Macomber 202 Final Exam pt 3

1.

1 point

Which of these is the smallest?

M2

Currency

M1

2.

1 point

Banks have three items that belong on its balance sheet as an asset, which of these is a liability of a bank?

Bonds

Deposits

Loans

Reserves

3.

1 point

Potential GDP is equivalent to

The natural rate of unemployment

The intersection of Aggregate Demand and Aggregate Supply

Th level of technology in an economy

The total quantity of goods and services purchased at any price level

4.

1 point

Increasing Aggregate Demand through an increase in government spending has the same result as cutting taxes.

True

False

5.

1 point

If the central bank were to take part in the buying and selling of government bonds to commercial banks, they are taking part in altering...

Reserve Requirements

Open Market Operations

Government Spending Legislation

Discount Rate

6.

1 point

Which entity takes part in creating monetary policy?

The States

Congress

The President

The Central Bank

7.

1 point

Banks make it more difficult for a complex economy to carry out the extraordinary range of transactions that occur in goods, labor, and financial capital markets.

True

False

8.

1 point

In the Neoclassical perspective, a decrease in Aggregate Demand is met by...

an equal decrease in Aggregate Demand

an increase in Potential GDP

a decrease in Aggregate Supply

an increase in Aggregate Supply

9.

1 point

Monetary policy involves altering the quantity of money, thus affecting interest rates, and the level of borrowing.

True

False

10.

1 point

Which of these is not one of the three functions of money?

unit of account

government issued

medium of exchange

store of value

11.

1 point

The effects of monetary policy are felt immediately.

True

False

12.

1 point

Which of the following is true of interest rates?

High interest rates give incentive for people to borrow more and save less, leading to more consumption

Low interest rates give incentive for people to borrow more and save less, leading to more consumption

Low interest rates give incentive for people to borrow less and save more, leading to more consumption

High interest rates give incentive for people to borrow less and save more, leading to more consumption

13.

1 point

If the current exchange rate between the US and Japan is $1 = 100Yen, and you make a $25,000 investment in a Japanese firm, how will the exchange rate changing to $1 = 90Yen affect you? (For simplicity assume no interest)

Cause an increase in value after turning the investment back into US $

Cause no change in value after turning the investment back into US $

Cause a decrease in value after turing the investment back into US $

Not enough information to tell

14.

1 point

As aggregate demand moves further to the left of Potential GDP, which the following occurs?

Inflation increases

Real GDP increases

Aggregate Supply increases

Cyclical unemployment increases

15.

1 point

What determines price level in the Neoclassical perspective?

Potential GDP only

Aggregate Supply only

the intersection of aggregate demand and aggregate supply

the intersection of Aggregate Demand and Potential GDP

16.

1 point

If the central bank were to take part in changing the interest rate they will loan money to commercial banks, they are taking part in altering the...

Government Spending Legislation

Reserve Requirements

Open Market Operations

Discount Rate

17.

1 point

When taxes are cut, what happens in the AS-AD model?

Aggregate Supply increases

Aggregate Demand increases

Aggregate Supply decreases

Aggregate Demand decreases

18.

1 point

All countries use their own sovereign currency within their borders.

True

False

19.

1 point

If I have US Dollars and want Euros, which best describes me?

Supplier of Dollars and Demander of Euros

Supplier of Dollars

Demander of Euros

Neither a Supplier nor Demander of Dollars or Euros

20.

1 point

If Aggregate Demand led to equilibrium past long-run equilibrium, the central bank would recommend taking part in __ monetary policy to __ Aggregate Demand

expansionary; reduce

contractionary; increase

contractionary; reduce

expansionary; increase

21.

1 point

If Zakistan increases government spending, the final overall effect, assuming the marginal propensity to consume is .5, is...

smaller than the initial expenditure

greater than the initial expenditure

the same as the initial expenditure

it depends

22.

1 point

The reserve requirements in an economy are 20%, making the money multiplier 5. If banks hold on to more than the legally mandated amount of reserves, they are holding onto __ and the multiplier is __ than expected.

reserve ratio; higher

reserve ratio; lower

excess reserves; lower

excess reserves; higher

23.

1 point

Which of the following is the formula for the money multiplier?

1/(1-Reserve Ratio)

1/Reserve Ratio

There is none

Reserve Ratio * Initial Deposit

24.

1 point

Which of the following is the Basic Equation of Money?

Velocity = Real GDP / Money Supply

Money Supply * Velocity = Real GDP

Velocity = Money Supply / Nominal GDP

Money Supply * Velocity = Nominal GDP

25.

1 point

Which of the following is not an effect that causes quantity purchased to fall as price level rises?

Foreign Price effect

Wealth effect

Substitution effect

Interest Rate effect

26.

1 point

Keynesian theory generally emphasizes...

central planning of the economy to increase AD

the use of government spending and tax cuts during a recession to increase AD

hands off economic policies, allowing AD to be where it needs to be

manipulation of the money supply to increase AD

27.

1 point

Which economist first postulated "Supply creates its own demand"?

David Ricardo

Jean-Baptiste Say

Adam Smith

John Maynard Keynes

28.

1 point

As the rate of return in the European Union increases, what will happen to the exchange rate between the US $ and the Euro?

It is unclear what will happen to the Euro, but the US $ will appreciate

The Euro will appreciate, while the US $ will depreciate

The US $ will appreciate, while the Euro will depreciate

It is unclear what will happen to the US $, but the Euro will appreciate

29.

1 point

Which views are consistent with Aggregate Demand not being automatically high enough to provide firms with an incentive to hire enough workers to reach full employment?

Neoclassical Economists

Keynesian Economists

Austrian Economists

Classical Economists

30.

1 point

The Phillips Curve shows what relationship between which two variables?

As inflation decreases, real GDP increases

As price level increases, unemployment increases

As real GDP increases, price level increases

As unemployment increases, inflation decreases

31.

1 point

A bank receives a $1,000,000 deposit. Assuming it has a 25% reserve ratio, how much can the bank immediately increase its loans by?

$250,000

$1,000,000

$750,000

$4,000,000

32.

1 point

Which of the following Neoclassical policy implications is false?

Recessions will fix themselves

Inflation is not important to manage

Economic growth must be stimulated

Unemployment will always be at the natural rate

33.

1 point

When it comes to wages and prices, they are __ in the short-run and __ in the long run.

sticky; sticky

sticky; flexible

flexible; sticky

flexible; flexible

34.

1 point

The US Dollar has appreciated to the Canadian Dollar by 33% since 2013, who has been helped by this?

US companies exporting to Canada

US investors in Canadian firms

US tourists visiting Canada

Canadian companies importing from the Us

35.

1 point

When productivity growth occurs, what happens in the AS-AD model?

Aggregate Demand decreases

Aggregate Demand increases

Aggregate Supply decreases

Aggregate Supply increases

36.

1 point

Qs of $ in the ForEx Market > Qd of $ in the ForEx Market

True

False

37.

1 point

A country can both keep a pegged exchange rate and use monetary policy to address the issues of inflation or recession at the same time.

True

False

38.

1 point

How can a financial investor use a financial transaction to protect against risk?

Insurance

ForEx

Hedging

Appreciation

39.

1 point

A bank receives a new deposit of $25,000. Assuming the bank system is working perfectly, and a 30% reserve ratio, how much new money could this bank ultimately create through the process of loans

$37,500

$83,333.33

$75,000

$35,714.29

40.

1 point

Keynes' Law seems to work better in the ___; while Say's Law seems to work better in the ___.

Long Run; Long Run

Long Run; Short Run

Short Run; Short Run

Short Run; Long Run

41.

1 point

What stops firms from constantly changing prices?

Goodwill toward their customers

Marginal costs

Menu costs

Average costs

42.

1 point

If prices become relatively higher in Macomberia than in Zakistan, what happens to AD?

AD increases in Zakistan and decreases in Macomberia

AD decreases in Macomberia and Zakistan

Ad increases in Macomberia and Zakistan

AD increases in Macomberia and decreases in Zakistan

43.

1 point

Which of these is the largest?

M2

Currency

M1

44.

1 point

If most people acted under adaptive expectations, changes in wages and prices would take place quickly.

True

False

45.

1 point

Which economist first postulated "Demand creates its own supply"?

Adam Smith

David Ricardo

Jean-Baptiste Say

John Maynard Keynes

46.

1 point

The best monetary policy will be countercyclical.

True

False

47.

1 point

If the central bank were to take part in changing the legal percentage of deposits banks must hold on to, they are taking part in altering...

Reserve Requirements

Government Spending Legislation

Discount Rate

Open Market Operations

48.

1 point

Potential GDP is the maximum quantity an economy can sustainably produce given its existing levels of labor, physical capital, technology, and legal institutions.

True

False