Macroeconomics 1

1.

1 point

If expected inflation is 2%, the nominal interest rate is 7% and the economy is growing at a rate of 3%, the real interest rate is equal to

5%

9%

6%

12%

4%

2.

1 point

The GDP deflator is

none of the above.

(Real GDP)/(Nominal GDP).

(Nominal GDP x 100)/(Real GDP)

(Nominal GDP)/(Real GDP).

(Real GDP x 100)/(Nominal GDP).

3.

1 point

According to the loanable funds framework, if businesses see new opportunities to expand capacity by building new factories, the likely effect will be that:

Interest rates decrease due to an increase in borrowing.

Interest rates decrease due to a greater amount of saving.

There will be no change in interest rates.

The total quantity of borrowing and lending will fall.

None of the above.

4.

1 point

A full-time student who did not have a job and was not looking for work would be categorized as

employed

unemployed

not in the labor force

marginally unemployed

partially employed

5.

1 point

Which of the following statements is consistent with the theory of liquidity preference?

When the Federal Reserve Board of Govenors increases the money supply faster than usual, interest rates fall.

When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates rise.

When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates don’t change in the short run, but we will get substantial inflation.

When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates don’t change in the short run, but the cost of living is likely to fall.

None of the above statements are correct.

6.

1 point

An open market purchase is where the Fed

purchases government bonds from the public, thereby decreasing the money supply.

purchases government bonds from the public, thereby increasing the money supply.

increases the money supply by selling government bonds to the public.

decreases the money supply by selling government bonds to the public.

none of the above.

7.

1 point

All of the following would cause a rightward shift in the short-run aggregate-supply curve except

a change in labor laws that facilitates labor mobility and thereby raises the productivity of workers.

the invention of a new and more powerful computer chip that increases productivity throughout the economy.

a war that reduces the economy’s physical capital stock.

new educational advances that substantially increase the level of human capital.

an increase in immigration.

8.

1 point

Which of the following is not an example of monetary policy?

Purchasing of government bonds in an open market operation.

A change in required reserve regulations.

A change in the discount rate.

An increase in the earned income tax credit.

Selling of government bonds in an open market operation.

9.

1 point

If nominal wages adjust slowly to changing economic conditions, then a decrease in the price level will cause the real wage rate to rise and employment and real output to fall. This description of the impact of a decrease in the price level on real output is used to explain:

a shift in the aggregate-demand curve.

the negative slope of the aggregate demand curve.

a shift in the short-run aggregate-supply curve.

the vertical shape of the long-run supply curve.

the positive slope of the short-run aggregate-supply curve.

10.

1 point

According to the theory of “money neutrality” which of the following statements is likely to be true?

When the money supply is increased, real wage rates will rise.

When the money supply is increased, real interest rates will fall

When the money supply is increased, real GDP will increase.

When the money supply is increased, real wage rates will fall.

When the money supply is increased, nominal wage rates will rise.

11.

1 point

If the reserve ratio is 25 percent, the money multiplier is

2.

4.

5.

8.

25.

12.

1 point

Private property rights

make it more likely that a society will develop rapidly.

allow an individual to decide what to do with the product of his/her labor.

force a person not to help support family members in need.

allow the owners of a firm to decide what to do with any profits

all but “c”.

13.

1 point

A country will grow faster if

investment in human capital increases.

saving decreases

the government raises taxes on savings.

investment in physical capital decreases.

all of the above

14.

1 point

The aggregate supply-aggregate demand model suggests that the government can stabilize an economy that experiences a sudden and unexpected decline in consumer confidence and aggregate demand by:

increasing the money supply.

decreasing government spending to balance the budget.

raising taxes.

all of the above.

none of the above.

15.

1 point

Suppose that aggregate consumption is $1,000,000, aggregate investment is $200,000, government spending is $300,000, the value of exports is $100,000, and the value of imports is $200,000. What is the value of Gross Domestic Product (GDP)?

$1,800,000

$1,500,000

$1,400,000

$1,700,000

$1,600,000

16.

1 point

If the dollar value of a country’s exports is greater than the value of its imports,

net foreign investment is generally positive.

net foreign investment is unaffected.

net foreign investment is generally negative.

investment flows into the country.

both a and d.