1．In the United States real GDP is reported each quarter.
a. These numbers are adjusted to make them measure at annual and seasonally adjusted rates.
b. These numbers are adjusted to make them annual rates, but no adjustment for seasonal variations are made.
c. These numbers are quarterly rates that have been seasonally adjusted.
d. These numbers are at quarterly rates and have not been seasonally adjusted.
2．The price of CD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by a. more than 1 percent. b. less than 1 percent. c. 1 percent.
d. It is impossible to make an informed guess without more information.
3．If increases in the prices of U.S. medical care cause the CPI to increase by 2 percent,
the GDP deflator will likely increase by a. more than 2 percent. b. 2 percent. c. less than 2 percent.
d. All of the above are correct.
4．The traditional view of the production process is that capital is subject to a. constant returns. b. increasing returns. c. diminishing returns.
d. diminishing returns for low levels of capital, and increasing returns for high levels of capital.
5．Which of the following is correct? a. Political instability can reduce foreign investment, reducing growth.
b. Gary's Becker proposal to pay mothers in developing countries to keep their children in school has not worked very well in practice.
c. Policies designed to prevent imports from other countries generally increase
economic growth.
d. All of the above are correct.
6．Use the following table to answer the following question. Stock Sym Yld % PE Vol 100s Hi Lo Close Net Chg GenMills GIS 2.5 35 13758 44.3 43.5 43.97 -0.63 Gillette G 2.2 31 30428 31.1 29.7 30 0.17 Graco GGG 1.2 16 705 24.2 23.1 23.95 -0.53 Hershey HSY 2.1 38 5418 63.4 61.7 62.45 0.72 Assume that the closing price was also the average price at which each stock transaction took place. What
was the total dollar volume of Gillette stock traded that day? a. $912,840,000 b. $91,284,000 c. $9,128,400
d. $912,840
7．Suppose that in a closed economy GDP is equal to 10,000, taxes are equal to 2,500 Consumption equals
6,500 and Government expenditures equal 2,000. What are private saving, public saving, and national saving? a. 1500, 1000, 500 b. 1000, 500, 1500 c. 500, 1500, 1000
d. None of the above are correct. 8．Risk-averse people will choose different asset portfolios than people who are not risk averse. Over a long period of time, we would expect that a. every risk-averse person will earn a higher rate of return than every non-risk averse person. b. every risk-averse person will earn a lower rate of return than every non-risk averse person.
c. the average risk-averse person will earn a higher rate of return than the average non-risk averse person.
d. the average risk-averse person will earn a lower rate of return than the average non-risk averse
person.
9．The natural rate of unemployment is the a. unemployment rate that would prevail with zero inflation.
b. rate associated with the highest possible level of GDP.
c. difference between the long-run and short-run unemployment rates.
d. amount of unemployment that the economy normally experiences.
10．Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits. Its required reserves are a. $5. b.
$50.
c. $95. d.
$950.
11．Suppose a bank has $200,000 in deposits and $190,000 in loans. It has a reserve ratio of a. 5 percent b. 9.5 percent c. 10 percent
d. None of the above is correct.
12．The inflation tax a. transfers wealth from the government to households. b. is the increase in income taxes due to lack of indexation. c. is a tax on everyone who holds money.
d. All of the above are correct.
13．In 1898, prospectors on the Klondike River discovered gold. This discovery caused
an unexpected price level a. decrease that helped creditors at the expense of debtors. b. decrease that helped debtors at the expense of creditors. c. increase that helped creditors at the expense of debtors.
d. increase that helped debtors at the expense of creditors.
14．Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale a. increases U.S. net exports and has no effect on Russian net exports. b. increases U.S. net exports and decreases Russian net exports. c. decreases U.S. net exports and has no effect on Russian net exports.
d. decreases U.S. net exports and increases Russian net exports.
15．Suppose that the real exchange rate between the United States and Kenya is defined
in terms of baskets of goods. Which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys)? a. an increase in the number of Kenyan shillings that can be purchased with a dollar b. an increase in the price of U.S. baskets of goods
c. a decrease in the price in Kenyan shillings of Kenyan goods
d. All of the above are correct.
16．Use the (hypothetical) information in the following table to answer the next question.
Country Currency Currency per U.S. Price Country U.S. Dollar Index Price Index Brazil Real 4.00 200 800 Japan Yen 125.00 200 50,000 Mexico Peso 10.00 200 2,000 Sweden Krona 9.00 200 2,000 Thailand Baht 45.00 200 8,000 In real terms, U.S. goods are more expensive than goods in which country(ies)? a. Brazil and Mexico
b. Japan, Sweden, and Thailand c. Japan and Sweden
d. Thailand.
17．Which of the following would tend to shift the supply of dollars in foreign-currency exchange market of
the open-economy macroeconomic model to the left? a. The exchange rate rises. b. The exchange rate falls.
c. The expected rate of return on U.S. assets rises.
d. The expected rate of return on U.S. assets falls.
18．The real exchange rate equals the relative a. price of domestic and foreign currency. b. price of domestic and foreign goods. c. rate of domestic and foreign interest.
d. None of the above is correct.
19．In the open-economy macroeconomic model, if the supply of loanable funds increases, the interest rate
a. and the real exchange rate increase.
b. and the real exchange rate decrease.
c. increases and the real exchange rate decreases.
d. decreases and the real exchange rate increases.
20．For the following question, use the graph below.
The initial effect of an increase in the budget deficit in the loanable funds market is
illustrated as a move from a. a to b. b. a to c. c. c to b.
d. c to d.
21．When the government spends more, the initial effect is that a. aggregate demand shifts right. b. aggregate demand shifts left. c. aggregate supply shifts right.
d. aggregate supply shifts left.
22．Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage, a major new discovery of oil, a large influx of immigrants, and new environmental regulations that reduce electricity production. In the short run, we would expect a. the price level to rise and real GDP to fall. b. the price level to fall and real GDP to rise.
c. the price level and real GDP both to stay the same.
d. All of the above are possible.
23．Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect a. the price level to rise and real GDP to fall. b. the price level to fall and real GDP to rise. c. the price level and real GDP both to stay the same.
d. All of the above are possible.
24．According to liquidity preference theory, the money supply curve is a. upward sloping.
b. downward sloping. c. vertical.
d. horizontal.
25．When the Fed buys government bonds, the reserves of the banking system a. increase, so the money supply increases. b. increase, so the money supply decreases. c. decrease, so the money supply increases.
d. decrease, so the money supply decreases. 26．According to the theory of liquidity preference, an increase in the price level causes the a. interest rate and investment to rise. b. interest rate and investment to fall. c. interest rate to rise and investment to fall.
d. interest rate to fall and investment to rise.
27．If the stock market crashes, a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate demand increases, which the Fed could offset by decreasing the money supply. c. aggregate demand decreases, which the Fed could offset by increasing the money supply.
d. aggregate demand decreases, which the Fed could offset by decreasing the money supply.
28．If the MPC = 3/5, then the government purchases multiplier is
a.
5/3. b.
5/2.