1. The market where business sell goods and services to households and the government is calleda.goods marketb.factor marketc.capital marketd.money market2. Real gross domestic product is best defined asa.the market value of intermediate goods and services produced in an economy including exportsb.all goods and services produced in an economy, stated in prices in a given year and multiplied by quantityc.the market value of all final goods and services produced in an economy stated in the prices of a given yeard.the market value of goods and services produced in an economy stated in current year prices3. underemployment includesa.who work off the books to avoid paying taxesb.who are working part time or not using all their skills at a fulltime jobc.who are tired of looking for a job so they quit looking but still want oned.whose skills are not in demand anymore4. .The bureau of economic analysis is responsible for which of the followinga.setting interest ratesb.managing the money supplyc.calculating the US gross domestic productd.paying unemployment benefits5. The federal reserve provides which of the following dataa.federal funds rateb.stock price of GEc.bond yields of corporationd.debt to GDP of Ireland6. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should havea.shifted the AD curve to the leftb.shifted the AD curve to the rightc.made the AD curve flatter7. The largest source of household income is in the U.S. is obtaineda.stock dividendsb.wages and salariesc.interest earningsd.rental income8. If the depreciation of a countryâs currency increases it aggregate expenditures by 20, the AD curve willa.shift right by more than 20b.shift right by less than 20c.shift right by exactly 20d.not shift at all9. Aggregate demand management policies are designed most directly toa.minimize unemploymentb.minimize inflationc.control the aggregate level of spending in the economyd.prevent budget deficits or surpluses10. 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 modela.an increase in government spendingb.an increase in taxesc.a reduction in government spendingd.no change in taxes or government spending.11. According to Keynes, market economiesA. never experience significant declines in aggregate demandB. quickly recover after they experience a significant decline in aggregate demandC. may recover slowly after they experience a significant decline in aggregate demandD. are constantly experiencing significant declines in aggregate demand12. The laissez-faire policy prescription to eliminate unemployment was toA. eliminate labor unions and government policies that hold real wages too highB. strengthen unions and government regulations protecting unions and workersC. increase real wages so that people are encouraged to workD. have government guarantee jobs for everyone13. In the AS/AD model, an expansionary monetary policy has the greatest effect on the price level when itA. increases both nominal and real incomeB. increases real income but not nominal incomeC. increases nominal income but not real incomeD. doesnât increase real or nominal income14. The Federal funds rateA. is always slightly higher than the discount rateB. can never be close to zeroC. may sometimes have to be targeted at zeroD. is an intermediate target15. What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1% to 1.25%?A. Open-market operationsB. The discount rateC. A change in reserve requirementsD. Margin requirements16. If the Federal Reserve increases the required reserves, financial institutions will likely lend outA. more than before, increasing the money supplyB. less than before, decreasing the money supplyC. more than before, decreasing the money supplyD. less than before, increasing the money supply17. Suppose the money multiplier in the U.S. is 3. Suppose further that if the Federal Reserve changes the discount rate by 1 percentage point, banks change their reserves by 300. To increase the money supply by 2700 the Federal Reserve shouldA. reduce the discount rate by 3 percentage pointsB. reduce the discount rate by 10 percentage pointsC. raise the discount rate by 3 percentage pointsD. raise the discount rate by 10 percentage points18. If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent. This policy would most likelyA. increase both the money multiplier and the money supplyB. increase the money multiplier but decrease the money supplyC. decrease the money multiplier but increase the money supplyD. decrease both the money multiplier and the money supply19. A country can have a trade deficit as long as it canA. purchase foreign assetsB. make loans to other countriesC. borrow from or sell assets to foreignersD. produce more than it consumes.20. A weaker dollarA. raises inflation and contracts the economy.B. reduces inflation and contracts the economyC. raises inflation and expands the economyD. reduces inflation and expands the economy21. In the short run, a trade deficit allows more consumption, but in the long run, a trade deficit is a problem becauseA. the country eventually will consume more and produce lessB. the country eventually will sell all its financial assets to foreignersC. the domestic currency will appreciateD. the country eventually has to produce more than it consumes in order to pay foreigners their profits22. Considering an economy with a current trade deficit and considering only the direct effect on income, an expansionary monetary policy tends toA. decrease the exchange rate and increase the trade deficitB. increase the exchange rate and increase the trade deficitC. decrease the exchange rate and decrease the trade deficitD. increase the exchange rate and decrease the trade deficit23. The balance of trade measures theA. difference between the value of imports and exportsB. share of U.S. imports coming from various regions of the worldC. share of U.S. exports going to various regions of the worldD. exchange rate needed to make imports equal exports24. When a country runs a trade deficit, it does so by:A. borrowing from foreign countries or selling assets to them.B. borrowing from foreign countries or buying assets from them.C. lending to foreign countries or selling assets to them.D. lending to foreign countries or buying assets from them.25. Expansionary fiscal policy tends toA. raise U.S. income, increase U.S. imports, and increase the trade deficitB. raise U.S. income, increase U.S. imports, and lower the trade deficitC. lower U.S. income, reduce U.S. imports, and increase the trade deficitD. lower U.S. income, reduce U.S. imports, and lower the trade deficit26. In considering the net effect of expansionary fiscal policy on the trade deficit, theA. income effect offsets the price effectB. price effect offsets the income effectC. income and price effects work in the same direction, so the trade deficit is decreasedD. income and price effects work in the same direction, so the trade deficit is increased27. If U.S. interest rates fall relative to Japanese interest rates and Japanese inflation falls relative to U.S. inflation, then theA. dollar will lose value in terms of yenB. dollar will gain value in terms of yenC. dollarâs value will not change in terms of yenD. change in the dollarâs value cannot be determined28. Expansionary monetary policy tends toA. lower the U.S. interest rate and increase the U.S. exchange rateB. lower the U.S. interest rate and decrease the U.S. exchange rateC. increase the U.S. interest rate and decrease the U.S. exchange rateD. increase the U.S. interest rate and increase the U.S. exchange rate29. The U.S. has limits on Chinese textile imports. Such limits are an example ofA. a tariffB. a quotaC. a regulatory trade restrictionD. an embargo30. Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp are an example ofA. tariffsB. quotasC. voluntary restrictionsD. regulatory trade restr ictions
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