Which of the following is most important in increasing a nation’s economic growth in the long-run?

Higher rates of technological change

Which of the following is true when comparing an increase in government spending to an increase in private investment

They will both increase aggregate demand

Which of the following best explains “every government has a fiscal policy, whether it realizes it or not”?

Every government sets tax and expenditure programs,

In the short run, how will an increase in aggregate demand most likely affect the overall price level and GDP?

Price Level Increases, Real GDP Increases

The basic money supply (M1) in the United States consists primarily of

Currency and checkable deposits

The limit of total productive capacity in an economy is set by:

The quantity and quality of its productive resources

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Midterm 2 Review

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Questions 19

Answers

1
The Fed sell more bonds and increase the discount rate, money supply
uncertain
decreases
Unchanged
increases
2
When the real GDP is less than the potential GDP, the economy is in recession. What policy can the government take?
all of the above
decrease tax
decrease interest rate
increase government spending
3
GDP increased from $10 to $15 trillion. GDP deflator increased from 100 to 125. How much is year 5 GDP in year 1 dollar?
16
14
12
19
4
If the USD appreciates, imports will ___, exports will___, net exports will____.
decrease, decrease, decrease
increase, increase, increase
decrease, increase, increase
increase, decrease, decrease
5
Which of the following is most important in increasing a nation’s economic growth in the long-run?
Higher rates of technological change
low exchange rate
Low tax rate
Increasing consumer spending in the economy.
6
You deposit $1,000 in currency at First National Bank, the reserve ratio is 5%, the total money creation is
none of the above
21,000
19,000
20,000
7
The key factors in raising standards of living in low-income countries have been increases in
technology and knowledge
low interest rate
low tax rate
high money supply
8
Which of the following will decrease aggregate expenditure?
an increase in the value of the dollar
a decrease in government purchases
an increase in interest rates
all of the above
9
Which of the following is true when comparing an increase in government spending to an increase in private investment
Government spending must equal taxes;
They will both increase aggregate demand
Government spending is inflationary; private investment spending is not.
They will both increase the aggregate supply
10
When the reserve ratio increases, the money supply
increases
none of the above
decreases
unpredictable
11
Which of the following best explains “every government has a fiscal policy, whether it realizes it or not”?
Every government sets tax and expenditure programs,
Every government is forced to do something about recessions and inflation
Every government makes decisions about the quantity of money in the economy
Decisions to spend money must be made
12
Which of the following actions by the Federal Reserve would have similar effects on the size of the U.S. money supply?
Increasing the discount rate and selling government securities
All of the above
Increasing the reserve ratio and selling government securities
Decreasing the reserve ratio and purchasing government securities
13
All numbers are in millions. Population is 125, employed workers is 60, unemployed workers is 15. Unemployment rate is
20 percent
25 percent
5 percent
33 percent
14
In the short run, how will an increase in aggregate demand most likely affect the overall price level and GDP?
Price Level Decreases, Real GDP Decreases
Price Level Increases, Real GDP Increases
Price Level Decreases, Real GDP Increases
Price Level Increases, Real GDP Decreases
15
Countries with high rates of economic growth tend to have
high rates of technological advancement
all of the above
a labor force that is more productive
higher life expectancy at birth
16
In the short run, aggregate demand in a country will increase if there is
An increase in government spendings
An increase in Money supply of the country
Decrease in tax rates in the country
All of the above
17
What are the functions of money
store of value
unit of account
all the above
medium of exchange
18
The basic money supply (M1) in the United States consists primarily of
Currency and checkable deposits
Currency, checkable deposits, and government bonds
Currency and government bonds
Currency, checkable deposits, and credit card accounts
19
The limit of total productive capacity in an economy is set by:
The amount of government spending
The amount of taxation
The quantity and quality of its productive resources
The consumption for goods and services

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