final exam

Question 1

Federal Reserve Notes in circulation are:

Answer 1

Physical dollar bills (as a form of enchange)

Question 2

Which of the following will increase commercial bank reserves?

Answer 2

Borrowing form a federal reserve bank

Question 3

When a commercial bank borrows from a Federal Reserve Bank:

Answer 3

The bank gets extra reserves, a discount window

Question 4

The Federal Reserve Banks sell government securities to the public. As a result, the checkable deposits:

Answer 4

Decrease

Question 5

The Federal Reserve Banks buy government securities from commercial banks. As a result, the checkable deposits:

Answer 5

No change in checkable deposits

Question 6

The commercial banking system borrows from the Federal Reserve Banks. As a result, the checkable deposits:

Answer 6

no change in checkable deposits

Question 7

Which of the following is a tool of monetary policy?

Answer 7

Open market operations, discount rate, and Required reserve ration

Question 8

Commercial banks and thrifts usually hold only small amounts of excess reserves because:

Answer 8

Banks perfer to lend out money to earn interest

Question 9

Tariffs:

Answer 9

Taxes on imports to protect domestic industries or raise revenue.

Question 10

An excise tax on an imported good that is not produced domestically is called a:

Answer 10

Revenue tariff

Question 11

An excise tax on an imported good that is also produced by domestic firms is called a:

Answer 11

Protective tariff

Question 12

Country A limits other nations’ exports to Country A to 1,000 tons of coal annually. This is an example of a(n):

Answer 12

Import quota

Question 13

What is the main argument in favor of trade barriers such as tariffs?

Answer 13

The cost of trade barriers don’t exceed their benefits creating efficiency and domestic employment

Question 14

What is an argument supporting the use of tariffs in the U.S.?

Answer 14

U.S. producers gain more from tariffs than U.S. consumers lose.

Question 15

A high tariff on imported good X might reduce domestic employment in industry Y if:

Answer 15

A high tariff on good X raises its price. If industry Y uses good X, their costs go up, leading to fewer jobs or less output in industry Y.

Question 16

The increased-domestic-employment argument for tariff protection holds that:

Answer 16

An increase in tariffs will increase net exports and stimulate domestic employment.

Question 17

Which of the following arguments comes closest to constituting a legitimate economic exception to the case for free trade?

Answer 17

the infant-industry argument

Question 18

The infant industry argument for tariffs is criticized:

Answer 18

• Hard to pick which industries need protection.
• Subsidies work better than tariffs to help industries grow.
• Tariffs might stay even after the industry is strong, hurting consumers.

Question 19

In terms of aggregate supply, the difference between the long run and the short run is that in the long run:

Answer 19

Wages and prices are flexible. for long run

Wages and prices are sticky for the short run

Question 20

The long-run aggregate supply curve is vertical at the same rate as real GDP.

Answer 20

Long run is at full employment

Question 21

The short-run aggregate supply curve is up-sloping because:

Answer 21

of the way firsts respond to changes in the price level when wages/imput prices are sticky

Question 22

Other things equal, an increase in the price level will:

Answer 22

SHORT-RUN: Higher prices = Higher profits
AD: decreases (less spending/investment,exports)

Question 23

Other things equal, a decrease in the price level will:

Answer 23

SHORT RUN: lower prices = lower profits

AD: increases (more spending/investment,exports)

Question 24

Suppose Smith pays $100 to Jones. We can say with certainty that the GDP has:

Answer 24

Too vague, could be transfer payment

Question 25

Suppose the total market value of all final goods/services in a country is $500 billion and sold is $450 billion. We conclude:

Answer 25

Unsold inventory adds to GDP.

Question 26

National income accountants can avoid multiple counting by:

Answer 26

Counting only final goods.

Question 27

Gross domestic product (GDP) measures and reports output:

Answer 27

In dollar amounts.

Question 28

GDP is:

Answer 28

The total value of all final goods and services.

Question 29

in the U.S., the rate of unemployment is highest for:

Answer 29

young adults

Question 30

Kimberly quit her job to earn an MBA and is now searching for a management position. She is:

Answer 30

frictionally unemployed

Question 31

To be officially unemployed a person must:

Answer 31

be apart of the labor force

Question 32

The natural rate of unemployment is:

Answer 32

Frictional + structional unemployment When cyclical unemployment is 0

Question 33

The labor force includes:

Answer 33

Unemplyed + employed

Question 34

The unemployment rate of:

Answer 34

Young adults are higher than adults

Question 35

Inflation initiated by increases in wages or resource prices is labeled:

Answer 35

Cost-push inflation.

Question 36

Cost-push inflation:

Answer 36

Moves left ward Operating inside the Production possibilities curve

Question 37

Cost-push inflation may be caused by:

Answer 37

negative supply shock When production costs rise

Question 38

Real income is found by:

Answer 38

Nominal Income/price level x100

Question 39

Correct formula: Percentage change in:

Answer 39

New Value−Old Value/old value ×100

Question 40

Real income can be determined by:

Answer 40

By taking out inflation

Question 41

The multiplier effect:

Answer 41

A small change in spending leads to a larger change in GDP.

Question 42

If the MPC is 0.6, the multiplier will be:

Answer 42

1/1-mpc = multiplier 1/1-.6 = 2.5

Question 43

Assume MPC is 2/3. If investment spending increases by $2 billion, GDP will increase by:

Answer 43

1/1-2/3 = 3 GDP increase = increased x multiplier

Question 44

The multiplier is:

Answer 44

1/1-mpc

Question 45

The multiplier applies to:

Answer 45

Spending changes in consumption, investment, or government.

Question 46

The multiplier effect indicates:

Answer 46

One dollar of spending creates more GDP.

Question 47

- Refer to the above diagram (PG 66-67)-. This economy will experience unemployment if it produces at point: - In drawing the production possibilities curve, we assume that:

Answer 47

- Point D, because it is inside the PPC. Points inside the curve represent the underutilization of resources, such as unemployment or inefficiency. - Resources and technology are fixed. The PPC assumes a specific time frame with constant resource availability and no technological change.

Question 48

- Refer to the above diagram (PG68-70). This production possibilities curve is constructed so that: - Refer to the above diagram. Which of the following is a normative statement? - Refer to the above diagram. Starting at point A, the opportunity cost of producing each successive unit of tractors is:

Answer 48

- A normative statement is an opinion or value judgment - It reflects increasing opportunity costs. The curve is bowed outward, which means as more tractors are produced, more bread must be sacrificed. This shows that resources are not perfectly adaptable to both goods. - Answer: The amount of bread sacrificed as tractors are produced. Moving from A to B: Bread decreases from 20 to 16, so the opportunity cost is 4 units of bread. Moving from B to C: Bread decreases from 16 to 12, so the opportunity cost is 4 units of bread, and so on.