ECON 545 Final Exam

ECON 545 Final Exam

Author: Christine Farr


1. Which of the following questions is an illustration of a macroeconomic question?
a. Is a business responsive to the demands of customers?
b.Is the level of employment in the economy sensitive to the quantity of consumer spending?
c.Is a consumer boycott an effective means of reducing product prices?
d.Are oil companies engaging in a rip-off of the consumer by charging exorbitantly high prices for gasoline?
2.Tariffs and quotas on an imported product:
a.Benefit both domestic producers and consumers of the product.
b.Benefit both foreign producers and consumers of the product.
c.Benefit foreign producers and hurt foreign consumers of the product.
d.Benefit domestic producers and hurt domestic consumers of the product.

3.The Keynesian multiplier (k) can be calculated by dividing:
a.The initial change in spending by the change in real GDP.
b.The change in real GDP by the initial change in spending.
c.One by one minus MPS.
d.One by one minus MPI.

4.Which combination of factors would most likely increase aggregate demand?
a.An increase in consumer indebtedness and a decrease in foreign demand for products.
b.An increase in the supply of money and a decrease in interest rates.
c.An increase in personal taxes and a decrease in government spending.
d.An increase in business taxes and a decrease in profit expectations
Answer the next three questions based on the following list of factors which
are related to the aggregate demand curve.
1.Wealth effect 7. Government spending
2.Household expenditures 8. Foreign purchase effect
3.Interest rate effect 9. Exchange rates
4.Personal income tax rates 10. Degree of excess capacity
5.Profit expectations
6.National income abroad
5.Changes in which of the above 2 factors would most likely cause a change in consumer spending?
a.1 and 3 b. 2 and 4 c. 5 and 10 d. 8 and 9
6.Investment spending would most likely be influenced by changes in:
a.1 and 3b. 4 and 6 c. 5 and 10 d. 6 and 9
7.A change in net export spending would most likely be caused by changes in:
a.2 and 3 b. 5 and 6 c. 7 and 8 d. 6 and 9
8.The set of fiscal policies that would be most contractionary would be:
a.Increase in both government spending and taxes
b.Decrease in both government spending and taxes
c.Increase in government spending and a decrease in taxes
d.Decrease in government spending and an increase in taxes
9.What are three quantitative tools of Monetary Policy?
Reserve Requirement,
Open Market Operations
Discount Rates
10.What are three qualitative tools of Monetary Policy?
Margin Requirements,
Consumer Credit Regulation
Selective Credit Control
11.Which situation causes a budget deficit to have the most expansionary effect?
a.When it occurs during a period of high inflation
b.When it is financed by borrowing from the public
c.When it is financed by newly printed money
d.When automatic stabilizers are effective
12.The primary responsibility of the FOMC (Federal Open Market Committee) is:
a.Issuing currency and acting as fiscal agent for the federal government
b.Handling the Fed’s collection of checks and adjusting legal reserves among banks
c.Setting the Fed’s monetary policy and directing the buying and selling of government securities
d.Supervising bank operations to ensure they follow regulations and monitoring banks for fraud
13.Assume that the required reserve ratio is 25%. If a commercial bank has $2 million cash in its vault, $1 million in short-term government securities, $3 million on deposit at a Federal Reserve Bank, and $6 million in demand deposits, its total reserves equal:
a.$3 million b. $4 million c. $5 million d. $8 million
14.M1 consists of The sum of currency in circulation, checking account deposits in banks, and holdings of traveler’s checks.[Glenn, R., Anthony Patrick. Economics, 4th Edition. Pearson Learning Solutions, 1/2012. VitalBook file.]
15.Suppose the Derek Jeter National Bank of the Bronx has excess reserves of $12,000 and outstanding demand deposits of $125,000. If the R.R. is 20%, what are the banks actual reserves?

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