ECO 372 Final Exam                    Click here for the solution1) The largest source of household income in the U.S. is ...
D. the market value of goods and services produced in an economy, stated in current-year prices4) Underemployment includes...
B. shifted the AD curve to the rightC. made the AD curve flatterD. made the AD curve steeper8) If the depreciation of a co...
11) According to Keynes, market economiesA. never experience significant declines in aggregate demandB. quickly recover af...
C. may sometimes have to be targeted at zeroD. is an intermediate target15) What tool of monetary policy will the Federal ...
18) If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent. Thispolicy would most likelyA. i...
C. the domestic currency will appreciateD. the country eventually has to produce more than it consumes in order to pay for...
25) Expansionary fiscal policy tends toA. raise U.S. income, increase U.S. imports, and increase the trade deficitB. raise...
D. increase the U.S. interest rate and increase the U.S. exchange rate29) The U.S. has limits on Chinese textile imports. ...
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ECO 372 Final Exam

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ECO 372 Final Exam

  1. 1. ECO 372 Final Exam Click here for the solution1) The largest source of household income in the U.S. is obtained fromA. stock dividendsB. wages and salariesC. interest earningsD. rental income2) The market where business sell goods and services to households and the government is calledtheA. goods marketB. factor marketC. capital marketD. money market3) Real gross domestic product is best defined asA. the market value of intermediate goods and services produced in an economy, includingexportsB. all goods and services produced in an economy, stated in the prices of a given year andmultiplied by quantityC. the market value of all final goods and services produced in an economy, stated in the pricesof a given year Click here for the solution
  2. 2. D. the market value of goods and services produced in an economy, stated in current-year prices4) Underemployment includes peopleA. who work "off-the-books" to avoid tax liabilitiesB. who are working part time, or not using all their skills at a full-time jobC. who are tired of looking for a job, so they quit looking, but still want oneD. whose skills are not in demand anymore5) The Bureau of Economic Analysis is responsible for which of the following?A. Setting interest ratesB. Managing the money supplyC. Calculating U.S. gross domestic product]D. Paying unemployment benefits6) The Federal Reserve provides which of the following data?A. Federal funds rateB. Stock price of GEC. Bond yields of corporationsD. Debt to GDP of Ireland7) Consider if the government instituted a 10 percent income tax surcharge. In terms of theAS/AD model, this change should haveA. shifted the AD curve to the left Click here for the solution
  3. 3. B. shifted the AD curve to the rightC. made the AD curve flatterD. made the AD curve steeper8) If the depreciation of a countrys currency increases its aggregate expenditures by 20, the ADcurve willA. shift right by more than 20B. shift right by less than 20C. shift right by exactly 20D. not shift at allECO 372 Final Exam9) Aggregate demand management policies are designed most directly toA. minimize unemploymentB. minimize inflationC. control the aggregate level of spending in the economyD. prevent budget deficits or surpluses10) Suppose that consumer spending is expected to decrease in the near future. If output is atpotential output, which of the following policies is most appropriate according to the AS/ADmodel?A. An increase in government spendingB. An increase in taxesC. A reduction in government spendingD. No change in taxes or government spending Click here for the solution
  4. 4. 11) According to Keynes, market economiesA. never experience significant declines in aggregate demandB. quickly recover after they experience a significant decline in aggregate demandC. may recover slowly after they experience a significant decline in aggregate demandD. are constantly experiencing significant declines in aggregate demand12) The laissez-faire policy prescription to eliminate unemployment was toA. eliminate labor unions and government policies that hold real wages too highB. strengthen unions and government regulations protecting unions and workersC. increase real wages so that people are encouraged to workD. have government guarantee jobs for everyoneECO 372 ECO372 Final Exam13) In the AS/AD model, an expansionary monetary policy has the greatest effect on the pricelevel when itA. increases both nominal and real incomeB. increases real income but not nominal incomeC. increases nominal income but not real incomeD. doesnt increase real or nominal income14) The Federal funds rateA. is always slightly higher than the discount rateB. can never be close to zero Click here for the solution
  5. 5. C. may sometimes have to be targeted at zeroD. is an intermediate target15) What tool of monetary policy will the Federal Reserve use to increase the federal funds ratefrom 1% to 1.25%?A. Open-market operationsB. The discount rateC. A change in reserve requirementsD. Margin requirementsECO372 Final Exam16) If the Federal Reserve increases the required reserves, financial institutions will likely lendoutA. more than before, increasing the money supplyB. less than before, decreasing the money supplyC. more than before, decreasing the money supplyD. less than before, increasing the money supply17) Suppose the money multiplier in the U.S. is 3. Suppose further that if the Federal Reservechanges the discount rate by 1 percentage point, banks change their reserves by 300. To increasethe money supply by 2700 the Federal Reserve shouldA. reduce the discount rate by 3 percentage pointsB. reduce the discount rate by 10 percentage pointsC. raise the discount rate by 3 percentage pointsD. raise the discount rate by 10 percentage points Click here for the solution
  6. 6. 18) If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent. Thispolicy would most likelyA. increase both the money multiplier and the money supplyB. increase the money multiplier but decrease the money supplyC. decrease the money multiplier but increase the money supplyD. decrease both the money multiplier and the money supply19) A country can have a trade deficit as long as it canA. purchase foreign assetsB. make loans to other countriesC. borrow from or sell assets to foreignersD. produce more than it consumes.20) A weaker dollarA. raises inflation and contracts the economy.B. reduces inflation and contracts the economyC. raises inflation and expands the economyD. reduces inflation and expands the economy21) In the short run, a trade deficit allows more consumption, but in the long run, a trade deficitis a problem becauseA. the country eventually will consume more and produce lessB. the country eventually will sell all its financial assets to foreigners Click here for the solution
  7. 7. C. the domestic currency will appreciateD. the country eventually has to produce more than it consumes in order to pay foreigners theirprofits22) Considering an economy with a current trade deficit and considering only the direct effect onincome, an expansionary monetary policy tends toA. decrease the exchange rate and increase the trade deficitB. increase the exchange rate and increase the trade deficitC. decrease the exchange rate and decrease the trade deficitD. increase the exchange rate and decrease the trade deficit23) The balance of trade measures theA. difference between the value of imports and exportsB. share of U.S. imports coming from various regions of the worldC. share of U.S. exports going to various regions of the worldD. exchange rate needed to make imports equal exports24) When a country runs a trade deficit, 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. Click here for the solution
  8. 8. 25) Expansionary fiscal policy tends toA. raise U.S. income, increase U.S. imports, and increase the trade deficitB. raise U.S. income, increase U.S. imports, and lower the trade deficitC. lower U.S. income, reduce U.S. imports, and increase the trade deficitD. lower U.S. income, reduce U.S. imports, and lower the trade deficit26) In considering the net effect of expansionary fiscal policy on the trade deficit, theA. income effect offsets the price effectB. price effect offsets the income effectC. income and price effects work in the same direction, so the trade deficit is decreasedD. income and price effects work in the same direction, so the trade deficit is increased27) If U.S. interest rates fall relative to Japanese interest rates and Japanese inflation falls relativeto U.S. inflation, then theA. dollar will lose value in terms of yenB. dollar will gain value in terms of yenC. dollars value will not change in terms of yenD. change in the dollars value cannot be determined28) Expansionary monetary policy tends toA. lower the U.S. interest rate and increase the U.S. exchange rateB. lower the U.S. interest rate and decrease the U.S. exchange rateC. increase the U.S. interest rate and decrease the U.S. exchange rate Click here for the solution
  9. 9. D. increase the U.S. interest rate and increase the U.S. exchange rate29) The U.S. has limits on Chinese textile imports. Such limits are an example ofA. a tariffB. a quotaC. a regulatory trade restrictionD. an embargo30) Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp arean example ofA. tariffsB. quotasC. voluntary restrictionsD. regulatory trade restrictions Click here for the solution

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