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Saint Leo University-GBA 334 1)Macroeconomics deals withmwhile microeconomics deals with

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Saint Leo University-GBA 334

1)Macroeconomics deals withmwhile microeconomics deals with.

A)choices important to people; choices not important to people

B)         economywide choices; choices of individuals

C)         choices that involve money; choices that does not involve money

D)        choices of rich people; choices of poor people

 

2)         Which of the following statements concerning the distinction between positive and normative economics is true?

A)         Positive statements are concerned with what is, while normative statements are concerned with what someone thinks should be.

B)         Positive statements are concerned with what people think, while normative statements are concerned with what people do.

C)         Positive statements are true while normative statements are false.

D)        Positive statements are concerned with what is while normative statements are concerned with what will be.

 

3.         Which one of the following individuals is NOT counted as unemployed?

A)         a recent college graduate currently without any employment and looking for her first full-time job

B)         a 35-year-old woman fired from her prior work because of poor performance and looking for another job

C)         a 50-year-old woman laid off from her former job because of a downturn in the company's sales and looking for another job

D)        a 22-year-old aspiring actress currently without any show business employment, but working temporarily as a waitress while she auditions for acting jobs

 

4)         Which of the following price indexes is designed to measure changes in the prices of goods and services purchased by a typical individual?

A)         Producer Price Index

B)         Gross Domestic Product (GDP) Deflator

C)         Index of Leading Economic Indicators

D)        Consumer Price Index

 

5)         If a bank advertises 3 percent interest for a checking account and the anticipated rate of inflation is 3.5 percent,

A)         the real rate of interest earned on the account is 0.5 percent.

B)         the real rate of interest earned on the account is -0.5 percent.

C)         the real rate of interest earned on the account is 6.5 percent.

D)        the real rate of interest earned on the account is 3.25 percent.

6)         Which of the following statements is FALSE regarding GDP?

A)         GDP excludes nonmarket production.

B)         There are no significant weaknesses in using GDP as a measure of the nation's economic performance.

C)         GDP is the value of final goods and services produced in the economy.

D)        GDP is not a measure of a nation's overall welfare.

 

7)         National Income

 

A)         adds the dollar value of final goods and services produced in an economy.

B)         adds the income received by all factors of production.

C)         adds the dollar value of final goods and services produced in an economy but excludes durable consumer goods since they last more than a year.

D)        adds the income received by all factors of production but excludes profits since profits are a cost of production.

 

8)         If nominal Gross Domestic Product (GDP) in 2013 was $8 trillion, and the price level index was 130, then real Gross Domestic Product (GDP) was about

A)         $6.2 trillion.

B)         $0.062 trillion

C)         $10.4 trillion

D)        $16.25 trillion

 

9)         The aggregate demand curve shows that, if other factors are held constant,

A)         higher price levels will result in lower total planned spending.

B)         higher price levels will result in higher total planned spending.

C)         higher price levels will result in lower interest rates.

D)        lower price levels will result in inflationary conditions.

 

10)       In the classical (full employment) range, how do shifts in aggregate demand affect real GDP?

A)         Real GDP will remain unchanged.

B)         Increases in aggregate demand increase real GDP.

C)         Increases in aggregate demand decrease real GDP.

D)        Decreases in aggregate demand increase real GDP.

 

11)       Which of the following will shift the aggregate supply curve to the right?

A)         a rise in the price level

B)         a fall in the price level

C)         a decrease in input costs

D)        an increase in input costs

 

12)       According to Keynesian range of the aggregate supply curve, if there are unutilized resources in the economy and aggregate demand increases,

A)         real GDP will rise and price level will remain constant.

B)         real GDP will fall and price level will remain constant.

C)         real GDP will rise and price level will rise.

D)        real GDP will rise and price level will fall.

 

13)       Suppose the economy is experiencing a recession at the current level of GDP. Which of the following fiscal policy actions would be most appropriate given this recessionary gap?

A)         decreasing interest rates

B)         increasing the money supply

C)         decreasing taxes

D)        a simultaneous and equal reduction in taxes and reduction in government spending

 

14)       Because of crowding out,

A)         expansionary fiscal policy during a recession must involve a tax increase.

B)         expansionary fiscal policy during a recession is reinforced by private investment spending.

C)         the effect of expansionary fiscal policy is partially offset by the decline in investment spending caused by higher interest rates.

 

D)        expansionary fiscal policy is completely achieved even with a decline in investment spending.

 

15)       Which of the following is an example of an automatic stabilizer?

A)         cost of living adjustments to Social Security payments

B)         unemployment benefits

C)         a temporary tax rebate

D)        all of the above

 

16)       A federal deficit of $300 billion means that

A)         the government has a total debt of $300 billion.

B)         government spending is $300 billion a year.

C)         the government is spending $300 billion a year more than it is collecting in taxes.

D)        the government plans on collecting $300 billion in taxes this year.

 

17)       Other things being equal, what is the effect of deficit spending on interest rates?

A)         Interest rates decline.

B)         Interest rates rise.

C)         Interest rates hold constant because the demand for credit decreases.

D)        There is no impact unless the Federal Reserve decides to alter the money supply.

 

18)       When money is accepted as payment in a market transaction, it is functioning as a

A)         store of value.

B)         unit of accounting.

C)         medium of exchange.

D)        unit of investment.

 

19)       The Board of Governors of the Federal Reserve System is

A)         elected by the general public.

B)         composed of seven members who are appointed by the President and approved by the Senate.

C)         composed of representatives from the country's 12 largest commercial banks.

D)        composed of 12 members of the Senate and the U.S. House of Representatives.

 

20)       If the money multiplier is 2.4 and the Fed buys $8 million in securities on the open market, transaction deposits could potentially

A)         increase by $19.2 million.

B)         increase by $8 million.

C)         decrease by $19.2 million.

D)        decrease by $16.5 million.

 

21)       An increase in the money supply typically leads to

A)         a reduction in the rate of interest.

B)         a decrease in the price level.

C)         a reduction in the velocity of money.

D)        an inward shift in money demand.

 

22)       The effect of an increase in the supply of money is

A)         an increase in both real Gross Domestic Product (GDP) and the price level.

B)         an increase in the price level but not in real Gross Domestic Product (GDP).

C)         an increase in real Gross Domestic Product (GDP) but not in the price level.

D)        an increase in the price level, a decrease in real Gross Domestic Product (GDP), but an increase in nominal national income.

 

 

23)       If we assume that velocity is constant, and if the money supply increases by 6 percent, we would expect, ceteris paribus, that the price level would

A)         increase by 3 percent.

B)         increase by 6 percent.

C)         decrease by 3 percent.

D)        decrease by 6 percent.

 

24)       Which of the following would cause the U.S. dollar to depreciate?

A)         A U.S. firm sells a product to a Mexican firm.

B)         An Italian tourist in Miami purchases a beach ball.

C)         A Spaniard buys 100 shares of Ford stock.

D)        A U.S. resident buys gold from the Japanese central bank.

 

25)       The supply of U.S. dollars on foreign exchange markets is

A)         determined directly by open market operations at the Federal Reserve Bank.

B)         derived from the demand for U.S. products by foreigners.

C)         derived from the supply of U.S. goods.

D)        derived from the demand by United States for imported goods and services.

 

26)       To prevent the dollar from depreciating, the U.S. central bank that tries to fix the currency value of the dollar can

A)         buy U.S. dollars in the foreign exchange market.

B)         sell U.S. dollars in the foreign exchange market.

C)         abandon the U.S. dollar and use another country's currency as its legal currency.

D)        buy foreign currencies in the foreign exchange market.

 

PART II-INSTRUCTOR QUESTIONS

27.       Which of the following do fiscal and monetary policy NOT have in common?

a.         They both affect aggregate demand.

b.         They both are determined by the President with the approval of both houses of Congress.

c.         They both affect the unemployment rate.

d.         They both affect the inflation rate.

 

28.       Fiat Money

a.         is a medium of exchange.

b.         is a store of value.

c.         can also be considered a real good and service.

d.         all of the above.

e.         both a) and b) are correct.

 

29.       Bank money

a.         can be divided into required and excess reserves.

b.         becomes more money when a loan is made.

c.         has a banking multiplier of 20 when the reserve ratio is 10 percent.

d.         all of the above.

e.         both a) and b) are correct.

 

30.       The transactions demand for money is a function of

a.         income levels only

b.         interest rates only.

 

c.         both income levels and interest rates.

d.         the supply of money.

 

31.       The liquidity trap makes         policy ineffective in fighting   .

a.         fiscal -- unemployment

b.         monetary – unemployment

c.         fiscal -- inflation

d.         fiscal -- unemployment

e.         both fiscal and monetary policy -- unemployment and inflation

 

32.       The article by the St. Louis Federal Reserve on professor productivity suggests increasing student quality. This really means

a.         small classes only.

b.         reducing taxpayer subsidies so that students have more of a “stake” in their education.

c.         expecting more work from the professors.

d.         expecting more work from both the students and professors.

e.         both a) and d) are correct.

 

33.       The article suggests that measuring learning outcomes is just as easy as measuring the number of widgets produced in a factory.

a.         true

b.         false

 

34.       The article on wage decoupling says that relationship between wage growth and may not be true anymore.

a.         aggregate demand

b.         productivity growth

c.         economic activism

d.         all of the above

 

For the following two questions go to http://www.youtube.com/watch?v=Ml9IMkxH8CY and watch about the first 7 minutes of video.

35.       Which part of the money supply equation represents aggregate demand?

a.         M

b.         MV

c.         PQ

d.         MV = PQ

 

36.       This video is about the            school of thought, a(n)            school.

a.         new Keynesian -- nonactivist

b.         monetarist – nonactivist

c.         new Keynesian -- activist

d.         monetarist -- activist

 

 

The following two questions are from the Commanding Heights videos shown in class.

37.       The battle of ideas is NOT between

a.         free markets and government intervention.

b.         Hayek vs. Keynes.

c.         classical macroeconomic ideas vs. Keynesian ideas.

d.         Hayek vs. laissez-faire

 

 

38.       Hayek  believe in macroeconomics.

a.         did

b.         did not

 

 

For the following question go to http://www.youtube.com/watch?v=zajMQzFTCNA

39.       What is the characteristic of the line showing the NAIRU?

a.         It shows an unemployment inflation tradeoff.

b.         It is a vertical line.

c.         Both of these.

Note:   The NAIRU is also referred to as the “natural rate of unemployment” in the schools of macro thought handout.

 

40.       According to the NAIRU model, the NAIRU is caused by something other than changes in aggregate demand.

a.         true

b.         false

 

Go to https://www.youtube.com/watch?v=fw5rp7MfD-Q for the next two questions:

41.       The Laffer Curve is associated with

a.         supply-side economics.

b.         demand-side economics.

c.         traditional Keynesian economics.

d.         New Keynesian economics.

 

42.       The rate of taxation that would maximize tax revenues is

a.         0 percent.

b.         100 percent.

c.         somewhere between 0 and 100 percent.

 

43.       Which of these passages in the schools of macroeconomic handout suggests that economic activism does not really help decrease the unemployment rate?

a.         In the long-run, the economy will return to the natural rate of unemployment after worker's correctly anticipate inflation. Unfortunately the inflation caused by the expansionary policy persists. Further attempts to expand the economy will result in the same scenario and will create an even higher inflation rate.

b.         When firms hear that an expansionary fiscal or monetary policy is going to be pursued, rather than worry about what the policy may do to the inflation rate, they instead become more optimistic about the macro economy. Therefore business may increase its spending on plant and equipment.

c.         both of these

 

44.       Which of these passages supports economic activism?

a.         In the long-run, the economy will return to the natural rate of unemployment after worker's correctly anticipate inflation. Unfortunately the inflation caused by the expansionary policy persists. Further attempts to expand the economy will result in the same scenario and will create an even higher inflation rate.

b.         When firms hear that an expansionary fiscal or monetary policy is going to be pursued, rather than worry about what the policy may do to the inflation rate, they instead become more optimistic about the macro economy. Therefore business may increase its spending on plant and equipment.

 

c.         both of these

 

45.       Economic nonactivism can be associated with laissez-faire

a.         true

b.         false

 

46.       The following passages are from Keynes’ letter to President Roosevelt, which you read for the midterm exam. Take each statement and reword it in your own words. (Make it as easy to understand as possible.) Each statement should be no more than 20 words.

 

a.         When more purchasing power is spent, one expects rising output at rising prices.

 

 

 

b.         It is a most misleading thing to stress the quantity of money, which is only a limiting factor, rather than the volume of expenditure, which is the operative factor.

 

 

47.       Find a recent newspaper editorial that applies to what we have studied. You need not turn in the article, but give the title of the article, date, source and columnist name if applicable. Then do the following:

a.         Summarize the article in 50 words or less.

 

 

 

 

b.         Take a statement in the article that you consider a positive statement. Reword in if, then form. The statement should be no more than 15 words.

 

c.         Find one normative statement in the article OR tell what you think are the normative implications of the article.

d.        Do you think it takes an activist stance or nonactivist stance? You may justify your response