Macroecon 832 Flashcards
(40 cards)
Suppose our domestic economy consists of two firms. One produces an intermediate good that it sells to the second firm for $300. The second firm then transforms this product and sells it to a foreign country for $500. What is the domestic country’s GDP?
a. 300
b. 500
c. 800
d. not enough information to answer
The answer is B
Suppose our domestic economy consists of two firms. One produces an intermediate good that it sells to the second firm for $300. The second firm then transforms this product and sells it to a foreign country for $500. What is the domestic country’s GDP?
Same as above except that the second firm sells its good to domestic consumers. What is the domestic country’s GDP?
a. 300
b. 500
c. 800
d. not enough information to answer
the answer is B
Imagine a country produces a single good. In 2006 it produced 200 units of this good, pricing it at $5. In 2011 it produced 500 units of this good pricing it at 8 dollars. What is the country’s nominal GDP in 2006?
$1000 - why is this? 200*5=1000 - see notes for explanation.
In a different economy, suppose a country produces 5 units in 2001 and produced 12 units in 2015. True or False: In this economy real GDP has gone up between 2001 and 2011:
a. True
b. False
c. Not enough information to answer
C
What is GDP (Y) equal to?
a. Y = C + I + G + NX
b. Y = C – T + I + G
c. Y - T = C
d. Y=mpc(Y-T)
e. T = G
A
Which of the following might make sense in terms of an investment function:
a. I = 1000r + 50 Y
b. I = 1000r - 50 Y
c. I = 50Y – 1000r
d. I = -50Y – 1000r
C is correct. Notice the positive year and the negative rate. prof. said something about the positive year and the negative rate.
Suppose a country produces 5 units in 2001 and produced 12 units in 2015. In this economy nominal GDP has gone up between 2001 and 2015:
a. True
b. False
c. Not enough information to answer
C. Not enough information
Which of the following is true in a closed economy:
a. Y=C+I+G
b. T=G
c. Money Supply = Money Demand
d. None of the above
A and B
In a closed economy, which is more likely to have the highest impact on GDP?
a. A reduction in taxes of 100
b. An increase in government spending of 100
c. A reduction of taxes of 50 and an increase in government spending of 50
d. Neither has any impact on GDP.
B
In an open economy, which of the following is true:
a. Y=C+I+G
b. Y=C+I+G-NX
c. Y=C-T
d. Y=C
e. None of the above
E
Don’t let answer B fool you. there is no plus sign there
Government Savings are equal to:
a. T+G
b. Y-T-C
c. C+I+G+NX
d. T-G
e. G-T
f. None of the above
D
Taxes minus government spending
In a closed economy, which may be true:
a. S>I
b. S = I
c. S<i></i>
b - Savings = Investment
Which of these will cause a drop in GDP:
a. An increase in the money supply
b. An increase in the marginal propensity to consume
c. An increase in government revenue
d. none of the above
C - an increase in government revenue
Public Savings are equal to:
a. S-I
b. Y-T-C
c. C+I+G+NX
d. G-T
e. None of the above
E.
Which of the following will affect the IS curve:
a. A change in taxes
b. An increase in government spending
c. A change in the money supply.
d. None of the above
a. A change in taxes
b. An increase in government spending
Which of the following will shift the LM curve to the left:
a. A decrease in the money supply
b. An increase in the money supply
c. An increase in government spending
d. A decrease in government spending
e. None of the above
A - A decrease in the money supply
True or False: If the Fed increases the money supply and the government increases spending, then the interest rate will go down.
False
Suppose the Fed decides to increase the money supply. Which of the following Fed actions would achieve that goal:
a. Buying bonds
b. Selling bonds
c. Increasing the reserve ratio
d. Decreasing the reserve ratio
e. Increasing the overnight interest rate
f. Decreasing the overnight interest rate
g. None of the above
The following answers are correct!
a. Buying bonds
d. Decreasing the reserve ratio
f. Decreasing the overnight interest rate
part 1
Suppose the Fed decides to conduct an open market purchase of bonds. Which would happen:
a. Money supply goes down and the interest rate rises.
b. Money supply goes up and the interest rate rises.
c. Money supply goes down and the interest rate falls.
d. Money supply goes up and the interest rate falls.
part 2 In the context of the above question, what happens to r in this economy? a. It goes up b. It goes down c. It stays the same d. Not enough information to answer. e. None of the above
part 1
d. The money supply goes up and the interest rate falls.
part 2
d. Not enough information to answer.
If inflation is positive, the value of your money:
a. Increases
b. Decreases
c. Stays the same
d. Not enough information to answer.
b. Decreases
Draw a “standard” IS-LM graph. Label both axes and curves.
Y axis contains r - interest rates
X axis contains income or GDP
LM curve is from origin upwards
IS curve comes downwards
In equilibrium in a open economy, we must have:
a. Y= C+I+G
b. Y=C+I+G+NX
c. S=I-NX
d. S=I
e. S=I+NX
c. None of the above
The following answers are correct
d. S=I
e. S=I+NX
In an open economy, what happens to domestic GDP if foreign income goes down?
a. It goes up
b. It goes down
c. It stays the same
d. None of the above
b. It goes down
The real exchange rate is (where Pf is the foreign price):
a. eP/Pf
b. ePPf
c. ePf/P
d. Pf/eP
e. None of the above.
a. eP/Pf
