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ECO 372 FINAL EXAMINATION (SOLUTION 30/30)

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Question;1. the market where;business sell goods and services to households and the government is called;a. goods market;b. factor market;c. capital market;d. money market;2. Real gross;domestic product is best defined as;a. the market value;of intermediate goods and services produced in an economy including exports;b. all goods and;services produced in an economy, stated in prices in a given year and;multiplied by quantity;c. the market value;of all final goods and services produced in an economy stated in the prices of;a given year;d. the market value;of goods and services produced in an economy stated in current year prices;3. Underemployment;includes;a. who work off the;books to avoid paying taxes;b. who are working part;time or not using all their skills at a fulltime job;c. who are tired of;looking for a job so they quit looking but still want one;d. whose skills are;not in demand anymore;4. The bureau of;economic analysis is responsible for which of the following;a. setting interest;rates;b. managing the money;supply;c. calculating the US;gross domestic product;d. paying;unemployment benefits;5. The federal;reserve provides which of the following data;a. federal funds rate;b. stock price of GE;c. bond yields of corporation;d. debt to GDP of;Ireland;6. Consider if the;government instituted a 10% income tax surcharge. In terms of the AS/AD model;this change should have;a. shifted the AD;curve to the left;b. shifted the AD;curve to the right;c. made the AD curve;flatter;7. The largest source;of household income is in the U.S. is obtained;a. stock dividends;b. wages and salaries;c. interest earnings;d. rental income;8. If the;depreciation of a country?s currency increases it aggregate expenditures by 20;the AD curve will;a. shift right by;more than 20;b. shift right by;less than 20;c. shift right by;exactly 20;d. not shift at all;9. Aggregate demand;management policies are designed most directly to;a. minimize;unemployment;b. minimize inflation;c. control the;aggregate level of spending in the economy;d. prevent budget;deficits or surpluses;10. 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. an increase in;government spending;b. an increase in;taxes;c. a reduction in;government spending;d. no change in taxes;or government spending.;11. According to;Keynes, market economies;A. never experience;significant declines in aggregate demand;B. quickly recover;after they experience a significant decline in aggregate demand;C. may recover slowly;after they experience a significant decline in aggregate demand;D. are constantly;experiencing significant declines in aggregate demand;12. The laissez-faire;policy prescription to eliminate unemployment was to;A. eliminate labor;unions and government policies that hold real wages too high;B. strengthen unions;and government regulations protecting unions and workers;C. increase real;wages so that people are encouraged to work;D. have government;guarantee jobs for everyone;13. In the AS/AD;model, an expansionary monetary policy has the greatest effect on the price;level when it;A. increases both;nominal and real income;B. increases real;income but not nominal income;C. increases nominal;income but not real income;D. doesn't increase;real or nominal income;14. The Federal funds;rate;A. is always slightly;higher than the discount rate;B. can never be close;to zero;C. may sometimes have;to be targeted at zero;D. is an intermediate;target;15. What tool of;monetary policy will the Federal Reserve use to increase the federal funds rate;from 1% to 1.25%?;A. Open-market;operations;B. The discount rate;C. A change in;reserve requirements;D. Margin;requirements;16. If the Federal;Reserve increases the required reserves, financial institutions will likely;lend out;A. more than before;increasing the money supply;B. less than before;decreasing the money supply;C. more than before;decreasing the money supply;D. less than before;increasing the money supply;17. Suppose the;money multiplier in the U.S. is 3. Suppose further that if the Federal Reserve;changes the discount rate by 1 percentage point, banks change their reserves by;300. To increase the money supply by 2700 the Federal Reserve should;A. reduce the;discount rate by 3 percentage points;B. reduce the;discount rate by 10 percentage points;C. raise the discount;rate by 3 percentage points;D. raise the discount;rate by 10 percentage points;18. If the Federal;Reserve reduced its reserve requirement from 6.5 percent to 5 percent. This;policy would most likely;A. increase both the;money multiplier and the money supply;B. increase the money;multiplier but decrease the money supply;C. decrease the money;multiplier but increase the money supply;D. decrease both the;money multiplier and the money supply;19. A country can;have a trade deficit as long as it can;A. purchase foreign;assets;B. make loans to;other countries;C. borrow from or;sell assets to foreigners;D. produce more than;it consumes.;20. A weaker dollar;A. raises inflation;and contracts the economy.;B. reduces inflation;and contracts the economy;C. raises inflation;and expands the economy;D. reduces inflation;and expands the economy;21. In the short run;a trade deficit allows more consumption, but in the long run, a trade deficit;is a problem because;A. the country;eventually will consume more and produce less;B. the country;eventually will sell all its financial assets to foreigners;C. the domestic;currency will appreciate;D. the country;eventually has to produce more than it consumes in order to pay foreigners;their profits;22. Considering an;economy with a current trade deficit and considering only the direct effect on;income, an expansionary monetary policy tends to;A. decrease the;exchange rate and increase the trade deficit;B. increase the;exchange rate and increase the trade deficit;C. decrease the;exchange rate and decrease the trade deficit;D. increase the;exchange rate and decrease the trade deficit;23. The balance of;trade measures the;A. difference between;the value of imports and exports;B. share of U.S. imports;coming from various regions of the world;C. share of U.S.;exports going to various regions of the world;D. exchange rate;needed to make imports equal exports;24. When a country;runs a trade deficit, it does so by;A. borrowing from;foreign countries or selling assets to them.;B. borrowing from;foreign countries or buying assets from them.;C. lending to foreign;countries or selling assets to them.;D. lending to foreign;countries or buying assets from them.;25. Expansionary;fiscal policy tends to;A. raise U.S. income;increase U.S. imports, and increase the trade deficit;B. raise U.S. income;increase U.S. imports, and lower the trade deficit;C. lower U.S. income;reduce U.S. imports, and increase the trade deficit;D. lower U.S. income;reduce U.S. imports, and lower the trade deficit;26. In considering;the net effect of expansionary fiscal policy on the trade deficit, the;A. income effect;offsets the price effect;B. price effect;offsets the income effect;C. income and price;effects work in the same direction, so the trade deficit is decreased;D. income and price;effects work in the same direction, so the trade deficit is increased;27. If U.S. interest;rates fall relative to Japanese interest rates and Japanese inflation falls;relative to U.S. inflation, then the;A. dollar will lose;value in terms of yen;B. dollar will gain;value in terms of yen;C. dollar's value;will not change in terms of yen;D. change in the;dollar's value cannot be determined;28. Expansionary;monetary policy tends to;A. lower the U.S.;interest rate and increase the U.S. exchange rate;B. lower the U.S.;interest rate and decrease the U.S. exchange rate;C. increase the U.S.;interest rate and decrease the U.S. exchange rate;D. increase the U.S.;interest rate and increase the U.S. exchange rate;29. The U.S. has;limits on Chinese textile imports. Such limits are an example of;A. a tariff;B. a quota;C. a regulatory trade;restriction;D. an embargo;30. Duties imposed by;the U.S. government on imported Chinese frozen and canned shrimp are an example;of;A. tariffs;B. quotas;C. voluntary;restrictions;D. regulatory trade;restrictions

 

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