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Economics Final
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Questions in this quiz (101)
1Which of the following is not included in M1?
- Aa $5 bill in your wallet
- B$100 in your checking account
- C$500 in your savings account
- DThe $5 bill in your wallet and $500 in your savings account
- EAll of the choices
2Which of the following does the Federal Reserve not do?
- Ait controls the supply of money
- Bit acts as a lender of last resort to banks
- Cit makes loans to any qualified business that requests one
- Dit tries to ensure the health of the banking system
- Enone of the choices
3A bank's reserve ratio is 6.5% and the bank has 1,950 in reserve. Its deposits amount to . . .
- A$62.25
- B$126.75
- C$22,500
- D$30,000
- E$126.75 and $22,500 added together
4Wealth is redistributed from debtors to creditors when inflation was expected to be . . .
- Ahigh and it turns out to be high
- Blow and it turns out to be low
- Clow and it turns out to be high
- Dhigh and it turns out to be low
- Enone of the choices
5If US residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate . . .
- Aand the quantity of dollars traded rises
- Brises and the quantity of dollars traded falls
- Cfalls and the quantity of dollars traded rises
- Dand the quantity of dollars traded falls
- Enone of the choices
6When a country experiences capital flight, its . . .
- Anet capital outflow increases and its real exchange rate rises
- Bnet capital outflow increases and its real exchange rate falls
- Cnet capital outflow decreases and its real exchange rate rises
- Dnet capital outflow decreases and its real exchange rate falls
- Enone of the choices
7In 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?
- A$0
- B$500 billion
- C$650 billion
- D$975 billion
- Enone of the choices
8If 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 . . .
- Adoes not change
- Brises
- Cdeclines
- Drises and declines
- Enone of the choices
9Which of the following is an example of US foreign portfolio investment?
- APaulo, a German citizen, buys stocks in a US computer company
- BNohora, a citizen of Columbia, opens a fish and chips restaurant in the US
- CDawit, a US citizen, buys bonds issued by a Japanese bank
- DYoseph, a US citizen, opens a country-western tavern in New Zealand
- Eall of the choices
10Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?
- Athe demand for loanable funds shift right
- Bthe demand for loanable funds shift left
- Cthe supply for loanable funds shift right
- Dthe supply for loanable funds shift left
- Ethe demand for loanable funds shift left and the supply for loanable funds shift right
11Which of the following is not included in GDP?
- Acarrots grown in your garden and eaten by your family
- Bcarrots purchased at a farmer's market and eaten by your family
- Ccarrots purchased at a grocery store and eaten by your family
- Dcarrots grown in your garden and eaten by your family and carrots purchased at a farmer's market and eaten by your family
- Enone of the choices
12Which of the following is correct?
- Anominal GDP never equals real GDP
- Bnominal GDP always equals real GDP
- Cnominal GDP equals real GDP in the base year
- Dnominal GDP equals real GDP in all years but the base year
- Eall of the choices
13When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?
- Athe quantity of the goods and services purchased
- Bthe price of the goods and services
- Cthe goods and services making up the basket
- Dthe quantity of the goods and services purchased and the goods and services making up the basket
- Eall of the choices
14Frederick 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 . . .
- A$25,000
- B$33,333.33
- C$44,250
- D$75,000
- Enone of the choices
15Which of the following items plays a role in determining productivity?
- Aphysical capital
- Bnatural resources
- Ctechnological know-how
- Dphysical capital and technological know-how
- Eall of the choices
16The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis . . .
- Ais positive and gets steeper as capital per worker rises
- Bis positive and gets flatter as capital per worker rises
- Cis negative and gets steeper as capital per worker rises
- Dis negative and gets flatter as capital per worker rises
- Enone of the choices
17The economy's two most important financial markets are . . .
- Athe investment market and the savings market
- Bthe bond market and the stock market
- Cbanks and the stock market
- Dfinancial markets and financial institutions
- Eall of the choices
18Suppose 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?
- A$5 trillion; $5 trillion
- B$ 5 trillion; $2 trillion
- C$1 trillion; $5 trillion
- D$1 trillion; $2 trillion
- Enone of the above
19If the interest rate is 7.5%, then what is the present value of $4,000 to be received in 6 years?
- A$2,420.68
- B$2,591.85
- C$2,996.33
- D$3,040.63
- Enone of the above
20JoEllen puts a greater proportion of her portfolio into government bonds. JoEllen's action . . .
- Aincreases both risk and the average rate of return
- Bdecreases both risk and the average rate of return
- Cincreases risk but decreases the average rate of return
- Ddecreases risk but increases the average rate of return
- Eall of the choices
21Unemployment data are collected . . .
- Afrom unemployment insurance claims
- Bthrough a regular survey of about 60,000 households
- Cthrough a regular survey of about 20,000 firms
- Dfrom unemployment claims and through a regular survey of about 60,000 households
- Eall of the choices
22The labor-force participation rate is computed as . . .
- A(employed/adult population) x 100
- B(employed/labor force) x 100
- C(labor force/adult population) x 100
- D(adult population/labor force) x 100
- Enone of the choices
23Suppose 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?
- A1.5 million
- B28.5 million
- C30 million
- D47.5 million
- Enone of the choices
24If 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?
- A$972
- B$973.44
- C$974.19
- D$966.50
- Enone of the choices
25Two of the economy's most important financial intermediaries are . . .
- Asuppliers of funds and demanders of funds
- Bbanks and the bond markets
- Cthe stock market and the bond market
- Dbanks and mutual funds
- Enone of the choices
26Suppose 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?
- A$1,500; $-500
- B$1,500; $500
- C$1,000; $-500
- D$1,000; $500
- Enone of the choices
27The key determinate of the standard of living in a country is . . .
- Athe amounts of goods and services produced from each hour of a worker's time
- Bthe total amount of goods and services produced within the country
- Cthe total amount of its physical capital
- Dits growth rate of GDP
- Eall of the choices
28The consumer price index is used to . . .
- Aconvert nominal GDP into real GDP
- Bturn dollar figures into meaningful measures of purchasing power
- Ccharacterize the types of goods and services that consumers purchase
- Dmeasure the quantity of goods and services that the economy produces
- Enone of the choices
29The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?
- A5.7%
- B6.0%
- C7.2%
- D27.2%
- Enone of the choices
30Tyree, a US citizen, works only in Germany. The value of Tyree's production is included in . . .
- AUS GDP and German GDP
- BUS GDP and German GNP
- CUS GNP and German GDP
- DUS GNP and German GNP
- Eall of the choices
31Which of the following is an example of US foreign direct investment?
- AA Swedish car manufacturer opens a plant in Tennessee
- BA Dutch citizen buys shares of stock in a US company
- CA US based restaurant chain opens new restaurants in China
- DA US citizen buys stock in companies located in Japan
- EAll of the above
32A US firm opens a factory that produces camping equipment in Estonia
- AThis increases US net capital outflow and decreases Estonian net capital outflow
- BThis decreases US net capital outflow and increases Estonian net capital outflow
- CThis increases US net capital outflow
- DThis increases Estonian net capital outflow
- ENone of the choices
33The inflation tax . . .
- Atransfers wealth from the government to households
- Bis the increase in income taxes due to lack of indexation
- Cis a tax on everyone who holds money
- Dtransfers wealth from the government to households and is the increase in income taxes due to lack of indexation
- Eall of the choices
34The 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?
- Adeflation; 2.5%
- Bdeflation; 20.5%
- Cinflation; 2.5%
- Dinflation; 20.5%
- Enone of the choices
35The federal funds rate is the . . .
- Apercentage of face value that the Federal Reserve is willing to pay for Treasury Securities
- Bpercentage of deposits that banks must hold as reserves
- Cinterest rate at which the Federal Reserve makes short term loans to banks
- Dinterest rate at which banks lend reserves to each other overnight
- Eall of the choices
36Which of the following lists two things that both decrease the money supply?
- AMake open market purchases, raise the reserve requirements
- Bmake open market purchases, lower the reserve requirements
- Cmake open market sales, raise the reserve requirements
- Dmake open market sales, lower the reserve requirements
- Enone of the choices
37A debit card is more similar to a credit card than to a check.
- ATrue
- BFalse
38If the Fed buys bonds in the open market, the money supply decreases.
- ATrue
- BFalse
39Suppose 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%.
- ATrue
- BFalse
40If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.
- ATrue
- BFalse
41When 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.
- ATrue
- BFalse
42Purchasing power parity says that nominal exchange rate must equal the real exchange rate.
- ATrue
- BFalse
43US GDP includes estimates of the value of items that are produced and consumed at home such as house work and car maintenance.
- ATrue
- BFalse
44If exports are $500, GDP is $8,000, government purchases are $1,200, imports are $700, and investment is $800, then consumption is $6,200.
- ATrue
- BFalse
45The contents of the basket of goods and services used to compute the CPI changes every month.
- ATrue
- BFalse
46If nominal interest rate is 5% and the inflation rate is 2%, then the real interest rate is 7%.
- ATrue
- BFalse
47Like physical capital, human capital is a produced factor of production.
- ATrue
- BFalse
48A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.
- ATrue
- BFalse
49When economists refer to investment, they mean the purchasing of stocks and bonds and other types of savings.
- ATrue
- BFalse
50To state that national saving is equal to investment, for a close economy, is to state an accounting identity.
- ATrue
- BFalse
51The sale of either stocks or bonds to raise money is known as equity financing.
- ATrue
- BFalse
52If GDP deflator in 2006 was 160 and the GDP deflator in 2007 was 180, then the inflation rate in 2007 was 12.5%.
- ATrue
- BFalse
53For an economy as a whole, income must exceed expenditure.
- ATrue
- BFalse
54Expenditures by households on education are included in the consumption component of GDP.
- ATrue
- BFalse
55If the GDP deflator in 2004 was 150 and the GDP deflator in 2005 was 120, then the inflation rate in 2005 was 25%.
- ATrue
- BFalse
56Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
- ATrue
- BFalse
57The goal of the CPI is to gauge how much incomes must rise to maintain a constant standard of living.
- ATrue
- BFalse
58Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.
- ATrue
- BFalse
59If the real interest rate is 5% and the inflation rate is 2%, then the nominal interest rate is 7%.
- ATrue
- BFalse
60A 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.
- ATrue
- BFalse
61Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.
- ATrue
- BFalse
62An increase in capital increases productivity only if it is purchased and operated by domestic residents.
- ATrue
- BFalse
63An increase in the saving rate does not permanently increase growth rate of real GDP per person.
- ATrue
- BFalse
64Productivity can be computed as number of hours worked divided by output.
- ATrue
- BFalse
65If, 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.
- ATrue
- BFalse
66An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.
- ATrue
- BFalse
67Public saving is T-G, while private saving is Y-T-C.
- ATrue
- BFalse
68When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stocks.
- ATrue
- BFalse
69The sooner the payment is received and the higher the interest rate, the greater the present value of a future payment.
- ATrue
- BFalse
70A person with diminishing marginal utility of wealth is risk averse.
- ATrue
- BFalse
71According 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.
- ATrue
- BFalse
72The future value of $1.00 saved today is $1.00/(1+r).
- ATrue
- BFalse
73Cyclical unemployment refers to the year-to-year fluctuation in unemployment that the economy normally experiences.
- ATrue
- BFalse
74The unemployment rate sometimes falls to zero.
- ATrue
- BFalse
75Changes in the composition of demand among industries or regions are called sectoral shifts.
- ATrue
- BFalse
76Full time students and homemakers are included in the Bureau of Labor Statistics "unemployed" category.
- ATrue
- BFalse
77A drop in a country's real interest rate reduces that country's net capital outflow.
- ATrue
- BFalse
78In the open economy model, the supply of loanable funds comes from national savings and net capital outflow.
- ATrue
- BFalse
79In 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.
- ATrue
- BFalse
80A higher US interest rate discourages Americans from buying foreign assets and encourages foreigners to buy US assets.
- ATrue
- BFalse
81Capital 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.
- ATrue
- BFalse
82An increase in the government budget deficit shifts the demand for loanable funds to the right.
- ATrue
- BFalse
83An import quota imposed by the US would reduce US imports but have no impact on US exports.
- ATrue
- BFalse
84A country with negative net exports has a trade surplus.
- ATrue
- BFalse
85If 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.
- ATrue
- BFalse
86A drop in the French real interest rate reduces French net capital outflow.
- ATrue
- BFalse
87If 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.
- ATrue
- BFalse
88Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
- ATrue
- BFalse
89To increase domestic investment, a country must increase its savings.
- ATrue
- BFalse
90If 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.
- ATrue
- BFalse
91If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.
- ATrue
- BFalse
92Shoeleather costs and menu costs are both costs of anticipated inflation.
- ATrue
- BFalse
93If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.
- ATrue
- BFalse
94If 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.
- ATrue
- BFalse
95Monetary neutrality means that while real variables change in response to changes in the money supply, nominal variables do not.
- ATrue
- BFalse
96Demand deposits are balances in bank accounts that depositors can access by writing checks or using debit cards.
- ATrue
- BFalse
97The 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.
- ATrue
- BFalse
98Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.
- ATrue
- BFalse
99US dollars are an example of commodity money and hides used to make trades are an example of fiat money.
- ATrue
- BFalse
100Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loan.
- ATrue
- BFalse
101Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
- ATrue
- BFalse
Information
- Description
- a review for the final of principles of macroeconomics I
- Author
- jrholland
- Language
- English
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