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Date Created: 11/06/15
ECO372 Principles of Macroeconomics Final Exam Study Guide 2013 1 The market where business sell goods and services to households and the government is called a goods market b factor market c capital market d money market 2 Real gross domestic product is best de ned as a the market value of intermediate goods and services produced in an economy including exports b all goods and services produced in an economy stated in prices in a given year and multiplied by quantity c the market value of all nal goods and services produced in an economv stated in the prices of a given vear d the market value of goods and services produced in an economy stated in current year prices 3 underemployment includes a who work off the books to avoid paying taxes b who are working part time or not using all their skills at a fulltime iob c who are tired of looking for a job so they quit looking but still want one d whose skills are not in demand anymore 4 The bureau of economic analysis is responsible for which of the following a setting interest rates b managing the money supply c calculating the US m domestic product d paying unemployment bene ts 5 The federal reserve provides which of the following data a federal funds rate b stock price of GE c bond yields of corporation d debt to GDP of Ireland 6 Consider if the government instituted a 10 income tax surcharge In terms of the ASAD model this change should have a shifted the AD curve to the left b shifted the AD curve to the right c made the AD curve atter 7 The largest source of household income is in the US is obtained a stock dividends b wages and salaries c interest earnings d rental income 8 If the depreciation of a country s currency increases it aggregate expenditures by 20 the AD curve will a shift right bv more than 20 b shift right by less than 20 c shift right by exactly 20 d not shift at all 9 Aggregate demand management policies are designed most directly to a minimize unemployment b minimize in ation c control the aggmate level of spending in the economy d prevent budget de cits or surpluses 10 Suppose that consumer spending is expected to decrease in the near future If output is at potential output which of the following policies is most appropriate according to the ASAD mode a an increase in government spending b an increase in taxes c a reduction in government spending d no change in taxes or government spending 11 According to Keynes market economies A never experience signi cant declines in aggregate demand B quickly recover after they experience a signi cant decline in aggregate demand C may recover slowly after they experience a siJni cant decline in aggregate demand D are constantly experiencing signi cant declines in aggregate demand 12 The laissezfaire policy prescription to eliminate unemployment was to A eliminate labor unions and government policies that hold real wages too high B strengthen unions and government regulations protecting unions and workers C increase real wages so that people are encouraged to work D have government guarantee jobs for everyone 13 In the ASAD model an expansionary monetary policy has the greatest effect on the price level when it A increases both nominal and real income B increases real income but not nominal income C increases nominal income but not real income D doesn39t increase real or nominal income 14 The Federal funds rate A is always slightly higher than the discount rate B can never be close to zero C may sometimes have to be targeted at zero D is an intermediate target 15 What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1 to 125 Openmarket operations A B The discount rate C A change in reserve requirements D Margin requirements 16 If the Federal Reserve increases the required reserves nancial institutions will likely lend out more than before increasing the money supply A B less than before decream the money supply C more than before decreasing the money supply D less than before increasing the money supply 17 Suppose the money multiplier in the US is 3 Suppose further that if the Federal Reserve changes the discount rate by 1 percentage point banks change their reserves by 300 To increase the money supply by 2700 the Federal Reserve should A reduce the discount rate bv 3 percentage points B reduce the discount rate by 10 percentage points C raise the discount rate by 3 percentage points D raise the discount rate by 10 percentage points 18 If the Federal Reserve reduced its reserve requirement from 65 percent to 5 percent This policy would most likely A increase both the monev multiplier and the monev sunplv B increase the money multiplier but decrease the money supply C decrease the money multiplier but increase the money supply D decrease both the money multiplier and the money supply 19 A country can have a trade de cit as long as it can A purchase foreign assets B make loans to other countries C borrow from or sell assets to foreigners D produce more than it consumes 20 A weaker dollar A raises in ation and contracts the economy B reduces in ation and contracts the economy C raises in ation and expands the economv D reduces in ation and expands the economy 21 In the short run a trade de cit allows more consumption but in the long run a trade de cit is a problem because A the country eventually will consume more and produce less B the country eventually will sell all its nancial assets to foreigners C the domestic currency will appreciate D the country eventually has to produce more than it consumes in order to pay foreigners their pro ts 22 Considering an economy with a current trade de cit and considering only the direct effect on income an expansionary monetary policy tends to A decrease the exchange rate and increase the trade de cit B increase the exchange rate and increase the trade de cit C decrease the exchange rate and decrease the trade de cit D increase the exchange rate and decrease the trade de cit 23 The balance of trade measures the A difference between the value of imports and exports B share of US imports coming from various regions of the world C share of US exports going to various regions of the world D exchange rate needed to make imports equal exports 24 When a country runs a trade de cit it does so by A borrowing from foreign countries or selling assets to them B borrowing from foreign countries or buying assets from them C lending to foreign countries or selling assets to them D lending to foreign countries or buying assets from them 25 Expansionary scal policy tends to A raise US income increase US imports and increase the trade de cit B raise US income increase US imports and lower the trade de cit C lower US income reduce US imports and increase the trade de cit D lower US income reduce US imports and lower the trade de cit 26 In considering the net effect of expansionary scal policy on the trade de cit the A income effect offsets the price effect B price effect offsets the income effect C income and price effects work in the same direction so the trade de cit is decreased D income and price effects work in the same direction so the trade de cit is increased 27 If US interest rates fall relative to Japanese interest rates and Japanese in ation falls relative to US in ation then the A dollar will lose value in terms of yen B dollar will gain value in terms of yen C dollar39s value will not change in terms of yen D change in the dollar39s value cannot be determined 28 Expansionary monetary policy tends to lower the US interest rate and increase the US exchange rate A B lower the US interest rate and decrease the US exchange rate C increase the US interest rate and decrease the US exchange rate D increase the US interest rate and increase the US exchange rate 29 The US has limits on Chinese textile imports Such limits are an example of A atariff B aguota C a regulatory trade restriction D an embargo 30 Duties imposed by the US government on imported Chinese frozen and canned shrimp are an example of A tariffs B quotas C voluntary restrictions D regulatory trade restrictions
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