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C. will remain the same and the CPI will rise.
32. According to the quantity equation, if M increases by 3 percent and V increases by 2 percent, then
D. nominal income increases by approximately 5 percent.
33. An increase in the expected rate of inflation will
B. lower demand for real balances because the nominal interest rate will rise.
34. According to the IS-LM model, an increase in government purchases causes a(n)
C. increase in income and an increase in the interest rate.
35. According to the IS-LM model, if the central bank increases the money supply, then the interest rate
B. falls and income rises.
36. According to the quantity equation, which of the following might happen if the money supply increases?
A. Velocity is constant, prices are constant, and total output increases.
37. Because of the relationship between prices and the real money supply, the aggregate demand curve is
D. downward sloping.
38. Consider the following aggregate supply equation:
Y = Y + a*(P - Pe)
Based on this equation, the slope of the AS curve is
D. 1/a.
39. Choose the pair of words that best complete this sentence: If government purchases increase, national saving will ________ and the equilibrium real exchange rate will _______.
B. fall; rise
40. Choose the pair of words that best completes this sentence: In a large open economy monetary policy is ____ potent and fiscal policy is ____ potent than in a closed economy.
D. more; less
41. Consider the following data on inflation and unemployment
| Year | Inflation | Unemployment |
| 10% | 5% | |
| 8% | 6% | |
| 4% | 9% |
The part of the business cycle characterizing this economy from year 1 to year 3 is a
A. recession.
42. Consider an economy where the money supply is growing at 7 percent per year and velocity is constant. Which of the following statements about real GDP growth and the inflation rate could be true?
A. Real GDP is growing at 2 percent and inflation is 5 percent.
43. Consider the following table
| Consumption of foreign goods and services | |
| Consumption of domestic goods and services | |
| Investment of foreign goods and services | |
| Investment of domestic goods and services | |
| Government purchases of foreign goods and services | |
| Government purchases of domestic goods and services | |
| Exports |
Based on the data, what are total imports?
B. 120
44Considerthefollowingtable
| Consumption of foreign goods and services | |
| Consumption of domestic goods and services | |
| Investment of foreign goods and services | |
| Investment of domestic goods and services | |
| Government purchases of foreign goods and services | |
| Government purchases of domestic goods and services | |
| Exports |
Based on the data, what are total imports?
B. 120
45. Consider an economy where the only goods traded are coconuts and pineapples. Last year, 100 coconuts were sold at $1 apiece, and 200 pineapples were sold at $2.50 apiece. If the money supply was $100, what was velocity?
C. 6
46. Considerthefollowingtable:
| ConsumptionGoods | NonconsumptionGoods | |
| Year | ProductionPrice | ProductionPrice |
| 20/$0.50 | 10/$1.00 | |
| 10/$1.00 | 10/$0.50 |
If 1995 is the base year, the CPI in 2000 is
A. 2.
47. Choose the pair of words that best completes this sentence: Investment depends on the ________ interest rate because higher inflation will ________ the value of the dollars with which the firm will repay the loan.
C. real, decrease
48. Consider the following table:
APPLES/ ORANGES
| Year | Production/Price | Production/Price |
| 20/ $0.50 | 10/$1.00 | |
| 10/ $1.00 | 10/$0.50 | |
If 1995 is the base year, what is the GDP deflator for 2000?
A. 1
49. Consider the following production table:
| Labor | Capital | Output | |
| (i) | 1,000 | 1,000 | 10,000 |
| (ii) | 2,002 | 2,000 | 20,010 |
Assuming that the production function displays constant returns to scale, what is the marginal product of labor when labor and capital are both equal to 1,000?
B. 5
50. Considerthefollowingtable
| Year | InflationRate | NominalInterestRate |
| 5% | 10% | |
| 10% | 5% |
By how much has the real interest rate changed between year 1 and year 2?
B. It has decreased 5 percent.
51. Consider the following production table:
| Labor | Capital | Output |
By how much does the marginal product of labor decrease as labor input increases from 1 to 2 and from 2 to 3?
B. 1
52. Consider the following table
| Domestic inflation: | 5% |
| Foreign inflation: | 6% |
| Change in nominal exchange rate: | 3% |
Based on the data, what is the change in the real exchange rate?
A. 2 percent
9 Consider the following data on the Transalpinian economy
Y = 1,000
C = 700
G = 150
I = 250 - 10r*
53. Consider the following data on the Transalpinian economy
Y = 1,000
C = 650
G = 200
I = 250 - 20r*
The world interest rate is 7.5 percent. How does the world interest rate have to change to make net exports zero?
D. It has to fall by 2.5 percent.
54. Choose the pair of words that best completes this sentence: The nominal interest rate is the sum of the ex ante real interest rate and the _________ inflation rate, and real money balances are a function of the ___________ interest rate.
A. expected; nominal
55. Compared to long-term unemployment, short-term unemployment is more likely to be
A. frictional unemployment.
56. Discouraged workers who want jobs, but have stopped looking for jobs are
C. no longer in the labor force.
57. Debt-deflation leads to lower income because
B. falling prices redistribute income from debtors to creditors, which leads to a decline in the APC.
58. Economists usually advocate targeting nominal rather than real variables because:
B. it is difficult to determine the exact level of real variables
59. Efficiency wage theories claim that firms may pay high real wages in order to
B. make workers more productive.
60. Efficiency wages do not lead to
C. lower firm profits.
61. Economic profit is the same as accounting profit minus
B. the return to capital.
62. Exogenous increases in the supply of loanable funds shift the
D. IS curve inward.
63. Euler's theorem implies that if a production function exhibits constant returns to scale
A. economic profit is zero.
64. Frictional unemployment occurs because
D. it takes time to match firms and workers.
65. Faced with an adverse supply shock, if the central bank wants to stabilize output, it should
B. increase the money supply.
66. For a fixed money supply, a higher level of real balances implies
B. a lower price level.
| Government purchases of foreign goods and services | |
| Government purchases of domestic goods and services | |
| Exports |
Based on the data, what are net exports?
A. -20
67. Government revenue raised through the printing of money is called
B. seignorage.
68. General Motors increases the price of a model car produced exclusively for export to Europe. Which U.S. price index is affected?
Date: 2015-12-11; view: 1762
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| C. durable goods consumption rises. | | | D. all of the above. |