Exam N ame___________________________________

1) Electric car enthusiasts want to buy more electric cars at a lower price. A ll of the following events would have this effect A) a decrease in the price of lithium, w hich is used in the electric car batteries. B) an increase in the price of gasoline. C) technological ad vancement in the production of electric car batteries. D) an increase in the number of manufacturers of electric cars. 2) W hich of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease? A) an increase in the price of mustard, a substitute for ketchup B) a decrease in the price of tomatoes C) an increase in the price of tomatoes D) an increase in the price of french fries, a complement for ketchup 3) ________ is defined as a market outcome in w hich the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in w hich the sum of consumer surplus and producer surplus is at a maximum. A) Dead weight efficiency B) Consumer efficiency C) Producer efficiency D) Economic efficiency 4) In a competitive market the ________ curve shows the marginal benefit received by consumers and the ________ curve shows the marginal cost to producers. A) demand; market demand B) supply; market supply C) .deman d; supply D) supply; demand 5) Tax incidence is the actual division of the A) tax revenues betw een government agencies. B) burden of the tax betw een buyers and sellers in a market. C) tax revenues bet ween the federal government and state governments. D) population into different tax brackets. 6) Buyers w ill bear the entire burden of a unit tax if the demand curve for a product is A) horizontal. B) dow n ward sloping. C) upw ard sloping. D) vertical. 7) W hich of the follow ing would increase gross private domestic investment in an economy? A) an increase in the number of w orkers A pple hires B) an increase in the level of A pple's inventory C) an increase in the number of high way construction projects the government is funding D) an increase in the shares of A pple stock households ow n

1)

2)

3)

4)

5)

6)

7)

be included in the expenditure category called investment 8) W hich of the following would expenditures? A) a purchase of a copy machine by Kinko's B) the cars held in in ventory on a local Ford dealer's lot C) a purchase of shares of preferred stock D) spending on new houses

8)

9) W hich of the follow ing transactions would take place in the "underground economy "? A) Elizabeth tells her mother she's going to work but really goes to see a movie. B) M att bought an iPhone for $299 but decided to sell it on eBay instead of keeping it. C) Paul buys 15 gallons of gasoline for $2.29 a gallon, not realizing that $1.50 per gallon of that price goes to the government as tax revenue. D) John makes chain - link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes. 10) If a country passes a labor la w limiting the number of hours of work per week, G DP would ________ and leisure w ould ________. A) increase; increase B) decrease; increase C) increase; decrease D) decrease; decrease 11) W hich of the follow ing is an example of a w orker experiencing frictional unemployment? A) A U nited A irlines pilot loses her job because of lack of demand for air travel. B) A computer programmer loses her job because it is outsourced to India. C) A worker quits his job at the Post O ffice to find more interesting work. D) A n employee is laid off because the economy is suffering a recession. 12) Monthly expenditures for a family of 4 in 2008 averaged $1,400. In 2009, the cost of the same purchases was $1,500. If 2008 is the base year, w hat w as the CPI in 2009? A) 110 B) 107 C) 100 D) 93 13) You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. W hat is the real interest rate you are paying? A) 15% B) 5% C) - 1.1% D) - 6.1% 14) W hich of the follow ing is a cost posed by inflation? A) Firms must pay for changing prices on products and printing new catalogs. B) The money that consumers and firms hold loses its purchasing power. C) Inflation reduces the affordability of goods and services to the average consumer. D) Banks can lose if they under predict inflation and charge an interest rate that does not completely compensate for inflation. 15) Labor productivity is A) the quantity of capital one worker can produce in one day. B) the quantity of output produced in one hour by one machine. C) the quantity of output produced by one worker or by one hour of work. D) the quantity of output produced in one hour by several workers.

9)

10)

11)

12)

13)

14)

15)

16) A n increase in public saving has w hat impact on the market for loanable funds? A) The supply of loanable funds increases. B) T he demand for loanable fu nds increases. C) T he demand for loanable funds decreases. D) T he supply of loanable funds decreases. 17) Falling demand for air travel in 2009 caused the demand curve for air travel to shift to the ________, resulting in ________ ticket prices and a ________ quantity of tickets supplied. A) right; lower; higher B) left; higher; low er C) left; lower; lower D) right; higher; higher 18) If aggregate expenditure is greater than G DP, how w ill the economy reach macroeconomic equilibrium? A) Inventories w ill rise, and G DP and employment w ill rise. B) Inventories w ill decline, and G DP and employment will rise. C) Inventories w ill rise, and G DP and employment w ill decline. D) Inventories w ill decline, and G DP and employment w ill decline. 19) If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real G DP, then A) the is 0.25. B) the is 0.75. C) the is 0.8. D) the is 2.5. 20) W hich of the following is a true statement about the multiplier? A) T he formula for the multiplier overstates the real world multiplier w hen we take into account the impact of changes in G DP on imports, inflation and the interest rate. B) T he multiplier makes the economy less sensitive to changes in autonomous expenditure. C) T he multiplier is the ratio of the change in spending to the change in G DP. D) The larger the , the smaller the multiplier. 21) A n increase in the price level ________ real w ealth, which causes consumption to ________. A) raises; decrease B) lowers; increase C) low ers; decrease D) raises; increase 22) A decrease in aggregate expenditure has what result on equilibrium G DP? A) Equilibrium G DP falls. B) Equilibrium G DP is not affected by a decrease in aggregate expenditure. C) Equilibrium G DP rises. D) Equilibrium G DP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of G DP. 23) W hen the price level in the U nited States rises relative to the price level of other countries, ________ w ill rise, ________ w ill fall, and ________ w ill fall. A) net exports; imports; exports B) imports; exports; net exports C) net exports; exports; imports D) exports; imports; net exports

16)

17)

18)

19)

20)

21)

22)

23)

24) Sup pose a developing country experiences a reduction in machinery and capital equipment as foreign entrep reneurs decrease the amount of investment in the econom y. A s a result, A) the long- run aggregate sup ply curve w ill shift to the right. B) the economy will move up along the long - run aggregate supply curve. C) the long- run aggregate supply curve w ill shift to the left. D) the economy w ill move dow n along the long- run aggregate supply curve. 25) Which of the following would cause the short- run aggregate supply curve to shift to the left? A) an increase in inflation expectations B) a decrease in interest rates C) a technological ad vance D) an increase in the price level 26) T he automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________. A) raises; expansion; raises; recession B) lowers; recession; raises; expansion C) raises; recession; lowers; expansion D) lowers; expansion; lowers; recession 27) Fiat money A) is rarely used in modern economies. B) has no or very little value except as money. C) serves well as a medium of exchange, but not as a store of value. D) functions well only if can be redeemed for gold or other precious metals. 28) If you liquidate $3,000 of your mutual fund and transfer the funds to your checking account, then initially, M1 w ill ________ and M2 w ill ________. A) increase; decrease B) not change; decrease C) increase; not change D) not change; not change 29) A cash w ithdra wal from the banking system A) decreases reserves. C) decreases deposits.

24)

25)

26)

27)

28)

29) B) decreases excess reserves. D) A ll of the above are correct. 30)

30) To decrease the money supply, the Federal Reserve could A) raise the required reserve ratio. B) raise income taxes. C) conduct an open market purchase of Treasury securities. D) lower the discount rate. 31) A n increase in the purchasing power of money would not, on average, result in an increase in the p urchasing pow er of people's income because a ________ price level w ould likely mean ________ w ages and salaries. A) falling; falling B) falling; rising C) rising; rising D) rising; falling 32) Suppose the Fed increases the money sup ply. W hich of the follow ing is true? A) A t the original interest rate, the quantity of money demanded is greater than the quantity of money supplied. B) The interest rate must rise for the money market to clear. C) A t the original interest rate, the quantity of money demanded is equal to the quantity of money supplied. D) A t the original interest rate, the quantity of money demanded is less than the quantity of money supplied.

31)

32)

33) If the Fed lowers its target for the federal funds rate, this indicates that A) the Fed is concerned that the growth in aggregate demand w ill exceed potential G DP. B) the Fed is attem pting to combat inflation. C) the Fed is pursuing an expansionary monetary policy. D) the Fed is pursuing a contractionary monetary policy. 34) Active changes in tax and spending by government intended to smooth out the business cycle are called ________, and changes in taxes an d spending that occur passively over the business cycle are called ________. A) automatic stabilizers; discretionary fiscal policy B) automatic stabilizers; monetary policy C) discretionary fiscal policy; automatic stabilizers D) discretionary fiscal policy; conscious fiscal policy 35) A n increase in government spending may expedite recovery from a recession in the short run, but in the long run this policy may A) reduce investment in new capital. B) raise interest rates and reduce consumer expenditures on automobiles and new houses. C) make domestic businesses less competitive in international markets as the dollar appreciates in value. D) A ll of the above are correct. 36) Suppose the government wants to maintain a balanced budget. To achieve this goal, w hen the economy falls into recession government would need to ________ taxes, w hich would cause aggregate demand to ________. A) increase; decrease B) decrease; decrease C) increase; increase D) decrease; increase 37) In the long run, the Phillips curve is a ________ at ________. A) negatively sloped line; the intersection of aggregate demand an d short- run aggregate supply B) vertical line; the natural rate of unemployment C) horizontal line; 0% inflation D) N one of the above are correct. 38) If rational workers and firms know that the Federal Reserve is follow ing a contractionary monetary policy, they w ill expect inflation to ________ and will adjust wages so that the real wage ________. A) increase; remains unchanged B) decrease; remains unchanged C) increase; decreases D) decrease; increases 39) A n economy that does as A) a closed economy. C) an open economy.
have interactions in trade or finance w ith other economies is referred to

33)

34)

35)

36)

37)

38)

39)

B) a net foreign investment economy. D) a trade- balanced economy. 40)

40) A decrease in U nited States net foreign direct investment would occur if A) U.S. citizens have decreased the value of foreign stocks and bonds they ow n. B) net capital flows increase. C) net foreign investment decreases. D) U.S. citizens have decreased their building or purchasing of facilities in foreign countries.

41) In international exchange markets, a rise in interest rates in the U nited States will cause the demand for dollars to ________ and the supply of dollars to ________. A) increase; increase B) decrease; decrease C) decrease; increase D) increase; decrease 42) If the demand for the yen increases relati ve to the dollar, w hich of the follow ing would occur? A) T he dollar w ill depreciate. B) T he dollar w ill appreciate. C) The yen will depreciate. D) The demand for the dollar w ill increase. 43) If the Fed pursues an expansionary monetary policy, investment in the United States w ill ________ and net exports w ill ________. A) decrease; increase B) decrease; decrease C) increase; decrease D) increase; increase 44) In an open economy, expansionary monetary policy will cause A) consumption to rise, but investment and net exports w ill fall. B) consumption and investment to rise, but net exports w ill fall. C) consumption to fall, but investment and net exports will rise. D) consumption, investment, and net exports to rise. 45) A decision by foreign central banks to sell their holdings of U.S. Treasury bonds w ill A) increase bond prices and lower interest rates in the United States. B) increase bond prices and interest rates in the United States. C) lower bond prices and interest rates in the United States. D) lower bond prices and increase interest rates in the U nited States. 46) W hen the value of a currency is determined ________, the exchange rate system is defined as a floating exchange rate system. A) mostly by supply and demand, but with occasional government intervention B) by its issuing government C) by its issuing government, w ith occasional readjustments in value D) only by supply and demand 47) Since the ow ners of the Toronto Blue Jays collect most of their revenues in Canadian dollars an d pay most of their expenses in U.S. dollars, they would A) benefit is the U.S. dollar appreciates relative to the Canadian dollar. B) benefit if the Canadian dollar appreciates relative to the U.S. dollar. C) benefit if the Canadian dollar depreciates relative to the U.S. dollar. D) Both A and C are correct. 48) A ll of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run A) tariffs and quotas. B) relative rates of productivity growth across countries. C) interest rates. D) preferences for domestic and foreign goods.

41)

42)

43)

44)

45)

46)

47)

48)

49) A Big M ac costs $3.57 in the U nited States and 7.80 zlotys in Poland. If the exchange rate is 3 zlotys per dollar, purchasing power parity predicts that A) the zloty is overvalued. B) the dollar is overvalued. C) the dollar is undervalued. D) both the zloty and dollar are undervalued. 50) Pegging a country's exchange rate to the dollar can be ad vantageous in all of the follow ing situations A) if imports are a significant fraction of the goods the country's consumers buy. B) if the country has extensive trade w ith the United States. C) if a country w ishes to conduct independent monetary policy. D) if in vestors believe the dollar to be more stable than the domestic country's currency.

49)

50)