Practice Final Answers Essays

Practice Final Answers Essays Practice Final Answers Essay Practice Final Answers Essay When the interest rate falls in the money market, the quantity of money demanded and the quantity of money supplied A) decreases; increases B) increases; decreases C) increases; stays the same D) stays the same; decreases 2) In short-run macroeconomic equilibrium, A) real GAP and the price level are determined by short-run aggregate supply and aggregate demand. B) real GAP equals potential GAP and aggregate demand determines the price level. C) the price level is fixed and short-run aggregate supply determines real GAP. D) real GAP is less than potential GAP. 3) The idea that a government budget deficit decreases investment is called B) the crowding-out effect. A) the capital investment effect. C) the Richard-Barron effect. D) government diseasing. 4) As labor increases, there is a A) shift of the aggregate production function, but no movement along it. 8) movement along the aggregate production function and real GAP will increase less with each additional increase in labor. C) movement along the aggregate production function, but no shift in it. D) decrease less with each additional increase in labor. ) Net investment equals A) the total quantity of plant, equipment and buildings. B) gross investment/depreciation. C) gross investment minus depreciation. D) capital stock minus depreciation. 6) If real GAP decreases, the demand for money curve will shift A) rightward and the interest rate will fall. B) leftward and the interest rate will rise. C) leftward and the interest rate will fall. D) rightward and the interest rate will rise. 7) Factors that influence labor productivity include . A) the labor demand curve B) the inflation rate, the real wage rate, and the exchange rate C) physical UAPITA, the real wage rate, and technology D) physical capital, human capital, and technology 8) The quantity theory of money is the idea that in the long run A) the quantity of money is determined by banks. B) the quantity of money serves as a good indicator of how well money functions as a store of value. C) the quantity of money determines real GAP. D) an increase in the growth rate of the quantity of money leads to an equal increase in the inflation rate. 9) Prime Pharmaceuticals has developed a new asthma medicine, for it has a patent An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime Pharmaceuticals will produce each inhaler. C) 8 million; $6 A) 8 million; $2 B) 16 million; $2 D) 10 million; $5 inhalers and set a price of for 10) A small country is a net foreign borrower if its real interest rate without foreign borrowing is A) lower than B) not comparable to C) higher than D) equal to the world real interest rate. 1 1) Which of the following is the most liquid asset? A) a share of stock C) money B) land D) a government bond 12) Starting at full employment, a business cycle can be described by the following sequence: equilibrium, equilibrium. A) below full-employment; full-employment; below full- employment B) above full-employment; below full-employment; full- employment C) full-employment; below full-employment; above full- employment D) below full-employment; full-employment; above full- employment 2 1 3) Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will A) decrease by $8 million. B) decrease by $500,000. C) increase by $8 million. D) increase by $500,000. 14) A bank creates money by A) buying bonds from the Reserve Bank. B) lending its excess reserves. C) purchasing currency from the Reserve Bank. D) printing more cheeses. 1 5) A decrease in the money wage rate increases the full employment quantity of labor increases B) only the Ass; the ASS and the LASS A) the ASS and the LASS; only the ASS C) only the LASS; the ASS and the LASS D) the ASS and the LASS; only the LASS and an increase in 16) Suppose the current account of a country is in balance and the official settlements account equals O. A new transaction occurs so that the current account is now in surplus, but the official settlements account does not change. From this we know that A) the balance of trade is now in surplus. B) the government is running a budget deficit. C) the government must make official reserve transactions. D) the capital and financial account is now in deficit. 17) People know that the inflation rate will increase from 3 percent to 5 percent. As a result A) the nominal interest rate rises by 2 percentage points. B) the real interest rate rises by 2 percentage points. C) the nominal interest rate is constant. D) the nominal interest rate falls by 2 percentage points. 8) A firm in will engage in to try to earn an economic profit. A) perfect competition; price wars B) perfect competition; advertising C) monopolistic competition; product differentiation D) monopolistic competition; price wars 19) Over time in a growing economy, the long-run aggregate supply curve will A) shift leftward. B) become horizontal at the long-run potential price level. C) become increasingly steep. D) shift rightward. 20) In 2011, Armenia had a real GAP of approximately 54. 21 billion and a population of 2. 98 million. In 201 2, real GAP was $4. 9 billion and population was 2. 7 million. Armenian real GAP per person in 201 2 was A) $1 ,545 B) $380 C) $1 32 D) $1,413 3 21) The key aim of monetary policy is to A) maintain price stability. B) change tax rates to boost investment. C) change government spending to spur in innovation. D) change tax rates to boost saving. 22) According to social interest theory, A) regulation helps markets achieve efficiency B) price regulations are unconstitutional C) unregulated firms try to avoid creating deadweight loss D) monopoly practices last forever 23) The velocity of circulation is A) constant. B) the changes in the purchasing power of money over a given time period. C) the rate of change of the GAP deflator. D) the average number oftentimes a dollar of money is used in a year to buy goods and services that make up GAP. 24) The quantity theory of money predicts that in the a 10 per cent increase in the quantity Of money leads to a 10 per cent increase in A) long run; velocity B) long run; real GAP C) long run; the price level D) short run; velocity 25) If the ARAB sells Australian government securities, A) the Australian Treasury gains some revenue. B) the cash rate rises. C) bank reserves increase. D) None of the above answers is correct. 26) Handy is a large South Korean company that produces finished steel products. Handy plans to buy raw steel from Australia. As a result, the A) demand Cleave for Australian dollars shifts leftward. B) demand curve for South Korean won shifts rightward. C) demand curve for Australian dollars shifts rightward. D) demand curve for South Korean won shifts leftward. 27) The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. What happens in the short run? A) The firms decrease production. B) Some of the existing firms shut down. C) The firms increase production. D) Firms will enter the market. 4 28) If the exchange rate between the Australian dollar and Japanese yen is below the equilibrium exchange rate, there will be a dollars, and the exchange rate will A) shortage; rise to the equilibrium level B) surplus; rise to the equilibrium level C) surplus; fall to the equilibrium level of Australian D) shortage; change only when the supply curve shifts leftward 29) Workers who pursue an education directly increase their A) financial capital. B) saving. D) human capital. C) physical capital. 0) Diminishing marginal returns occurs when A) a variable unit is increased and its marginal product falls. B) all inputs are increased and output increases by a smaller proportion. C) all inputs are increased and output decreases. D) a variable input is increased and output decreases. 31 ) If a countrys central bank does not intervene in the foreign exchange market, the country has A) a crawling peg exchange rate policy. B) a fixed exchange rate policy. C) a flexible exchange rate policy. D) no exchange rate policy. 32) The Reserve Bank of Australia A) sells Australian dollars to China in an attempt to depreciate the Australian alular. B) has no influence on the exchange rate. C) allows a flexible exchange rate, though their actions can impact on the exchange rate. D) alternates between a flexible, fixed and crawling peg exchange rate policy depending on economic conditions. 33) If the real interest rate is below the equilibrium real interest rate, A) a shortage Of Of alienable funds will cause the real interest rate to rise. B) lenders will be unable to find borrowers Willing to borrow all of the available funds and the supply of alienable funds curve will shift leftward. C) borrowers will be unable to borrow all of the funds they want to borrow ND the demand for alienable funds curve will shift leftward. D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for alienable funds curve will shift rightward. 34) Suppose a country is producing $20 million of real GAP. If the economy grows at 10 percent per year, approximately how many years will to take for real GAP to grow to $80 million? B) 14 A) 30 35) If the Reserve Bank wants to depreciate the Australian dollar against the British pound, it will B) sell Australian dollars A) decrease the money supply C) sell foreign exchange D) sell British pounds 5 6) In the global alienable funds market, A) funds flow into countries with the highest risk-adjusted interest rates and out of countries with the lowest risk-adjusted interest rates. B) when funds leave a country, a shortage of funds lowers the real interest rate. C) when funds enter a country, a surplus of funds raises the real interest rate. D) funds flow into countries with the lowest risk-adjusted interest rates and out of countries with the highest risk-adjusted interest rates. 37) Ticket scalpers at the FALL grand final last year charged prices high above the printed ticket price. This observation is evidence Of A) a surplus at printed ticket prices. B) the grand final not being televised. C) the grand final getting too much television exposure. D) a shortage at printed ticket prices. 38) As the real wage rate increases, the A) supply of labor curve shifts leftward. B) quantity of labor supplied increases. C) supply of labor curve shifts rightward. D) quantity of labor supplied increases and the supply of labor shifts rightward. 39) When the ARAB increases the cash rate, the Australian interest rate differential B) rises; appreciates A) rises; depreciates C) falls; depreciates D) falls; appreciates ND the Australian exchange rate 40) To pay for a current account deficit, a country can A) borrow money from abroad. B) increase official reserves to cover the shortfall. C) lend money abroad. D) transfer money from the capital account to the reserve assets account. 41) Fifth price level in the U. S. Is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rand per dollar, then the real exchange rate is A) 1. 4 South African goods per U. S. Good. B) 8. 4 South African goods per U. S. Good. D) 6 South African goods per U. S. Good. C) 9. 8 South African goods per U. S. Good. 2) If Chinas government runs a budget surplus and there is no Richard- Barron effect, there will be in the supply of alienable funds, private . B) an increase; decreases; increases saving 6 and investment A) an increase; increases; increases C) a decrease; decrease; increases D) a decrease; Increases; Increases 43) For a commercial bank, the term reserves refers to A) the profit that the bank retains at the end of the year. B) a bankers concern (reservation) in making loans to an individual without a job. C) the cash in its vaults and its deposits at the central bank. D) the net interest that it earns on loans. 4) people expect their incomes will decrease next year. As a result, the will shift .