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Date Created: 11/18/15
1 The largest source of household income in the US is obtained from A stock dividends B wages and salaries C interest earnings D rental income 2 The market where business sell goods and services to households and the government is called the A goods market B factor market C capital market D money market 3 Real gross domestic product is best defined 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 the prices of a given year and multiplied by quantity C the m et vglue of an ting goods gnd services produced in gun economv stated inthe prices of a given vear D the market value of goods and services produced in an economy stated in current year prices 4 Underemployment includes people who work quotoffthebooksquot to avoid tax liabilities who gre working part time or not using when slills M fulltime iob who are tired of looking for a job so they quit looking but still want one Whose skills are not in demand anymore POP 5 The Bureau of Economic Analysis is responsible for which of the following A Setting interest rates B Managing the money supply C calculating US gross domestic product D Paying unemployment benefits 6 The Federal Reserve provides which of the following data A Federgl funds r23 B Stock price of GE C Bond yields of corporations D Debt to GDP of Ireland 7 Consider if the government instituted a 10 percent income tax surcharge In terms of the ASAD model this change should have shifted the AD curve to the left shifted the AD curve to the right made the AD curve atter made the AD curve steeper PCP 8 If the depreciation of a country39s currency increases its aggregate expenditures by 20 the AD curve will shift right by more than 20 shift right by less than 20 shift right by exactly 20 not shift at all PCP 9 Aggregate demand management policies are designed most directly to A minimize unemployment B minimize in ation C control the aggregate level of spending in the economv D prevent budget deficits 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 model An increase in government spending An increase in taxes A reduction in government spending No change in taxes or government spending POP 11 According to Keynes market economies A never experience significant declines in aggregate demand B quickly recover after they experience a significant decline in aggregate demand C mgv recover slowlv after thev experience a significant decline in aggregate D are constantly experiencing significant declines in aggregate demand 12 The laissezfaire policy prescription to eliminate unemployment was to eliminate labor union nd government policies Mt hold real wages too high strengthen unions and government regulations protecting unions and workers increase real wages so that people are encouraged to work have government guarantee jobs for everyone gowgt 13 In the ASAD model an expansionary monetary policy has the greatest effect on the price level when it increases both nominal and real income increases real income but not nominal income increases nominal income but not real income doesn39t increase real or nominal income POP 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 The discount r23 A change in reserve requirements Margin requirements POP 16 If the Federal Reserve increases the required reserves financial institutions Will likely lend out more than before increasing the money supply less than before decreasing the monev supply more than before decreasing the money supply less than before increasing the money supply POP 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 money multiplier and the money supply B increase the money multiplier but decrease the money supply C decrease the monev multiDlier but increwhe monev SllDDlV D decrease both the money multiplier and the money supply 19 A country can have a trade deficit 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 raises in ation and contracts the economy reduces in ation and contracts the economy raises in ation and expands the economv reduces in ation and expands the economy wow 21 In the short run a trade deficit allows more consumption but in the long run a trade deficit is a problem because A the countrv eventuallv will consume more and produce less B the country eventually will sell all its financial 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 profits 22 Considering an economy with a current trade deficit and considering only the direct effect on income an expansionary monetary policy tends to A decrease the exchange rate and increase the trade deficit B increase the exchange rate and increase the trade deficit C decrease the exchange rate and decrease the trade de cit D increase the exchange rate and decrease the trade deficit 23 The balance of trade measures the difference between the value of imports and exports share of US imports coming from various regions of the world share of US exports going to various regions of the world exchange rate needed to make imports equal exports POP 24 When a country runs a trade deficit it does so by borrowing from foreign countries or selling assets to them borrowing from foreign countries or buying assets from them lending to foreign countries or selling assets to them lending to foreign countries or buying assets from them P POP 25 Expansionary fiscal policy tends to raise US income increase US imports and increase the trade de cit raise US income increase US imports and lower the trade deficit lower US income reduce US imports and increase the trade deficit lower US income reduce US imports and lower the trade deficit PCP 26 In considering the net effect of expansionary fiscal policy on the trade deficit the income effect offsets the price effect price effect offsets the income effect income and price effects work in the same direction so the trade deficit is decreased income and price effects worl in the same direction so the trade de cit is POP 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 dollgr will lose value in terms of ven 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 exchgnge r lower the US interest rate and decrease the US exchange rate increase the US interest rate and decrease the US exchange rate increase the US interest rate and increase the US exchange rate POP 29 The US has limits on Chinese textile imports Such limits are an example of A a tariff B a guota 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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