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University of California, Santa Barbara - ECON 2 Econ 2 Final Exam - Version A 1)In one hour, Abe can make 3 shoes and 5 socks, while Bill can make 4 shoes and 6 socks

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University of California, Santa Barbara - ECON 2

Econ 2 Final Exam - Version A

1)In one hour, Abe can make 3 shoes and 5 socks, while Bill can make 4 shoes and 6 socks. Who has the absolute advantage in sock making? The comparative advantage? a. Abe, Abe

 

	Abe, Bill Bill, Abe Bill, Bill
____	2. In one hour, Abe can make 3 shoes and 5 socks, while Bill can make 4 shoes and 6 socks.  If Abe and Bill worked together, which point would NOT lie on their production possibility frontier? a. (5, 4) (2, 8) (0, 11) (7, 0)
____	3. An open economy has consumption of $10T, government spending of $2T, investment of $3T, and $5T of exports. If GDP is $20T, how much were imports? a. $3T $5T $0T $2T
____	4. If the Fed conducted an open-market sale of treasury bonds, we would expect money supply to __________ and interest rate to __________. a. increase, increase increase, decrease decrease, increase decrease, decrease
____	5. If the nominal interest rate is 5% and inflation is 2%, in approximately how many years will your investment double in real terms? a. 24 years 36 years 10 years 16 years
____	6. Celine is risk-neutral and chooses between two bets: A) flip a coin; if it's heads, she gets $100 in one year, or B) roll a 6-sided die; if it's a 6, she gets $240 now. What is the interest rate that makes her indifferent? a. 20% 25% 30% 15%
____	7. There is a small country in the world named San Barbara. It produces sugar and doesn’t trade with other

countries. San Barbara is abundant in sugar while the rest of world isn’t. It is thinking about trading sugar with other countries. Which of the following would NOT be true after San Barbara opens its economy to trading sugar?

1. Consumers in San Barbara will complain about higher price of sugar they have to pay,

because it increases their daily living cost.

2. Producers in San Barbara will produce more sugar since it is a scarce and valuable resource in the international market.
3. Sugar price will increase but producers in San Barbara will produce less sugar since fewer domestic consumers are willing to buy at higher price. 
4. The trade will make San Barbara as a whole better off finally. 

 

 

	____	8. You are a macro-economist and are asked to predict the change in national savings. Government tax revenue is expected to increase by 8 million, while government spending is expected to decrease by 10 million. There is an anticipated 15 million increase in output. All other components of GDP are predicted to stay the same and net exports is predicted to be zero. What would be the the predicted change in national saving?  a. National saving will increase by $25M National saving will increase by $5M National saving will increase by $13M National saving will decrease by $3M
	____	9. Adam is risk averse, and he has 100 dollars. It is possible that Adam would be indifferent between having $100 and: A lottery to win 105 dollars or to win 90 dollars with equal chance A lottery to win 105 dollars or to win 95 dollars with equal chance A lottery to win 110 dollars or to win 95 dollars with equal chance Adam would never participate in a lottery.
	____ 10. Which of the following about unemployment is true? The labor force includes the entire population in an economy. The labor force participation rate is influenced by the number of retirees. The unemployment rate must include retirees. Discouraged workers are part of the people defined to be unemploye    ____ 11. Consider the balance sheet of Barbara County Bank. The information about its assets and liabilities are as follows:
Assets or liabilities`			Value (million)
Reserves			$200
Debt			$150
Capital			$50
Securities			$100
loans			??
Deposit			??

 

What is the difference between its total loans and deposits? a. -$100 million

2. -$200 million
3. -$300 million
4. insufficient information

  

____ 12. Suppose the Fed buys $ 2 million worth of bonds. What could be the reason for the money supply to not increase by the maximum amount possible as per the money multiplier? a. The money multiplier being equal to 1 over the reserve ratio.

2. Open market operations.
3. The people taking out loans deposit all of the money back into the bank.
4. The banks do not loan out all of the money and keep excess reserves.

  

____ 13. What is the percentage change in inflation if the money supply is declining at 6%, the velocity of money does not change, real GDP was $1,000 last year, and real GDP is $950 this year? a. 1%

2. 2%
3. -1%
4. -2%

  

____ 14. Rick can cut 6 pieces of wood or catch 6 fish per day. Timmy can cut 9 pieces of wood or catch 18 fish per day. Which one of the following points is not on the Timmy’s production possibility frontier fish is on the horizontal axis and pieces of wood is on the vertical axis? a. (0, 9)

2. (18, 0)
3. (8, 5)
4. (10, 3)

  

____ 15. The Government regularly puts out information on employment and unemployment. In order to be considered unemployed you must be:

1. at least 16 years of age and been looking for a job in the past 4 weeks
2. at least 18 years of age and been looking for a job in the past 4 weeks
3. at least 16 years of age and been looking for a job in the past 6 weeks
4. at least 18 years of age and been looking for a job in the past 6 weeks

  

____ 16. Japanese automaker Honda has produced $3 million worth of cars at the US factory and Chrysler made $2 million worth of cars at their factory in the US. Good Year tire company made $2 million worth of tires of which half were sold to Chrysler and Honda and the other half were sold in the market. What is the contribution towards the GDP? a. $6 million

2. $7 million
3. $5 million
4. $4 million

  

____ 17. Which of the following is true of tariffs?

1. They cause deadweight loss
2. They increase the quantity of imports
3. They increase consumer surplus
4. None of the above are true

  

____ 18. Violet and Jasmine can both produce sweaters and scarves.  If Violet is twice as fast as Jasmine at producing sweaters and three times as fast as Jasmine at producing scarves then Violet has a a. comparative advantage in sweaters only

2. comparative advantage in scarves only
3. comparative advantage in both sweaters and scarves
4. comparative advantage in neither good

  

____ 19. Suppose that velocity is 10 and that real GDP is $30 million.  If the money supply increases from $6 million to $8 million then what happens to prices? a. Increase by 67%

2. Increase by 33%
3. Decrease by 33%
4. Increase by 2 million

 

 

____ 20. Suppose that people hold all of their money in bank deposits and that banks hold no excess reserves.  If the current money supply is $4 million and the reserve requirement is 2%, what will happen to the money supply if the Fed increases the reserve requirement to 3%? a. Decreases by $2 million

2. Increases by $1.33 million
3. Decreases by 30%
4. Decreases by $1.33 million

  

____ 21. Which of the following would cause the present value of a future payment to increase?

1. An increase in the time until payment
2. An increase in the interest rate
3. A decrease in the interest rate
4. None of the above

  

____ 22. Suppose that the typical consumer’s basket consists of one cell phone and one computer.  All else equal, if the quality of computers increases dramatically while the price of computers increases only a moderate amount, then CPI will

1. overstate inflation
2. understate inflation
3. not change
4. understate the typical consumer’s cost-of-living

  

____ 23. If (4,5) is a point on the production possibilities frontier, then ____ could be a feasible allocation while _____ would be an infeasible allocation. a. (3,3) (7,6)

2. (3,5) (3,6)
3. (6,6) (5,6)
4. (1,1) (3,6)

  

____ 24. If the nominal GDP for a country is increased from $10 million to $12 million, the money supply of $4 billion remains the same. by how much percentage the velocity of money is changed?  a. 20%

2. 15%
3. 6%
4. 30%

  

____ 25. If the US real exchange rate appreciates, exports will____, and imports will____. a. increase, decrease

2. increase, increase
3. decrease, increase
4. decrease, decrease

  

____ 26. Which of the following would increase the demand for money in an economy? 

1. An increase in the price level 
2. A decrease in the price level 
3. An increase in the interest rate 
4. A decrease in the interest rate

  

____ 27. When the Fed conducts open market purchases, bank reserves 

1. increase and banks can increase lending.
2. increase and banks must decrease lending. 
3. decrease and banks can increase lending. 
4. decrease and banks must decrease lending.

  

____ 28. Purchasing-power parity describes the forces that determine 

1. prices in the short run.
2. prices in the long run.
3. exchange rates in the short run.
4. exchange rates in the long run.

  

____ 29. When the nation of Econto allows international trade of iclickers, the producers of iclickers in this nation will be better off if

1. Econto is importing iclickers
2. Econto is exporting iclickers
3. Both a and b
4. Neither a or b

  

____ 30. Which of the following will happen if the tariff in a country is cancelled?

1. Society will be worse off.
2. Domestic producers will be worse off.
3. Governments will be better off.
4. Domestic consumers will be worse off.

  

____ 31. Which of the following is NOT true when the reserve ratio is reduced?

1. The money multiplier is increased
2. The money supply decreases
3. Nominal output increases
4. Real output is unaffected

  

____ 32. If you presently have $150,000 saved and earn 10 percent interest per year, about how many years will it take for your investment to double? a. 5 years

2. 6 years
3. 7 years
4. 8 years

  

____ 33. A dealer in United States imported 1,000 cars from a Japanese company in the last quarter of 2013. He did not sell them to consumers until the first quarter of 2014.  Which of the following components of U.S. GDP is affected by this transaction in the first quarter of 2014? a. consumption, investment and imports

2. only consumption and investment
3. only consumption and imports
4. only investment and imports

  

____ 34. 1. Star Cycles is a German-owned company that produces bicycles. All of its bicycles are produced in American plants. In 2013, Star Cycles produced $10 million worth of automobiles, with $3 million in sales to Americans, $2 million in sales to Canadians, and $5 million worth of bicycles added to Star Cycle’s inventory. How much do the transactions described above contribute to U.S. GDP for 2013?

 

1. $3 million
2. $5 million
3. $8 million
4. $10 million

 

 

____ 35. 2. Suppose that there are only 3 footballs and 4 basketballs in a representative consumer basket of Country A. Over three years, the prices for both goods evolves as the following table:

 

Year	Price of Footballs	Price of Basketballs
Year 1	$10	$12
Year 2	$12	$15
Year 3	$14	$18

 

Using Year 1 as the base year, what is CPI for Year 2 and what is the inflation rate for Year 3?

 

1. 123.08; 23.08%
2. 123.08; 18.74%
3. 146.15; 23.08%;
4. 146.15; 18.74%

  

____ 36. 3. Betty bakes 10 cakes a day using 1 mixer and 1 oven. Her rival Kate bakes 18 cakes a day using 2 mixers and 2 ovens. Both Betty and Kate use the same technology and the same number of workers. Suppose Kate both increase her capital by 1 mixer and 1 oven. What is the most realistic expectation Kate should have about how much more cakes will be baked?

 

1. more than 8
2. at least 10
3. about 5
4. more than 9

  

____ 37. 4. Suppose that the banking system currently has $500 billion in reserves, the reserve requirement is 9% and the excess reserves are $5 billion. What is the level of loans?

 

1. $5,500 billion
2. $5,495 billion
3. $5,000 billion
4. $4,955 billion

  

____ 38. The following table shows the amount of time Alice and Betty take to bake 1 cake and 1 donut:

 

	Minutes Needed to Make One:
	Cake	Donut
Alice	60 mins	15 mins
Betty	20 mins	10 mins

 

Who has an absolute advantage in baking cake? Who has a comparative advantage in baking donuts?

 

 

1. Alice; Alice
2. Alice; Betty
3. Betty; Alice
4. Betty; Betty

  

____ 39. The following table shows the amount of time Alice and Betty take to bake 1 cake and 1 donut:

 

	Minutes Needed to Make One:
	Cake	Donut
Alice	60 mins	15 mins
Betty	20 mins	10 mins

 

      Suppose that Alice and Betty can specialize in baking the product that they have comparative advantages in and trade with each other. Which of the relative price will make them both strictly better off?

 

1. 1 cake for 1 donut
2. 2 cakes for 4 donuts
3. 3 cakes for 9 donuts
4. 4 cakes for 16 donuts

  

____ 40. Suppose that the auto industry in the United States is facing increasingly strong competition from foreign producers. The President is considering implementing a strong quota in order to prop up the domestic auto industry. How will this affect consumers in the United States?

1. They will be better off. They will no longer have to attempt to pronounce brands like “Daewoo” and “Peugeot.”
2. There will be no difference. The quota won’t impact choice.
3. They will be worse off. Supply will be lower, which will decrease surplus accrued by consumers.
4. They will be better off. A quota will support jobs in the United States, increasing demand and thus consumer surplus.

  

____ 41. Suppose that a law has changed and citizens can now invest abroad and foreigners can invest domestically. If the real interest rate is higher abroad, what will this do to the supply of loanable funds in the home country? a.      Increase them. Foreigners will be wealthier, so they will need places to invest.

2. Decrease them. Investors will seek higher rates of return elsewhere.
3. Increase them. Foreign investors will seek the less risky assets domestically.
4. Do nothing. Loanable funds don’t respond to interest rate changes.

  

____ 42. Suppose that the country of Woodstock has a large middle class who holds all of their assets in money. After a war, the victors require them to pay a great deal of money in reparations. They pay this back by inflating their currency. What is the likely effect on the middle class?

1. They will lose a large part of their savings in real terms.
2. They will be unaffected.
3. The increase in currency will inflate their bank accounts, making them better off.
4. They will spend more time listening to “Money” by Pink Floyd.

  

____ 43. Suppose that the equilibrium wage in the economy is 7 dollars. In an attempt to increase support before the upcoming election, the mayor is thinking about implementing a 6 dollar minimum wage. What will happen to the unemployment rate?

1. It will increase. The minimum wage will cause employers to hire fewer workers.
2. It will decrease. More people will be willing to work.
3. Employers will decrease their wages to $6.
4. The unemployment rate won’t change.

  

____ 44. Suppose that the supply of loanable funds is perfectly inelastic (i.e. vertical). If firms decide they want to invest more, what will happen to the market for loanable funds?

1. The interest rate will increase, but the quantity of loanable funds will remain the same.
2. Both the interest rate and the quantity of loanable funds will increase.
3. The interest rate will remain constant, but the quantity of loanable funds will increase. d.       Nothing will change.

  

____ 45. If nominal GDP has increased, but real GDP declined, what does this mean?

1. A cell reference error in Microsoft Excel.
2. Inflation outpaced the rate of growth in the economy.
3. The price level declined in the last year.
4. Prices were very low in the base year.

  

____ 46. Ralph pays someone to mow his lawn, while Mike mows his own lawn.  Regarding these two practices, which of the following statements is correct?

1. Only Ralph’s payments are included in GDP.
2. Ralph’s payments as well as the estimated value of Mike’s mowing services are included in GDP.
3. Neither Ralph’s payments nor the estimated value of Mike's mowing services is included in GDP.
4. Ralph’s payments are included in GDP, while the estimated value of Mike’s mowing services is included in GDP only if Mike voluntarily provides his estimate of that value to the government.

  

____ 47. A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

1. U.S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.
2. U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, German GNP is unaffected, and German GDP decreases.
3. U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.
4. U.S. net exports and GDP are unaffected, Japanese GNP increases, and German net exports, GNP, and GDP decrease.

  

____ 48. In the economy of Ukzten in 2010, consumption was $3000, GDP was $5500, government purchases were $1000, imports were $2000, and investment was $1000.  What were Ukzten’s exports in 2010? a. -$1500

2. $500
3. $1500
4. $2500

 

 

Table 23-6

 

The table below contains data for the country of Batterland, which produces only waffles and pancakes.  The base year is 2009.

 

Prices and Quantities

Year	Price of  Waffles	Quantity of Waffles	Price of Pancakes	Quantity of  Pancakes
2008	$2.00	100	$1.00	100
2009	$2.00	120	$2.00	150
2010	$2.00	150	$3.00	200
2011	$4.00	180	$3.00	220

 

 

____ 49. Refer to Table 23-6.  This country's inflation rate from 2008 to 2009 was a. -25%.

2. 25%.
3. 33.3%.
4. 100%.

  

____ 50. Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100.  Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. 

What happened to the real GDP per person? a. It more than doubled.

2. It increased, but it less than doubled.
3. It was unchanged.
4. It decreased.

 

 

Table 24-1

 

The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.  

 

Year	Price of Peaches	Price of Pecans
2005	$11 per bushel	$6 per bushel
2006	$9 per bushel	$10 per bushel

 

 

____ 51. Refer to Table 24-1.  If 2005 is the base year, then the CPI for 2005 was a. 83.3.

2. 100.
3. 120.
4. 200.

  

____ 52. One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

1. fails to measure all changes in the quality of goods.
2. displays a housing bias.
3. accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant.
4. All of the above are correct.

  

____ 53. In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

1. GDP deflator rises much more than does the consumer price index.
2. consumer price index rises much more than does the GDP deflator.
3. GDP deflator and the consumer price index rise by about the same amount.
4. consumer price index rises slightly more than does the GDP deflator.

  

____ 54. An increase in the price of imported coffee shows up 

1. in the consumer price index and in the GDP deflator.
2. in the consumer price index, but not in the GDP deflator.
3. in the GDP deflator, but not in the consumer price index.
4. in neither the consumer price index nor in the GDP deflator.

 

 

Scenario 24-1

 

The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00.  The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

 

____ 55. Refer to Scenario 24-1.  In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost a. $0.27, so tennis balls were cheaper in 1975.

2. $0.27, so tennis balls were cheaper in 2005.
3. $3.66, so tennis balls were cheaper in 1975.
4. $3.66, so tennis balls were cheaper in 2005.

  

____ 56. In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same planes are available today and the price increased at exactly the rate of inflation. If the CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today? a. $24.15

2. $11.50
3. $5.48
4. $2.10

  

____ 57. If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is a. -4 percent.

2. -0.44 percent.
3. 4 percent.
4. 14 percent.

 

 

____ 58. The consumer price index was 225 in 2006 and 234 in 2007.  The nominal interest rate during this period was 6.5 percent.  What was the real interest rate during this period? a. 2.5 percent

2. 4.0 percent
3. 6.76 percent
4. 10.5 percent

  

____ 59. A nation's standard of living is best measured by its

1. real GDP.
2. real GDP per person.
3. nominal GDP.
4. nominal GDP per person.

 

 

Figure 25-1.  On the horizontal axis, K/L represents capital (K) per worker (L).  On the vertical axis, Y/L represents output (Y) per worker (L).

 

 

K/L

Y/L

 

 

____ 60. Refer to Figure 25-1.  The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

1. In the long run, a higher saving rate leads to a higher level of productivity.
2. In the long run, a higher saving rate leads to a higher level of income.
3. In the long run, a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income.
4. All of the above are correct.

  

____ 61. Institutions that help to match one person's saving with another person's investment are collectively called the a. Federal Reserve system.

2. banking system.
3. monetary system.
4. financial system.

  

____ 62. A bond is a

1. financial intermediary.
2. certificate of indebtedness.
3. certificate of partial ownership in an enterprise.
4. None of the above is correct.

  

____ 63. On which of these bonds is the prospect of default most likely?

1. a junk bond
2. a municipal bond
3. a U.S. government bond
4. a corporate bond issued by Proctor & Gamble Corporation

  

____ 64. Which of the following is not correct?

1. Gross domestic product is both total income in an economy and total expenditures on the economy’s output of goods and services.
2. In a closed economy net exports are zero.
3. National saving is the sum of private saving and public saving.
4. Purchases of capital goods are excluded from GDP.

  

____ 65. Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

1. There would be no change in the interest rate or saving.
2. The interest rate would decrease and saving would increase.
3. The interest rate would increase and saving would decrease.
4. None of the above is correct.

 

 

Figure 26-4.   On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.

 

 

$50

$62

%

6

8

%

Supply

D

D

1

2

L

r

 

 

 

____ 66. Refer to Figure 26-4.  If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent,  then 

1. there is an excess supply of loanable funds at a real interest rate of 6 percent.
2. there is an excess demand for loanable funds at a real interest rate of 8 percent.
3. the rate of inflation is approximately 2 percent.
4. the rate of inflation is approximately 14 percent.

 

 

____	67. Discounting refers directly to  finding the present value of a future sum of money. finding the future value of a present sum of money. calculations that ignore the phenomenon of compounding for the sake of ease and simplicity. decreases in interest rates over time, while compounding refers to increases in interest rates over time.
____	68. Which of the following changes would increase the present value of a future payment? a. a decrease in the size of the payment a decrease in the time until the payment is made an increase in the interest rate All of the above are correct.
____	69. A risk-averse person has utility and marginal utility curves that slope upward. utility and marginal utility curves that slope downward. a utility curve that slopes down and a marginal utility curve that slopes upward. a utility curve that slopes upward and a marginal utility curve that slopes downwar
____	70. Risk can be reduced by placing a large number of small bets rather than a small number of large bets. can be reduced by increasing the number of stocks in a portfolio. Both A and B are correct. Neither A nor B are correct.
____	71. Other things the same, as the number of stocks in a portfolio rises, risk increases and the standard deviation of the return rises. risk increases and the standard deviation of the return falls. risk decreases and the standard deviation of the return rises. risk decreases and the standard deviation of the return falls.
____	72. Ben decided to increase the number of stocks in his portfolio. In doing so, Ben reduced both the firm-specific risk and the market risk of his portfolio. the firm-specific risk, but not the market risk of his portfolio. the market risk, but not the firm-specific risk of his portfolio. neither the market risk nor the firm-specific risk of his portfolio.
____	73. A pharmaceutical company unexpectedly announces that it just developed an important new drug.  This news should raise the price of the corporation's stock; if it does not the stock is overvalued. raise the price of the corporation's stock; if it does not the stock is undervalued. reduce the price of the corporation's stock; if it does not the stock is overvalued. reduce the price of the corporation's stock; if it does not the stock is undervalue
____	74. Sirius has just finished high school and started looking for his first job, but has not yet found one.  Other

things the same, the unemployment rate

1. and the labor-force participation rate both increase.
2. increases and the labor-force participation rate is unaffected.
3. is unaffected and the labor-force participation rate increases.
4. and the labor-force participation rate are both unaffected.

 

 

____ 75. A survey showed that in each of the past 12 months there was one person who was unemployed who worked in all other months. There were also two people who were unemployed for all 12 months. What percentage of the unemployment spells during the year was short-term, and what percentage of the unemployment in a given month was long-term?

1. 75 percent and 33.3 percent
2. 75 percent and 66.7 percent
3. 85.7 percent and 33.3 percent
4. 85.7 percent and 66.7 percent

 

 

Figure 28-1

 

 

 

       

____ 76. Refer to Figure 28-1.  If the government imposes a minimum wage of $8, then unemployment will increase by

1. 0 workers.
2. 2000 workers.
3. 4000 workers.
4. 7000 workers.

  

____ 77. Other things the same, an increase in wages above their equilibrium level

1. increases frictional unemployment but leaves the natural rate of unemployment unchanged.
2. increases frictional unemployment and increases the natural rate of unemployment.
3. increases structural unemployment but leaves the natural rate of unemployment unchanged.
4. increases structural unemployment and increases the natural rate of unemployment.

  

____ 78. Suppose interest of 5% for two years can be earned on $1,000 saved today with no risk.  What is the least amount a person would need to have a 50% chance of winning to be willing to face a 50% chance of losing $1,000 today and be considered risk averse? a. $907.03 to be paid in two years

2. $1,000.01 to be paid in two years
3. $1,100.01 to be paid in two years
4. $1,102.51 to be paid in two years

  

____ 79. Factors that increase the demand for U.S. dollars include:

1. An increase in the preference for U.S. goods
2. An increase in real GDP abroad
3. An increase in the real interest rate on U.S. assets
4. All of the above

  

____ 80. Suppose money supply is declining at 5%, velocity does not change, and real gdp is declining at 3%.  What is inflation?

1. 2%
2. 3%
3. -2%
4. -3%