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Macroeconomics Review v3 Flashcards | StudBud
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Macroeconomics Review v3
Macroeconomics Review v3
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Answers
1
The Shoe-Leather Costs of inflation is that money is a less convenient to use.
FALSE
TRUE
2
Which one of the following statements are false?
An increase in technology the money demand curve to shift right.
Increases in aggregate price causes the money demand curve to shift right.
A decrease in real GDP causes the money demand curve to shift left.
A decrease in interest causes a movement along the money demand curve.
3
An improvement in technology causes what to increase?
Human Capital
Number of Labor Used
Physical Capital
Total Factor of Productivity
4
Real GDP is calculated using current year prices.
TRUE
FALSE
5
An increase in the price of commodities causes:
The SRAS curve to shift left.
The SRAS curve to shift right.
The LRAS curve to shift right.
The LRAS curve to shift left.
6
An increase in MS under a floating exchange rate regime does what to DC?
DC stays the same.
DC depreciates.
DC appreciates.
DC shifts to the right.
7
What happens to Unemployment Rate during a contraction?
Decreases
Increases
It Depends
Does not Change
8
Which of the following is included in calculating GNP.
The old house you just bought.
The tips you gave to your server.
The money you were paid from babysitting.
Income sent home from a Canadian working in the US.
9
As interest rates rise, investments become more desirable.
TRUE
FALSE
10
What is NOT a way that government can increase the growth rate.
Property Rights
Patents
Government Spending
Research Subsidies
11
If the demand for domestic currency increases, what happens to the value of foreign currency?
It depends on the exchange rate regime
FC stays the same.
FC depreciates.
FC appreciates.
12
Lump Sum Taxes and Transfers reduce the effect of the multiplier.
FALSE
TRUE
13
An import quota causes imports to drop.
FALSE
TRUE
14
The Rule of 70 determines how many years it takes for a number to double.
TRUE
FALSE
15
Under a fixed exchange rate regime, how does a change in Lump Sum taxes to 30 from 50 affect GDP?
Appreciates
GDP increases.
Aggregate Expenditure stays the same.
Output stays the same.
16
The Central Bank runs Expansionary Monetary Policy and takes away 60 from CC. If the rr = 3%, what is the change in MS?
1800
2000
-2000
-1800
17
Reserve Ratio is equal to Bank Reserves / Loans
FALSE
TRUE
18
If the reserve ratio is 5%, how much does MS increase if $100 is added to circulation?
2000
1900
950
105
19
Which of the following is an automatic stabilizer?
Households pay a percent of their income as tax.
Government programs transfer less money as GDP grows.
Government increases lump sum taxes to reign in spending.
The Central Bank starts an open market sale to reduce MS.
20
Capital only ever flows in one direction at a time.
TRUE
FALSE
21
All else held constant, when the Central Bank sells government bonds, what does NOT happen in the long term?
Money Supply decreases
Currency in Circulation stays the same.
Monetary Base decreases
Currency in Circulation decreases
22
Macroville's GDP grew by 10%. If L, H and K grew by 3% this year then how much did its A grow by?
2%
4%
3%
No way to tell
23
Government Budget Balance is equal to:
Transfers - Government Spending + Taxes
Taxes + Transfers - Government Spending
Taxes + Transfers + Government Spending
Taxes - Transfers - Government Spending
24
A decrease in real GDP causes the demand for money to fall.
TRUE
FALSE
25
Let X1 = 0.3, IM1 = 0, and IM2 = 0.1. If the exchange rate goes from 50 to 65, what is the change in GDP?
-6
6
4
-4
26
Monetary Policy is COMPLETELY ineffective under a fixed exchange rate regime.
FALSE
TRUE
27
DF = 500 - 600i. SF = 200 + 1400i. Find i at equilibrium.
15%
35%
45%
30%
28
Which of the following will NOT cause Aggregate Demand to increase?
An increase in natural resources.
An increase in Money Supply.
An Open Market Purchase.
Expansionary Monetary Policy.
29
The Bank Rate is always higher than the Overnight Rate.
FALSE
TRUE
30
What happens to Net Capital Flows when the housing market slows.
Capital Inflows increase.
The Capital flows don't change.
Capital Outflows increase.
Capital Inflows decrease
31
Which of the following can causes the Demand Curve for Loanable Funds to shift right?
The government introduces a new tax credit for investment.
Households decide to save more.
Consumers become less optimistic about future investment opportunities.
The government decides to run a budget surplus.
32
An increase in interest rates cause bond prices to rise.
FALSE
TRUE
33
How is the Unemployment Rate Calculated?
Unemployed Workers / (Unemployed Workers + Employed Workers)
Unemployed Workers / Employed Workers
Unemployed Workers / Adult Population
Unemployed Workers / Labor Force
34
How do you get the multiplier?
1 / (1 - MPC(1 - t - tr))
Change in Aggregate Expenditure / Change in GDP
1 / (1 - MPS)
Change in GDP / Change in Aggregate Expenditure
35
If Nominal GDP increased by 20% in one year and Aggregate Price Level increased by 15%, how much did Real GDP Grow By?
5%
3%
6%
4%
36
A rise in prices reduces purchasing power and reduces consumption.
FALSE
TRUE
37
What does Money Neutrality mean?
In the long run, and increase in MS leads to no change in GDP
In the long run, an increase in MS leads to an increase in Prices.
Money Supply does not affect Full Employment.
In the long-run, any real measure is not affected by money supply.
38
Fiscal Policy is more effective under a flexible exchange rate regime.
FALSE
TRUE
39
What does not change when the reserve ratio changes?
Direct Deposits
Loans
Bank Reserves
Equity
40
Disposable income = GDP - Taxes + Transfers
TRUE
FALSE
41
What is the Quantity Equation for Money?
Money Supply x Velocity = Price Level x Nominal GDP
Monetary Base x Velocity = Price Level x Real GDP
Monetary Base x Velocity = Price Level x Nominal GDP
Money Supply x Velocity = Price Level x Real GDP
42
Which statement about Inflation Targeting is NOT true.
Inflation Targeting sets a target for inflation rate.
Inflation Targeting provides more Accountability
Inflation Targeting provides more Transparency
Inflation Targeting makes it easier to control MS.
43
Which of the following events cause Aggregate Expenditure to decrease?
The government cuts tax rates.
House prices increase by 10%.
The government reduces transfers.
Real interest rates increase by 1%.
44
The Financial Account includes the sale or purchase of assets.
TRUE
FALSE
45
The Marginal Propensity to Consume is 1 - MPS
FALSE
TRUE
46
What is the present value of a two-year bond with a face value of 100 and a coupon rate of 10%? Interest is 5%
109.3
100.2
114.3
120
47
An increase in Aggregate Price Level causes the demand for money to increase.
FALSE
TRUE
48
An increase in productivity causes:
The SRAS curve to shift right.
The LRAS curve to shift left.
The SRAS curve to shift left.
The LRAS curve to shift right.
49
In an open economy national savings equals investment spending.
FALSE
TRUE
50
Is the increase in GDP caused by an increase in Government Spending affected by the multiplier effect.
FALSE
TRUE
51
Currency can have a depreciate under a fixed exchange rate regime.
TRUE
FALSE
52
Which one is not an argument for a fixed exchange rate?
Fiscal Policy is More Effective
Does not use Capital Controls to fix the Exchange Rate.
Eliminates Exchange Rate Uncertainty.
Promotes International Trade.
53
50 adults live in the town of Macroville. 35 are employed and 12 are looking for jobs. Calculate the Unemployment Rate.
12%
34%
74%
70%
54
What does NOT happen when Planned Aggregate Expenditure is greater than Actual Output?
Output moves toward equilibrium
Inventories fall below desired levels.
Firms increase production.
Autonomous investment increases.
55
How is the GDP Deflator calculated?
Real GDP / Nominal GDP
Nominal GDP / Real GDP
Price Index / Real GDP
Real GDP / Price Index
56
Bob earns 45,000 a year and spends 33,000. What is Bob's MPS
0.64
0.27
0.73
0.36
57
What does NOT happen when the Central Bank uses Expansionary Monetary Policy.
A fall in interest rates increases Consumption.
The Money Supply increases.
A fall in interest rates reduces Investment.
The price of Bonds rise.
58
What happens to interest rates and exchange rates if autonomous exports fall?
Interest Rates decrease and Exchange Rates increase.
Interest Rates increase and Exchange Rates decrease.
Both Interest and Exchange Rates increase.
Both Interest Rates and Exchange Rates decrease.
59
What is the true cost of borrowing?
The return on investment
The nominal interest rate
The real interest rate
The inflation rate
60
Macroland had a debt of $500 and has a GDP of $800. Macroland's GBB was $150. What is the current Debt-to-GDP ratio?
53.80%
76.90%
43.80%
62.50%
61
Which one is NOT an argument for a flexible exchange rate?
Monetary Policy Autonomy
Disciplines the Central Bank.
Helps avoid running out of Official Reserves.
Prevents an Inefficient Allocation of Resources.
62
Current Account + Financial Account = 0
TRUE
FALSE
63
Which of the following is an implicit liability?
Debt from running budget deficits
National Debt
Retirement Benefits
Loans
64
A rise in prices causes interest rates to fall.
TRUE
FALSE
65
An increase in Minimum Wage leads to higher Structural Unemployment.
TRUE
FALSE
66
An increase in Human Capital causes the Marginal Product of Human Capital to decrease.
TRUE
FALSE
67
What is NOT a long-run effect of increasing the money supply by 25%
Aggregate Price Level increases by 25%
Consumer Price Index stays the same.
Real GDP stays the same.
Nominal GDP increases by 25%
68
Capital usually flows from fast growing countries to slow growing countries.
TRUE
FALSE
69
Under a fixed exchange rate regime, how does a change in Government Spending changes from 50 to 60 affect GDP?
The Aggregate Expenditure Curve shifts to the right.
Output increases.
GDP decreases.
GDP stays the same.
70
What is the final form of the Multiplier!?! (E represents the exchange rate for FC to DC)
1 / (1 - MPC (1 - t - tr))
1 / (1 - MPC (1 - t - tr - E))
1 / (1 - MPC (1 - t - tr)-E)
1 / (1 - MPC (1 - t + tr - E))
71
In which ways can a change in target overnight interest rate affect the economy? (Monetary Transmission Mechanism)
Change in the Exchange Rate
Change in Asset Prices
Change in Interest Rates on other Assets and Loans
Change in Market Expectations
72
Price Stability is when overall prices change slowly.
FALSE
TRUE
73
Purchasing foreign assets cause capital outflows.
TRUE
FALSE
74
Which of the following is NOT an approach to caculating GDP?
Income Approach
Value Added Approach
National Product Approach
Expenditure Approach
75
Which of the following are a part of the Current Account?
Stocks
Loans
Disaster Relief
Companies
76
What happens to foreign interest rates and domestic interest rates when they open their economies.
Both interest rates eventually equal each other.
Both interest rates decrease.
One of the interest rates become the world interest rate.
Both interest rates increase.
77
If the CA/US exchange rate goes down. What happens to the US $?
Not enough information.
Depreciates
Appreciates
The Exchange Rate stays the same.
