Macro-Economics
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21 terms
Terms | Definitions |
|---|---|
| 3) With a constant money supply, if the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways? Interest Rate............ Quantity of Money A) Increase........ Decrease B) Increase........ Not change C) Decrease........ Decrease D) Decrease........ Increase E) Decrease........ Not change |  E) Decrease........ Not Change |
| 4) An increase in aggregate supply will most likely cause income and employment to change in which of the following ways? Income........ Employment A) Decrease........ Decrease B) Decrease........ Increase C) No change........ Increase D) Increase........ Decrease E) Increase........ Increase | E) Increase........ Increase |
| 5) If the exchange rate between the US dollar ($) and the British pound (£) changed from $2 per £1 to $3 per £1, and domestic prices in both countries stayed the same, then the United States dollar would A) depreciate, making US imports from Britain more expense B) depreciate, making US imports from Britain cheaper C) appreciate, making US imports from Britain more expensive D) appreciate, making US imports from Britain cheaper E) purchase 3 times more British goods than before the change occurred | A) depreciate, making US imports from Britain more expense |
| 7) An increase in which of the following is most likely to promote economic growth? A) Consumption spending B) Investment tax credits C) The natural rate of unemployment D) The trade deficit E) Real interest rates | B) Investment tax credits |
| 10) An appreciation of the US dollar on the foreign exchange market could be caused by a decrease in which of the following? A) US interest rates B) The US consumer price index C) Demand for the dollar by US residents D) Exports from the US E) The tariff on goods imported into the US | B) The US consumer price index |
| 25) If the federal government reduces its budget deficit when the economy is close to full employment, which of the following will most likely result? A) Inflation will increase. B) Tax revenues will increases. C) Interest rates will decrease D) Unemployment will decrease E) The international value of the dollar will increase | C) Interest rates will decrease |
| 26) Which of the following will cause the United States dollar to depreciate relative to the euro? A) An increase in household income in the US B) An increase in interest rates in the US C) An increase in household income in Europe D) A decrease in interest rates in Europe E) A decrease in price level in the US | A) An increase in household income in the US |
| 28) Assume that the nominal interest rate is 10%. If the expected inflation rate is 5%, the real interest rate is A) 0.5% B) 2% C) 5% D) 10% E) 15% | C) 5% |
| 37) Which types of unemployment would increase if workers lost their jobs because of a recession? A) Cyclical B) Frictional C) Seasonal D) Search E) Structural | A) Cyclical |
| 38) Which of the following is true about the marginal propensity to consume? A) It is the percentage of total income that is spent on consumption B) It determines the size of the simple spending multiplier C) It increases as incomes increase because increases in income cause people to spend more D) It is the same as the money multiplier E) It is equal to the average propensity to consume for people with low incomes | B) It determines the size of the simple spending multiplier |
| 40) Assume that the economy is at full employment. Policymakers wish to maintain the price level but want to encourage greater investment. Which of the following combination of monetary and fiscal policies would best achieve this goal? Monetary Policy........ Fiscal Policy A) No change........ Contractionary B) Expansionary........ No change C) Expansionary........ Contractionary D) Expansionary........ Expansionary E) Contractionary........ Expansionary | C) Expansionary........ Contractionary |
| 44) Assume that the world operates under a flexible exchange rate system. If the central bank of Mexico increases its money supply but other countries do not change theirs, Mexico's inflation rate and the international value of the Mexican peso will most likely change in which of the following ways? Inflation Rate........ International Value of the Peso A) Increase........ Appreciate B) Increase........ Depreciate C) Increase........ No change D) Decrease........ Appreciate E) Decrease........ Depreciate | B) Increase........ Depreciate |
| 45) The Federal Reserve decreases the federal funds rate by A) decreasing the reserve requirement B) decreasing the discount rate C) increasing the discount rate D) selling government bonds on the open market E) buying government bonds on the open market | E) buying government bonds on the open market |
| 47) Suppose that the government decreases taxes and at the same time the central bank decreases the discount rate. The combined actions will result in A) an increase in unemployment and a decrease in the interest rate B) an increase in unemployment and an increase in the interest rate C) an increase in the real gross domestic product and a decrease in the interest rate D) an increase in the real gross domestic product and an increase in the interest rate E) an increase in the real gross domestic product and an indeterminate change in the interest rate | E) an increase in the real gross domestic product and an indeterminate change in the interest rate |
| 51) Under rational expectations, an announced expansion in the money supply will change nominal and real gross domestic products (GDP) in which of the following ways? Nominal GDP........ Real GDP A) Increase........ Increase B) Increase........ Decrease C) Increase........ No change D) No change........ Decrease E) No chnage........ No change | C) Increase........ No change |
| 53) In the long run, if aggregate demand decreases, real gross domestic product (GDP) and the price level will change in which of the following ways? Real GDP........ Price Level A) Decrease........ Decrease B) Decrease........ Increase C) No change........ Decrease D) Increase........ Decrease E) No change........ Increase | C) No change........ Decrease |
| 54) Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10%. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be A) $10 B) $100 C) $900 D) $1,000 E) $1,100 | C) $900 |
| 56) Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product? A) Government bonds B) Shares of a company stock C) Corporate bonds D) A new car for personal use E) A newly constructed home | E) A newly constructed home |
| 58) Which of the following would cause the short-run aggregate supply curve to shift to the right? A) An increase in the wage rate B) An increase in the interest rate C) An increase in the natural rate of unemployment D) A decrease in the capital stock E) A decrease in the expected price level | E) A decrease in the expected price level |
| 59) A decrease in business taxes would lead to an increase in national income by increasing which of the following? A) The money supply B) Unemployment C) Aggregate demand only D) Aggregate supply only E) Both aggregate demand and aggregate supply | E) Both aggregate demand and aggregate supply |
| 60) In an open economy, an increase in government budget deficit tends to cause the international value of a country's currency and its trade deficit to change in which of the following ways? Value of Currency........ Trade Deficit A) Appreciate........ Become smaller B) Appreciate........ Become larger C) Depreciate........ Become smaller D) Depreciate........ Become larger E) Not change........ Not change | B) Appreciate........ Become larger |
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