Question;TRUE / FALSE1.TrueFalseA side benefit of international trade is that it links national interestsand increases the opportunity costs of war.2.TrueFalseWhen C + Ig = GDP in a private closed economy, S = Ig and thereare no unplanned changes in inventories.3.TrueFalseThe risk-free interest rate is the rate on long-term U.S. governmentbonds.4.TrueFalseBond prices and interest rates are directly or positively related.5.TrueFalseThe public debt is the accumulation of all deficits and surplusesthat have occurred through time.6.TrueFalseThe M2 money supply may be larger or smaller than the M1 moneysupply depending on the size of small-denominated time depositbalances and Money Market Mutual Fund balances held byindividuals.7.TrueFalseExcess reserves are the amount by which required reserves exceedactual reserves.8.TrueFalseThe public debt is held as Treasury bills, Treasury notes, Treasurybonds, and U.S. savings bonds.9.TrueFalseThe equilibrium price level and equilibrium level of real GDPoccur at the intersection of the aggregate demand curve and theaggregate supply curve.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 110.True FalseInvestment is highly stable, it increases over time at a very steadyrate.MULTIPLE CHOICE11. A recessionary expenditure gap is:A. the amount by which the full-employment GDP exceeds the level of aggregate expenditures.B. the amount by which equilibrium GDP falls short of the full-employment GDP.C. the amount by which investment exceeds saving at the full-employment GDP.D. the amount by which aggregate expenditures exceed the full-employment level of GDP.12. The multiplier effect indicates that:A. a decline in the interest rate will cause a proportionately larger increase in investment.B. a change in spending will change aggregate income by a larger amount.C. a change in spending will increase aggregate income by the same amount.D. an increase in total income will generate a larger change in aggregate expenditures.13. Which one of the following is true about the U.S. Federal Reserve System?A. There are 12 regional Federal Reserve Banks.B. The head of the U.S. Treasury also chairs the Federal Reserve Board.C. There are 14 members of the Federal Reserve Board.D. The Open Market Committee is smaller in size than the Federal Reserve Board.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 114. If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rateis:A. 18 percent.B. 24 percent.C. 12 percent.D. 6 percent.15.Refer to the above diagram for a private closed economy. The equilibrium level of GDP is:A. $400.B. $300.C. $200.D. $100.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 116. Which of the following represents the most expansionary fiscal policy?A. a $10 billion tax cutB. a $10 billion increase in government spendingC. a $10 billion tax increaseD. a $10 billion decrease in government spending17.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 1Refer to the above table. The economy shown is a:A. private economy.B. private open economy.C. mixed closed economy.D. mixed open economy.18. Currency held in the vault of First National Bank is:A. counted as part of M1.B. counted as part of M2, but not M1.C. only counted as part of M1 if it was deposited into a checking account.D. not counted as part of the money supply.19. If the dollar appreciates relative to foreign currencies, we would expect:A. the multiplier to decrease.B. a country's exports and imports to both fall.C. a country's net exports to rise.D. a country's net exports to fall.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 120. The most important determinant of consumption and saving is the:A. level of bank credit.B. level of income.C. interest rate.D. price level.21. The multiple by which the commercial banking system can increase the supply of money on thebasis of each dollar of excess reserves is equal to:A. the reciprocal of the required reserve ratio.B. 1 minus the required reserve ratio.C. the reciprocal of the income velocity of money.D. 1/MPS.22. Which one of the following would not shift the aggregate demand curve?A. a change in the price levelB. depreciation of the international value of the dollarC. a decline in the interest rate at each possible price levelD. an increase in personal income tax rateECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 123. The cyclically-adjusted budget tells us:A. that in a full-employment economy the Federal budget should be in balance.B. that tax revenues should vary inversely with GDP.C. what the size of the Federal budget deficit or surplus would be if the economy was at fullemployment.D. the actual budget deficit or surplus realized in any given year.24. The aggregate supply curve:A. is explained by the interest rate, real-balances, and foreign purchases effects.B. gets steeper as the economy moves from the top of the curve to the bottom of the curve.C. shows the various amounts of real output that businesses will produce at each price level.D. is downsloping because real purchasing power increases as the price level falls.25.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 1Refer to the above diagram. If the equilibrium price level is P1, then:A. aggregate demand is AD2.B. the equilibrium output level is Q3.C. the equilibrium output level is Q2.D. producers will supply output level Q126. Discretionary fiscal policy refers to:A. any change in government spending or taxes that destabilizes the economy.B. the authority that the President has to change personal income tax rates.C. intentional changes in taxes and government expenditures made by Congress to stabilize theeconomy.D. the changes in taxes and transfers that occur as GDP changes.27.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 1Refer to the above diagram. Which tax system has the most built-in stability?A. T4B. T3C. T2D. T1ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 128. Countries engaged in international trade specialize in production based on:A. relative levels of GDP.B. comparative advantage.C. relative exchange rates.D. relative inflation rates.29. When a bank loan is repaid the supply of money:A. is constant, but its composition will have changed.B. is decreased.C. is increased.D. may either increase or decrease.30. The Federal budget deficit is found by:A. subtracting government tax revenues plus government borrowing from government spendingin a particular year.B. subtracting government tax revenues from government spending in a particular year.C. cumulating the differences between government spending and tax revenues over all yearssince the nation's founding.D. subtracting government revenues from the noninvestment-type government spending in aparticular year.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 131.Refer to the above information. Money supply M1 for this economy is:A. $60.B. $70.C. $130.D. $140.32. Which of the following statements is true as a result of Federal Reserve efforts to rescue thefinancial industry from the financial crisis of 2007 and 2008?A. From February 2008, to May 2009, the Fed oversaw the consolidation of 20 major financialinstitutions into fewer than a dozen.B. From March 2008, to February 2009, the Fed experienced a 50 percent decline in the valueof assets held.C. From February 2008, to March 2009, Fed assets more than doubled to nearly $2 trillion.D. From February 2008, to March 2009, Fed lending caused the U.S. public debt to rise by over$1 trillion.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 133. Which of the following is the basic economic policy function of the Federal Reserve Banks?A. holding the deposits or reserves of commercial banksB. acting as fiscal agents for the Federal governmentC. controlling the supply of moneyD. the collection or clearing of checks among commercial banks34. In a fractional reserve banking system:A. bank panics cannot occur.B. the monetary system must be backed by gold.C. banks can create money through the lending process.D. the Federal Reserve has no control over the amount of money in circulation.35. The primary gain from international trade is:A. increased employment in the domestic export sector.B. more goods than would be attainable through domestic production alone.C. tariff revenue.D. increased employment in the domestic import sector.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 136. Assume the Continental National Bank's balance statement is as follows:Assuming a legal reserve ratio of 20 percent, how much in excess reserves would this bank haveafter a check for $10,000 was drawn and cleared against it?A. $3,000B. $24,000C. $6,000D. $16,00037. Answer the question on the basis of the following table for a commercial bank or thrift:Refer to the above table. When the legal reserve ratio is 25 percent, the excess reserves of this singlebank are:A. $0.B. $1,000.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 1C. $5,000.D. $30,000.38. Which of the following is a tool of monetary policy?A. open market operationsB. changes in banking lawsC. changes in tax ratesD. changes in government spending39. An increase in nominal GDP increases the demand for money because:A. interest rates will rise.B. more money is needed to finance a larger volume of transactions.C. bond prices will fall.D. the opportunity cost of holding money will decline.40. Answer the next question on the basis of the following table:At equilibrium in the above market for money, the total amount of money demanded is:A. $500.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 1B. $480.C. $460.D. $440.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 141. For most financial assets investors must be compensated for:A. non-diversifiable and diversifiable risk.B. diversifiable risk and time preference.C. non-diversifiable risk and time preference.D. non-diversifiable and diversifiable risk, and time preference.42. Reserves must be deposited in the Federal Reserve Banks by:A. only commercial banks which are members of the Federal Reserve System.B. all depository institutions, that is, all commercial banks and thrift institutions.C. state chartered commercial banks only.D. federally chartered commercial banks only.43. Tariffs:A. may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers fromforeign competition (protective tariffs).B. are also called import quotas.C. are excise taxes on goods exported abroad.D. are per unit subsidies designed to promote exports.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 144. The discount rate is the interest:A. rate at which the central banks lend to the U.S. Treasury.B. rate at which the Federal Reserve Banks lend to commercial banks.C. yield on long-term government bonds.D. rate at which commercial banks lend to the public.45. What concept describes how quickly an investment increases in value when interest is paid notonly on the original amount invested, but also on the accumulated interest payments?A. present valueB. future valueC. compound interestD. real rate of interest46. The aggregate demand curve:A. is upsloping because a higher price level is necessary to make production profitable asproduction costs rise.B. is downsloping because production costs decline as real output increases.C. shows the amount of expenditures required to induce the production of each possible level ofreal output.D. shows the amount of real output that will be purchased at each possible price level.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 147. The Security Market Line depicts the relationship between the:A. average expected rate of return on stocks and the average expected rate of return on bonds.B. average expected rate of return of a financial asset and the discount rate.C. risk level of a financial asset and the prime interest rate.D. average expected rate of return and risk level of a financial asset.48. Arbitrage causes all financial assets:A. of the same risk level to have the same price.B. to have the same expected rate of return.C. to have the same beta.D. of the same risk level to have the same average expected rate of return.49. Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in theUnited States while the world price is $1.00 a pound. Assuming no transportation costs, theUnited States will:A. have a domestic surplus of copper.B. export copper.C. import copper.D. neither export nor import copper.ECON 201 FINAL EXAM ANSBACH - KATTERBACH - SPRING 2013, SESSION 150. Given the expected rate of return on all possible investment opportunities in the economy:A. an increase in the real rate of interest will reduce the level of investment.B. a decrease in the real rate of interest will reduce the level of investment.C. a change in the real interest rate will have no impact on the level of investment.D. an increase in the real interest rate will increase the level of investment.
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