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ECO 372 FINAL EXAM JAN 2017 VERSION

Author: Yanis Gherasim

ECO 372 FINAL EXAM

 

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ECO 372 FINAL EXAM

The depreciation of currency will:

Improve a country’s comparative advantage.

Balance a trade surplus.

Worsen a country’s comparative advantage.

Have no impact on a country’s comparative advantage.

 

US imports involve an:

Inflow of dollars from foreigners to the United States economy

Outflow of dollars from the United States to foreigners

Outflow of foreign currency from the United States to foreigners

Inflow of foreign currency from foreigners to the U.S. economy

 

ECO 372 FINAL EXAM

Suppose farmers can use their land to grown either wheat or corn The law of supply predicts that an increase in the market price of wheat will cause:

Farmers to raise the production of corn and wheat.

Farmers to lower the production of corn and wheat.

Farmers to substitute corn for the production of wheat.

Farmers to substitute wheat for the production of corn.

In which of the following situations is a budget surplus most likely to occur?

When fiscal policy is contractionary and the economy is expanding

When the economy is contracting

When fiscal policy is expansionary

When fiscal policy is expansionary and the economy is contracting

 

According to the Classical growth model an economy that increases its saving will grow:

Quickly since the increase in saving will permit more rapid technological progress.

Quickly since the increase in saving will permit greater investment.

Slowly because consumption and aggregate demand will be reduced.

Slowly because interest rates will fall, causing investment to decline.

 

The law of demand states that quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes:

Down, the quantity demanded goes down.

Up, the quantity demanded goes down.

Down, the quantity demanded stays the same.

Up, the quantity demanded also goes up.

ECO 372 FINAL EXAM

If a country wants to prevent its exchange rates from falling, it could: 

Pursue easier monetary policy

Remove restrictions on imports

Remove any subsidies on exports

Place restrictions on imports

News Story Workers at a car-manufacturing plant in Flint Michigan are laid off because the economy is weak and GM cars aren’t selling well. GM isn’t sure when the plant will reopen. What type of unemployment describes the workers’ situation?

Cyclical unemployment

Full unemployment

Structural unemployment

Frictional unemployment

ECO 372 FINAL EXAM

The interest rate is the price paid for use of a:

Financial asset.

Real liability.

Financial liability.

Real asset.

Which of the following topics is best characterized as a macroeconomic issue?

The decision by Apple to produce fewer Macintosh computers

The effect of an increase in federal spending on the unemployment rate

The choice a student makes in selecting college course

The effect of a drought on the price of corn

How do investment in technology and investment in capital differ?

They have similar effects on output so they have no important differences from an economic point of view.

They have the same effects on output but investments in technology are much more closely tied to the level of saving than investments in capital.

They have different effects on output because of the positive externalities associated with investments in capital.

They have different effects on output because of the positive externalities associate with investments in technology.

As a country develops economically what changes usually take place in the goods it exports?

There is little change because comparative advantage does not change.

Services and manufactured goods decline in importance and are replaced by raw materials and agricultural products.

Exports go from being diversified to being specialized in whatever the country finds to its comparative advantage.

Raw materials and agricultural products decline in importance and are replaced by services and manufactured goods.

When interest rates rise people are:

More likely to borrow, that is, purchase a financial asset.

More likely to borrow, that is, sell a financial asset.

Less likely to borrow, that is, purchase a financial asset.

Less likely to borrow, that is, sell a financial asset.

ECO 372 FINAL EXAM

If banks hold excess reserves whereas before they did not the money multiplier:

Will become larger

Will be unaffected

Will become smaller

Might increase or might decrease

 

Using the expenditure approach, gross domestic product equals:

Gross national product

The sum of consumption, investment, government purchases, and net exports

Gross national product minus net exports

The sum of consumption, investment, and government purchases

 

ECO 372 FINAL EXAM

Macroeconomics is: 

An analysis of economic reality that proceeds from the parts to the whole.

The study of aggregate economic relationships.

The study of individual choice and how that choice is influenced by economic forces.

The study of pricing policies of firms and the purchasing decisions of households.

 

The largest expenditure component of GDP is:

Consumption

Government spending

Net exports

Investment

Quotas and tariffs can:

Have the same effect on the price of domestically produced goods if they are set appropriately.

Yield the same amount of tax revenue if they are set appropriately.

Both increase international trade by the same amount if set appropriately.

Never have the same effect on imports and import prices.

If income increases more rapidly than expected, then:

Tax revenues will be lower than expected.

The budget is less likely to be in surplus.

Spending on income-support programs will likely be lower than expected.

Estimates of the target rate of employment are likely to increase.

 

Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model?

An increase in government spending

No change in taxes or government spending

An increase in taxes

A reduction in government spending

ECO 372 FINAL EXAM

According to Keynes, why might deflation create problems for an economy?

In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail.

The cost of repricing goods would increase costs, and therefore reduce profits, for businesses and they would cut production.

Consumers might expect prices to fall further and cut back consumption now.

People would drop out of unions because unions would become ineffective at keeping wages of members high.

 

Globalization that allows governments to pursue expansionary policies can be dangerous because it can lead to:

Goods price inflation

A reduction in the debt ceiling

Asset price inflation

Goods price deflation

 

Which of the following is the path through which contractionary monetary policy works?

Money down implies interest rate up implies investment down implies income down.

Money down implies interest rate down implies investment up implies income down.

Money down implies interest rate up implies investment up implies income down.

Money down implies interest rate down implies investment down implies income down.

 

Between 2007 and 2009, the U.S. unemployment rate rose from under 5 percent to over 8 percent. A Keynesian economist would most likely blame this increase in unemployment on:

A decline in the level of aggregate demand.

A decline in aggregate supply.

An increase in the minimum wage.

An increase in the bargaining power of labor unions.

 

ECO 372 FINAL EXAM

Which of the following types of unemployment is considered to be the most controllable through demand-side macroeconomic policy?

Structural unemployment

Frictional unemployment

Natural unemployment

Cyclical unemployment

Central banks are responsible for:

Monetary policy but not fiscal policy

Fiscal policy but not monetary policy

Both monetary policy and fiscal policy

Neither monetary policy nor fiscal policy

The government of Crossland wants to influence its exchange rate. It will do so by buying and selling:

Currencies in its official reserves

Commodities

Goods and services from the current account

Transfers

 

What would make foreigners want to buy more from the United States?

Higher tariffs

Inflation in the United States

A fall in the value of the dollar in the foreign exchange market

Higher interest rates in the United States

 

According to Keynes, market economies:

Are constantly experiencing significant declines in aggregate demand.

Quickly recover after they experience a significant decline in aggregate demand.

Never experience significant declines in aggregate demand.

May recover slowly after they experience a significant decline in aggregate demand.

 

If the reserve requirement is 20 percent, and banks keep no excess reserves, an increase in an initial inflow of $100 into the banking system will cause an increase in the money supply of:

$500

$20

$50

$100

ECO 372 FINAL EXAM