Question 58

Question
Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.
Answer
  • True
  • False

Question 59

Question
If the real interest rate is 5% and the inflation rate is 2%, then the nominal interest rate is 7%.
Answer
  • True
  • False

Question 60

Question
A dollar figure from 1908 is converted into 2009 dollars by dividing the 2009 price level by the 1908 price level, then multiplying by the 2009 dollar figure.
Answer
  • True
  • False

Question 61

Question
Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.
Answer
  • True
  • False

Question 62

Question
An increase in capital increases productivity only if it is purchased and operated by domestic residents.
Answer
  • True
  • False

Question 63

Question
An increase in the saving rate does not permanently increase growth rate of real GDP per person.
Answer
  • True
  • False

Question 64

Question
Productivity can be computed as number of hours worked divided by output.
Answer
  • True
  • False

Question 65

Question
If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private savings must amount to $12,500.
Answer
  • True
  • False

Question 66

Question
An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.
Answer
  • True
  • False

Question 67

Question
Public saving is T-G, while private saving is Y-T-C.
Answer
  • True
  • False

Question 68

Question
When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stocks.
Answer
  • True
  • False

Question 69

Question
The sooner the payment is received and the higher the interest rate, the greater the present value of a future payment.
Answer
  • True
  • False

Question 70

Question
A person with diminishing marginal utility of wealth is risk averse.
Answer
  • True
  • False

Question 71

Question
According to the efficient markets hypothesis, at any moment in time, the market price is the best estimate of the company's value based on publicly available information.
Answer
  • True
  • False

Question 72

Question
The future value of $1.00 saved today is $1.00/(1+r).
Answer
  • True
  • False

Question 73

Question
Cyclical unemployment refers to the year-to-year fluctuation in unemployment that the economy normally experiences.
Answer
  • True
  • False

Question 74

Question
The unemployment rate sometimes falls to zero.
Answer
  • True
  • False

Question 75

Question
Changes in the composition of demand among industries or regions are called sectoral shifts.
Answer
  • True
  • False

Question 76

Question
Full time students and homemakers are included in the Bureau of Labor Statistics "unemployed" category.
Answer
  • True
  • False

Question 77

Question
A drop in a country's real interest rate reduces that country's net capital outflow.
Answer
  • True
  • False

Question 78

Question
In the open economy model, the supply of loanable funds comes from national savings and net capital outflow.
Answer
  • True
  • False

Question 79

Question
In the open economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.
Answer
  • True
  • False

Question 80

Question
A higher US interest rate discourages Americans from buying foreign assets and encourages foreigners to buy US assets.
Answer
  • True
  • False

Question 81

Question
Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.
Answer
  • True
  • False

Question 82

Question
An increase in the government budget deficit shifts the demand for loanable funds to the right.
Answer
  • True
  • False

Question 83

Question
An import quota imposed by the US would reduce US imports but have no impact on US exports.
Answer
  • True
  • False

Question 84

Question
A country with negative net exports has a trade surplus.
Answer
  • True
  • False

Question 85

Question
If Wal-Mart buys $50 million worth of consumer goods from China and sells them in the US, and China uses the $50 million to purchase US bonds, then US net exports and US net capital outflow both fall.
Answer
  • True
  • False

Question 86

Question
A drop in the French real interest rate reduces French net capital outflow.
Answer
  • True
  • False

Question 87

Question
If prices in the US rise faster than prices in the UK, then according to the doctrine of purchasing power parity, the US nominal exchange rate should fall.
Answer
  • True
  • False

Question 88

Question
Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
Answer
  • True
  • False

Question 89

Question
To increase domestic investment, a country must increase its savings.
Answer
  • True
  • False

Question 90

Question
If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.
Answer
  • True
  • False

Question 91

Question
If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.
Answer
  • True
  • False

Question 92

Question
Shoeleather costs and menu costs are both costs of anticipated inflation.
Answer
  • True
  • False

Question 93

Question
If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.
Answer
  • True
  • False

Question 94

Question
If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.
Answer
  • True
  • False

Question 95

Question
Monetary neutrality means that while real variables change in response to changes in the money supply, nominal variables do not.
Answer
  • True
  • False

Question 96

Question
Demand deposits are balances in bank accounts that depositors can access by writing checks or using debit cards.
Answer
  • True
  • False

Question 97

Question
The money supply of Princess Anne is $10,000 in 100% reserve banking system. If the Central Bank of Princess Anne decreases the reserve requirement ratio to 10%, the money supply could increase by no more than $9,000.
Answer
  • True
  • False

Question 98

Question
Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.
Answer
  • True
  • False

Question 99

Question
US dollars are an example of commodity money and hides used to make trades are an example of fiat money.
Answer
  • True
  • False

Question 100

Question
Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loan.
Answer
  • True
  • False

Question 101

Question
Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
Answer
  • True
  • False
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