ECO 372 Final Exam (New)

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ECO 372 Final Exam (New) 1. News Story Workers
at a car-manufacturing plant in Flint, Michigan
are laid off because the economy is weak and
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GM cars aren't selling well. GM isn't sure when
the plant will reopen. What type of unemployment
describes the workers' situation? Frictional
unemployment Structural unemployment Full
unemployment Cyclical unemployment
ww.e 3372,, ntirecourse.com 2. Globalization that
allows governments to pursue expansionary
policies can be dangerous because it can lead to
A reduction in the debt ceiling Goods price
inflation Asset price inflation Goods price
deflation
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3. Macroeconomics is
The study of aggregate economic
relationships. An analysis of economic reality
that proceeds from the parts to the whole. The
study of pricing policies of firms and the
purchasing decisions of households. The study
of individual choice and how that WWchoice is
infliienced by economic forces.
4. Which of the following types of unemployment
is considered to be the most controllable through
demand-side macroeconomic policy? Frictional
unemployment Cyclical unemployment
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Structural unemployment Natural
unemployment 5. If banks hold excess reserves
whereas before they did not, the money
multiplier Will become smaller Will become
larger WWV\ Might increase or might decrease
Will be unaffected
6. Using the expenditure approach, gross
domestic product equals The sum of
consumption, investment, government purchases,
and net exports Gross national product minus
net exports
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The sum of consumption, investment, and
government purchases Gross national product 7.
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.
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8. The interest rate is the price paid for use of
a
Real asset. Financial liability. Financial
asset.
Real liability.
9. 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
50 100 500
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10. 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 substitute wheat for the
production of corn.
Farmers to raise the production of corn
and wheat. Farmers to lower the production of
corn and www.eco372wheat- , J Farmers to
substitute corn for the production of wheat.
11. 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.
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The cost of repricing goods would increase
costs, and therefore reduce profits, for
businesses and they would cut production.
People would drop out of unions because unions
would become ineffective at keeping wages
of members high. Consumers might expect prices
to fall further and cut back consumption now.
12. 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, sell a financial asset. Less likely to
borrow, that is, purchase a financial asset.
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13. According to the Classical growth model, an
economy that increases its saving will grow
Quickly since the increase in saving will
permit greater investment. Quickly since the
increase in saving will permit more rapid
technological progress. Slowly because interest
rates will fall, causing www.eccinvestment to
decline-
Slowly because consumption and aggregate demand
will be reduced.
14. 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?
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A reduction in government spending An
increase in taxes An increase in government
spending No change in taxes or government
spending
15. Which of the following topics is best
characterized as a macroeconomic issue? o ,
-o372e itireco rs .com The effect of a drought
on the price of corn
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
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16. If income increases more rapidly
than expected, then Estimates of the target
rate of employment are likely to increase. The
budget is less likely to be in surplus. Tax
revenues will be lower than expected. Spending
on income-support programs will WWW.ltlikely be
lower than expected.
17. 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 fiscal policy is expansionary
and the economy is contracting
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When fiscal policy is expansionary When the
economy is contracting
18. The largest expenditure component of GDP
is Government spending Net
exports www.eco3/ Investment
Consumption 19. Which of the following is the
path through which contractionary monetary policy
works? Money down implies interest rate up
implies investment up implies income down.
Money down implies interest rate down implies
investment down implies income down.
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Money down implies interest rate up implies
investment down implies income down. Money down
implies interest rate down implies investment up
implies income down.
20. As a country develops economically, what
changes usually take place in the goods it
exports? There is little change because
comparative www_0advantage doeS not change.
Exports go from being diversified to being
specialized in whatever the country finds to its
comparative advantage. Services and
manufactured goods decline in importance and are
replaced by raw materials and agricultural
products. Raw materials and agricultural
products decline in importance and are replaced
by services and manufactured goods.
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21. What would make foreigners want to buy
more from the United States?
Higher tariffs Higher interest rates in the
United States Inflation in the United States
A fall in the value of the dollar in the
foreign www.eco?xchange market 22. The
depreciation of currency will Balance a trade
surplus. Have no impact on a country's
comparative advantage. Worsen a country's
comparative advantage. Improve a country's
comparative advantage.
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23. 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 www.eco3 7 Transfers
24. If a country wants to prevent its exchange
rates from falling, it could Place
restrictions on imports Pursue easier monetary
policy Remove any subsidies on exports Remove
restrictions on imports
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25. Central banks are responsible for Both
monetary policy and fiscal policy Monetary
policy but not fiscal policy Neither monetary
policy nor fiscal policy Fiscal policy but not
monetary policy www.eco372entirecourse.com 26.
Quotas and tariffs can Never have the same
effect on imports and import prices. 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.
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Both increase international trade by the same
amount if set appropriately.
27. 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 An increase
in the minimum wage.
www.eco372entirecourse.com An increase in the
bargaining power of labor unions. A decline in
the level of aggregate demand. A decline in
aggregate supply.
28. U.S. imports involve an
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Inflow of foreign currency from foreigners to
the U.S. economy Inflow of dollars from
foreigners to the United States economy Outflow
of foreign currency from the United States to
foreigners Outflow of dollars from the United
States to foreigners
www.eco372entirecourse.com 29. 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 Up, the
quantity demanded goes down. Down, the quantity
demanded stays the same. Up, the quantity
demanded also goes up. Down, the quantity
demanded goes down.
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30. According to Keynes, market economies
Never experience significant declines in
aggregate demand. Are constantly experiencing
significant declines in aggregate demand. May
recover slowly after they experience a
significant decline in aggregate
demand. www.eco372entirecourse.com Quickly
recover after they experience a significant
decline in aggregate demand.