BA207 Cumulative Final Exam
Question 1
5 / 5 pts
The two topics of primary concern in macroeconomics are:
Correct!
short-run fluctuations in output and employment, and long-run economic growth.
unemployment, and wage rates in labor markets.
monopoly power of corporations, and small business profitability.
oil prices and housing markets.
Question 2
5 / 5 pts
If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?
nominal and real GDP would both rise.
nominal and real GDP would both be unchanged.
real GDP would rise, but nominal GDP would be unchanged.
Correct!
nominal GDP would rise, but real GDP would be unchanged.
Question 3
5 / 5 pts
Why are high rates of unemployment of concern to economists?
Higher rates of unemployment generally lead to higher inflation rates.
Environmental destruction is more prevalent when unemployment rates are high.
Correct!
There is lost output that could have been produced if the unemployed had been working.
All of the above are reasons why economists are concerned about high unemployment rates.
Question 4
5 / 5 pts
National income accountants can avoid multiple counting by:
including transfer payments in their calculations.
Correct!
only counting final goods.
counting both intermediate and final goods.
only counting intermediate goods.
Question 5
5 / 5 pts
If intermediate goods and services were included in GDP:
Correct!
the GDP would be overstated.
the GDP would then have to be deflated for changes in the price level.
nominal GDP would exceed real GDP.
the GDP would be understated.
Question 6
0 / 5 pts
If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:
You Answered
nominal GDP is rising but real GDP is declining.
Correct Answer
net investment is negative.
the economy is importing more than it exports.
the economy's production capacity is expanding.
Question 7
0 / 5 pts
For a nation's real GDP per capita to rise during a year:
You Answered
consumption spending must increase.
Correct Answer
real GDP must increase more rapidly than population.
population must increase more rapidly than real GDP.
investment spending must increase.
Question 8
5 / 5 pts
Given the annual rate of economic growth, the "rule of 70" allows one to:
determine the accompanying rate of inflation.
calculate the size of the GDP gap.
Correct!
calculate the number of years required for real GDP to double.
determine the growth rate of per capita GDP.
Question 9
5 / 5 pts
Strong property rights are important for modern economic growth because:
they allow governments to extract the gains from private citizens' investments.
Correct!
people are more likely to invest if they don't fear that others can take their returns on investment without compensation.
they ensure an equitable distribution of income.
business cycle fluctuations will be smaller and less likely to disrupt investment patterns.
Question 10
0 / 5 pts
Most economists agree that the immediate determinant of the volume of output and employment is the:
You Answered
composition of consumer spending.
ratio of public goods to private goods production.
Correct Answer
level of total spending.
size of the labor force.
Question 11
0 / 5 pts
During a severe recession, we would expect output to fall the most in:
the healthcare industry.
the clothing industry.
You Answered
agriculture.
Correct Answer
the construction industry.
Question 12
5 / 5 pts
Most economists agree that the immediate cause of most business cycle variation is:
an unexpected change in the productivity of workers.
Correct!
an unexpected change in the level of total spending.
the invention of new products.
the growth and subsequent bursting of financial bubbles.
UnansweredQuestion 13
0 / 5 pts
Tessa's break-even income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of:
Correct Answer
consumption spending will be $14,500.
consumption spending will be $15,500.
consumption spending will be $13,000.
saving will be $2,500.
Question 14
5 / 5 pts
The saving schedule is drawn on the assumption that as income increases:
saving will decline absolutely and as a percentage of income.
saving will increase absolutely, but remain constant as a percentage of income.
saving will increase absolutely, but decline as a percentage of income.
Correct!
saving will increase absolutely and as a percentage of income.
Question 15
5 / 5 pts
The greater is the marginal propensity to consume, the:
Correct!
smaller is the marginal propensity to save.
higher is the interest rate.
smaller is the average propensity to consume.
lower is the price level.
Question 16
5 / 5 pts
The interest-rate effect suggests that:
a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.
Correct!
an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.
No answer text provided.
Question 17
5 / 5 pts
The real-balances effect indicates that:
an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending.
a lower price level will decrease the real value of many financial assets and therefore reduce spending.
a higher price level will increase the real value of many financial assets and therefore increase spending.
Correct!
a higher price level will decrease the real value of many financial assets and therefore reduce spending.
Question 18
0 / 5 pts
The foreign purchases effect:
shifts the aggregate demand curve rightward.
You Answered
shifts the aggregate demand curve leftward.
shifts the aggregate supply curve rightward.
Correct Answer
moves the economy along a fixed aggregate demand curve.
Question 19
0 / 5 pts
If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:
increasing government spending by $25 billion.
You Answered
increasing government spending by $80 billion.
Correct Answer
decreasing taxes by $25 billion.
decreasing taxes by $100 billion.
Question 20
0 / 5 pts
The effect of a government surplus on the equilibrium level of GDP is substantially the same as:
a decrease in imports.
Correct Answer
an increase in saving.
an increase in consumption.
You Answered
an increase in investment.
Question 21
5 / 5 pts
Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?
A Congressional proposal to incur a Federal surplus to be used for the retirement of public debt.
Reductions in agricultural subsidies and veterans' benefits.
Postponement of a highway construction program.
Correct!
Reductions in Federal tax rates on personal and corporate income.
Question 22
5 / 5 pts
Money functions as:
a store of value.
a unit of account.
a medium of exchange.
Correct!
all of these.
Question 23
5 / 5 pts
The paper money used in the United States is:
National Bank Notes.
Treasury Notes.
United States Notes.
Correct!
Federal Reserve Notes.
UnansweredQuestion 24
0 / 5 pts
The difference between M1 and M2 is that:
the former includes time deposits.
Correct Answer
the latter includes small-denominated time deposits, non-checkable savings accounts, money market deposit accounts, and money market mutual fund balances.
the latter includes negotiable government bonds.
the latter includes cash held by commercial banks and the U.S. Treasury.
Question 25
0 / 5 pts
Which of the following statements is correct? Other things equal:
You Answered
a decline in real output will shift both the transactions demand curve for money and the total money demand curve to the right.
a decline in the interest rate will shift the asset demand curve for money to the right, but leave the total money demand curve unchanged.
Correct Answer
deflation will shift both the transactions demand curve for money and the total money demand curve to the left.
inflation will shift the transactions demand curve for money to the right, but leave the total money demand curve unchanged.
Question 26
0 / 5 pts
The opportunity cost of holding money:
is zero because money is not an economic resource.
You Answered
varies inversely with the interest rate.
Correct Answer
varies directly with the interest rate.
varies inversely with the level of economic activity.
Question 27
0 / 5 pts
If in the market for money the quantity of money demanded exceeds the money supply, the interest rate will:
fall, causing households and businesses to hold less money.
Correct Answer
rise, causing households and businesses to hold less money.
rise, causing households and businesses to hold more money.
You Answered
fall, causing households and businesses to hold more money.
Question 28
5 / 5 pts
In terms of aggregate supply, the difference between the long run and the short run is that in the long run:
the price level is variable.
employment is variable.
real output is variable.
Correct!
nominal wages and other input prices are fully responsive to price-level changes.
Question 29
5 / 5 pts
Other things equal, a decrease in the price level will:
shift the aggregate supply curve to the left.
shift the aggregate demand curve to the left.
cause a movement up a short-run aggregate supply curve.
Correct!
cause a movement down an aggregate supply curve.
Question 30
5 / 5 pts
The natural rate of unemployment:
Correct!
can vary over time and defines the location of the long-run aggregate supply curve.
is constant over time and defines the location of the long-run aggregate supply curve.
varies over time in response to changes in aggregate demand.
is inversely related to the price level.
Question 31
5 / 5 pts
The mainstream view is that macro instability is caused by:
erratic growth of the nation's money supply.
government interference in the economy.
Correct!
significant changes in investment spending.
consumption "booms" and "busts."
Question 32
0 / 5 pts
Monetarists believe that:
prices and wages are inflexible or sticky.
both product and resource markets are monopolistic.
Correct Answer
velocity is relatively stable.
You Answered
the economy is more stable when active fiscal and monetary policy are used.
Question 33
0 / 5 pts
If M is $400, P is $4, and Q is 300, then V must be:
You Answered
1.33.
Correct Answer
3.
5.33.
100.
Question 34
5 / 5 pts
Differences in production efficiencies among nations in producing a particular good result from:
different endowments of fertile soil.
different amounts of skilled labor.
different levels of technological knowledge.
Correct!
all of these.
Question 35
5 / 5 pts
Countries engaged in international trade specialize in production based on:
relative levels of GDP.
Correct!
comparative advantage.
relative exchange rates.
relative inflation rates.
Question 36
5 / 5 pts
In order for mutually beneficial trade to occur between two otherwise isolated nations:
each nation must be able to produce at least one good absolutely cheaper than the other.
Correct!
each nation must be able to produce at least one good relatively cheaper than the other.
each nation must face constant costs in the production of the good it exports.
one nation's production must be labor-intensive while the other nation's production is capital-intensive.
Question 37
0 / 5 pts
Which of the following would call for outpayments from the United States?
U.S. exports computer software
Correct Answer
U.S. purchases assets abroad
foreigners purchase assets in the United States
You Answered
foreign tourists spend money in the United States
Question 38
5 / 5 pts
A nation's official reserves:
Correct!
compensates for differences in the current and capital and financial accounts.
consist of all domestic and foreign currency held by a nation's central bank.
is always zero.
is always negative.
Question 39
0 / 5 pts
If a nation has a current account deficit and it does not have to make any inpayments or outpayments of official reserves, it must have a:
Correct Answer
surplus in its capital and financial account.
balance of payments deficit.
balance of payments surplus.
You Answered
deficit in its capital and financial account.
Question 40
0 / 5 pts
Which of the following is not inversely related to per capita income?
mortality rates for children under 5 years of age
You Answered
adult illiteracy rates
Correct Answer
per capita energy consumption
population growth rates
Question 41
5 / 5 pts
The exports of the DVCs consist largely of:
high-technology goods.
Correct!
raw materials and farm products.
manufactured goods.
services and financial capital.
Question 42
0 / 5 pts
If population is expanding at the same rate as real output:
You Answered
real per capita output will increase.
real per capita output will decrease.
Correct Answer
real per capita output will remain unchanged.
living standards will increase.
Question 43
0 / 5 pts
Which attitude or custom is the most conducive to long-term economic growth?
You Answered
focus on group contentment rather than individual achievement
the belief there is little or no correlation between an individual's economic actions and her or his economic fortunes
Correct Answer
direct connections between individual efforts (including educational efforts) and economic rewards
use of the majority of resources for religious structures and ceremonies
Question 44
5 / 5 pts
Increases in the total real output of many DVCs do not increase the nation's standard of living because:
diminishing returns may be encountered in increasing total output.
Correct!
population increases may dissipate the increase in real output.
disguised unemployment in agriculture will persist.
surplus farm labor may move from rural areas to industrial areas, causing unemployment.
Question 45
0 / 5 pts
Rapid population growth can be an obstacle to economic development because:
You Answered
it can translate a relatively large increase in real output into a small increase in real output per capita.
more investment will be required to simply maintain the quantity of capital goods per person.
it may lead to the overutilization and therefore ecological degradation of farmland.
Correct Answer
all of these reasons.
Question 46
3 / 5 pts
Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods produced and not sold is included directly as part of GDP.
Your Answer:
Because GDP is total output. GDP would be overstated if Intermediate goods produced and sold was factored in.
Intermediate goods produced and sold during the year are not included separately as part of GDP because the value of those goods is included in the value of the final goods produced from them. If the intermediate good is produced but not sold during the year, its value is included as inventory investment for the year in which it was produced. If inventory investment was not included as part of GDP, true production would be underestimated for the year the intermediate good went into inventory, and overestimated for the year the intermediate good is used or sold.
Question 47
2 / 5 pts
Why does the GDP deflator give a different rate of inflation than the CPI?
Your Answer:
GDP depends on the goods and services produced in a give year and can be flexible while the prices of goods are fixed. CPI goods and services remain the same each year but the costs of these goods and services change.
The GDP deflator and the CPI differ in two important ways. The GDP deflator uses as a basket all final goods and services produced in the domestic economy, while the CPI basket includes goods and services purchased by typical consumers. Therefore, changes in the price of imported goods affect the CPI, but not the GDP deflator. Also, changes in the price of domestically produced capital goods affect the GDP deflator, but not the CPI. Changes in the price of domestically produced consumer goods are likely to affect the CPI more than the GDP deflator because it is likely that those goods make up a larger part of consumer budgets than of GDP.
UnansweredQuestion 48
0 / 5 pts
Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean. Make a list of things that determine labor productivity.
Your Answer:
UnansweredQuestion 49
0 / 5 pts
Explain how each of the following changes the money supply.
a.
the Fed buys bonds
b.
the Fed auctions credit
c.
the Fed raises the discount rate
d.
the Fed raises the reserve requirement
Your Answer:
UnansweredQuestion 50
0 / 5 pts
List the factors that might influence a country's exports, imports, and trade balance.
Your Answer:
Quiz Score: 130 out of 250
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