Macro final

Question 1

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

1) appreciated and so buys fewer Thai goods.

2) appreciated and so buys more Thai goods.

3) depreciated and so buys more Thai goods.
Correct Answer

4) depreciated and so buys fewer Thai goods.

Answer 1

4) depreciated and so buys fewer Thai goods.

Question 2

2

Question 3

3

Question 4

The unemployment rate is computed as the number of unemployed

1) divided by the number of employed, all times 100.

2) divided by the adult population, all times 100.

3) divided by the labor force, all times 100.

4) times the labor-force participation rate, all times 100.

Answer 4

3) divided by the labor force, all times 100.

Question 5

Other things the same, in the open-economy macroeconomic model, which of the following would make India’s net capital outflow increase?

1) a decrease in U.S. interest rates

2) a decrease in Indian interest rates

3) an appreciation of the Indian rupee

4) None of the above is correct.

Answer 5

2) a decrease in Indian interest rates

Question 6

The natural unemployment rate includes

1) neither frictional nor structural unemployment.

2) frictional, but not structural unemployment.

3) structural, but not frictional unemployment.

4) both frictional and structural unemployment.

Answer 6

4) both frictional and structural unemployment.

Question 7

The interest-rate effect

1) depends on the idea that increases in interest rates increase the quantity of goods and services supplied.

2) is responsible for the downward slope of the money-demand curve.

3) is the least important reason, in the case of the United States, for the downward slope of the aggregate-demand curve.

4) depends on the idea that increases in interest rates decrease the quantity of goods and services demanded.

Answer 7

4) depends on the idea that increases in interest rates decrease the quantity of goods and services demanded.

Question 8

In the economy of Ukzten in 2010, consumption was $3000, exports were $200, GDP was $8000, government purchases were $1000, and imports were $600. What was Ukzten’s investment in 2010?

1) $3200

2) $3800

3) $3600

4) $4400

Answer 8

4) $4400

Question 9

Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending and thus aggregate demand should remain depressed for some time. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts

1) short-run aggregate supply left.

2) aggregate demand right.

3) aggregate demand left.

4) short-run aggregate supply right

Answer 9

4) short-run aggregate supply right

Question 10

10

Question 11

In 2009, the imaginary nation of Florastan had a population of 8,300 and real GDP of 190,900. In 2010 it had a population of 8,400 and real GDP of 200,445. What was growth in real GDP per person in Florastan in 2010?

1) 5%

2) 1.2%

3) 3.8%

4) None of the above is correct.

Answer 11

3) 3.8%

Question 12

For an imaginary closed economy, T = $5,000; S = $11,000; C = $50,000; and the government is running a budget deficit of $1,000. Then

1) private saving = $12,000 and GDP = $67,000.

2) private saving = $10,000 and GDP = $54,000.

3) private saving = $10,000 and GDP = $58,000.

4) private saving = $12,000 and GDP = $72,000

Answer 12

1) private saving = $12,000 and GDP = $67,000.

Question 13

13

Question 14

The sale of stocks

1) to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

2) and bonds to raise money is called debt finance.

3) and bonds to raise money is called equity finance.

4) to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.

Answer 14

1) to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

Question 15

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

1) and the net capital outflow of other countries rise.

2) falls and the net capital outflow of other countries rise.

3) rises and the net capital outflow of other countries fall.

4) None of the above are correct.

Answer 15

3) rises and the net capital outflow of other countries fall.

Question 16

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 14 percent for 2011?

1) CPI in 2010 = 150; CPI in 2011 = 164

2) CPI in 2011 = 150; CPI in 2012 = 171

3) CPI in 2010 = 150; CPI in 2011 = 171

4) CPI in 2011 = 150; CPI in 2012 = 164

Answer 16

3) CPI in 2010 = 150; CPI in 2011 = 171

Question 16

Danielle did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor Statistics counts Danielle as

1) unemployed and not in the labor force.

2) employed and in the labor force.

3) unemployed and in the labor force.

4) employed and not in the labor force.

Answer 16

2) employed and in the labor force.

Question 17

18

Question 18

In the long run, the level of output

1) depends on the money supply.

2) is determined by supply-side factors.

3) depends on the price level.

4) All of the above are correct.

Answer 18

2) is determined by supply-side factors.

Question 19

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

1) decreased by 3 percent between 1999 and 2009.

2) increased by 2 percent between 1999 and 2009.

3) remained unchanged between 1999 and 2009.

4) increased by 5 percent between 1999 and 2009.

Answer 19

3) remained unchanged between 1999 and 2009.

Question 20

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?

1) $700

2) $500

3) $1700

4) $1200

Answer 20

4) $1200

Question 21

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $5.00 U.S., and a gallon of Canadian gas costs 8 Canadian dollars. What is the nominal exchange rate?

1) 1.25 Canadian dollars per U.S. dollar

2) 1.60 Canadian dollars per U.S. dollar

3) .80 Canadian dollars per U.S. dollar

4) None of the above is correct.

Answer 21

3) .80 Canadian dollars per U.S. dollar

Question 22

Which of the following events shifts aggregate demand rightward?

1) a decrease in the price level, but not an increase in government expenditures

2) an increase in government expenditures, but not a change in the price level

3) an increase in government expenditures or a decrease in the price level

4) a decrease in government expenditures or an increase in the price level

Answer 22

2) an increase in government expenditures, but not a change in the price level

Question 23

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar increases. At the same time, people in the U.S. revise their expectations so that the expected price level falls. We would expect that in the short-run

1) the price level will fall, and real GDP might rise, fall, or stay the same.

2) real GDP will fall and the price level might rise, fall, or stay the same.

3) the price level will rise, and real GDP might rise, fall, or stay the same.

4) real GDP will rise and the price level might rise, fall, or stay the same.

Answer 23

1) the price level will fall, and real GDP might rise, fall, or stay the same.

Question 24

Two countries are the same, except one is poorer. Assuming the traditional assumption about the production function is made there are

1) increasing returns to capital so the poor country grows slower.

2) diminishing returns to capital so the poor country grows faster.

3) diminishing returns to capital so the poor country grows slower.

4) increasing returns to capital so the poor country grows faster.

Answer 24

2) diminishing returns to capital so the poor country grows faster.

Question 25

The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?

1) 6.0 percent

2) 27.2 percent

3) 5.7 percent

4) 7.2 percent

Answer 25

1) 6.0 percent

Question 26

When the Federal Reserve conducts open-market operations to increase the money supply, it

1) redeems Federal Reserve notes.

2) buys government bonds from the public.

3) decreases its lending to member banks.

4) raises the discount rate.

Answer 26

2) buys government bonds from the public.

Question 27

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 800 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 720,000 yen and the exchange rate is 900 yen per dollar. Which country has a real exchange rate equal to 1 with the U.S.?

1) both

2) Belgium but not Japan

3) Japan but not Belgium

4) neither Belgium nor Japan

Answer 27

3) Japan but not Belgium

Question 28

In which of the following cases was the inflation rate 10 percent over the last year?

a) One year ago the price index had a value of 145 and now it has a value of 163.

b) One year ago the price index had a value of 120 and now it has a value of 132.

c) One year ago the price index had a value of 126 and now it has a value of 140.

d) One year ago the price index had a value of 110 and now it has a value of 120.

Answer 28

b) One year ago the price index had a value of 120 and now it has a value of 132.

Question 29

The term hyperinflation refers to ___.

a) inflation accompanied by a recession.

b) the spread of inflation from one country to others.

c) a decrease in the inflation rate.

d) a period of very high inflation.

Answer 29

d) a period of very high inflation.

Question 30

When the price level falls, the number of dollars needed to buy a representative basket of goods

increases, so the value of money falls.

decreases, so the value of money rises.

decreases, so the value of money falls.

increases, so the value of money rises.

Answer 30

decreases, so the value of money rises.

Question 31

If inflation is higher than what was expected, ___.

a) debtors pay a higher real interest rate than they had anticipated.

b) creditors pay a lower real interest rate than they had anticipated.

c) debtors receive a higher real interest rate than they had anticipated.

d) creditors receive a lower real interest rate than they had anticipated.

Answer 31

d) creditors receive a lower real interest rate than they had anticipated.

Question 32

33

Question 33

If the reserve requirement ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $65 million of bonds to the public, bank reserves ___

decrease by $65 million and the money supply eventually decreases by $433.33 million

increase by $65 million and the money supply eventually increases by $433.33 million

decrease by $65 million and the money supply eventually decreases by $266.67 million.

increase by $65 million and the money supply eventually increases by $266.67 million

Answer 33

decrease by $65 million and the money supply eventually decreases by $433.33 million

Question 34

The consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

1.5%

2.5%

3%

5%

Answer 34

2.5%

Question 35

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

$37.11

$25.84

$1.72

$32.79

Answer 35

$37.11

Question 36

37

Question 37

38

Question 38

Country A has a population of 1,000, of whom 700 worked an average of 8 hours a day and had a productivity of 2.5. Country B has a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. The country with the higher real GDP was ___.

a) country B, and the country with higher real GDP per person was country B.

b) country A, and the country with higher real GDP per person was country B.

c) country A, and the country with higher real GDP per person was country A.

d) country B, and the country with higher real GDP per person was country A.

Answer 38

b) country A, and the country with higher real GDP per person was country B.

Question 39

If the Fed conducts open-market sales, which of the following quantities increase(s)?

a) interest rates, prices, and investment spending

b) interest rates and prices, but not investment spending

c) interest rates, but not investment or prices

d) interest rates and investment, but not prices

Answer 39

c) interest rates, but not investment or prices

Question 40

Suppose the economy’s price level is 2 and real GDP is 30,000 for the year. Suppose the money supply is 5,000. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay for a newly produced good or service?

10

8

12

16

Answer 40

12

Question 41

Suppose that over the last twenty-five years a country’s nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

a) It increased, but it less than doubled.

b) It more than doubled.

c) It was unchanged.

d) It decreased.

Answer 41

a) It increased, but it less than doubled.

Question 42

43