Unit 1: Basic Economic Concepts
Unit 2: Economic Indicators and the Business Cycle
Unit 3: National Income and Price Determination
Unit 4: Financial Sector
Unit 5: Long-Run Consequences of Stabilization Policies
Unit 6: Open Economy—International Trade and Finance
100
All societies face a trade-off for every decision for which of the following reasons?
A - A decision entails zero opportunity cost.
B - Resources are scarce.
C - Some resources are always unemployed.
D - Resources have no alternative uses.
E - Resources are not allocated efficiently.
What is....B?
100
GDP does NOT account for which of the following?
A - The value added by all firms in the economy
B- The depletion of natural resources
C - Wages, rent, profit, and interest payments
D - The value of final goods and services produced domestically
E - Imports from foreign countries
What is....B?
100
Which of the following is a reason why the aggregate demand curve is downward sloping?
A - A higher price level decreases savings.
B - A higher price level decreases interest rates.
C - A higher price level increases exports.
D - A higher price level decreases imports.
E - A higher price level decreases real wealth.
What is...E?
100
Sam pays monthly installments on a five-year fixed interest rate auto loan. If the expected inflation rate increases, which of the following will happen?
Sam will pay __________ real interest rate. (higher or lower)
what is....lower rir?
100
An increase in government spending financed by borrowing will result in which of the following?
A - Private savings will decrease in the short run.
B - The real interest rate will decrease in the short run.
C - Interest-sensitive private sector spending will increase in the short run.
D - Potential real output will increase in the long run.
E - The rate of physical capital accumulation will decrease in the long run.
What's E?
100
What is one potential cause of the value of the USD increasing?
RIR increase, GDP increase, inflation decrease in the US
200
Assume gasoline is sold in a competitive market, the equilibrium price is $50 per barrel, and the equilibrium quantity is 1000 barrels.
(a) Using the numerical values above, draw a correctly labeled graph of the gasoline market and show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
What is...graph?
200
What is the nation’s unemployment rate assuming it is in a recession?
A - 4%
B - 5%
C - 6%
D - 9%
E - 66.7%
What is...A?
200
The diagram below shows two points on the short-run aggregate supply curve.
The movement from point g to point h is best described as which of the following?
A - A decrease in full employment output
B - A decrease in aggregate demand
C - An increase in real output due to an increase in the price level
D - An increase in real output due to technological change
E - An increase in unemployment
What is...C?
200
What is the max amount of loans a new bank could make given the reserves?
What is...10k?
200
According to the quantity theory of money, if the money supply is $40 billion, real output is $100 billion, and the price level is 1.2, what is the velocity of money?
What is..3?
200
Properly draw the forex market for the japanese yen in terms of USD when the real interest rates of the US are higher relative to Japan's.
What is...see graph drawn by teacher...?
300
Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded?
A - An increase in consumers' income
B - An increase in the price of fish, a substitute good
C - An increase in the price of barbecue sauce, a complementary good
D - A decrease in the price of chicken
E - A decrease in the number of consumers of chicken
What is...D?
300
The table below shows the cost of the same representative basket of goods in the base year 2012 and in 2013, and the average weekly nominal wage rate in 2012 and 2013.
If 2012 is the base year, which of the following is true?
A - The inflation rate from 2012 to 2013 is 10%.
B - The CPI in year 2013 is 110.
C - The CPI in year 2013 is 120.
D - Based on the CPI, the average real weekly wage rate increased by 10% from 2012 to 2013.
E - Based on the CPI, the average real weekly wage rate decreased by 20% from 2012 to 2013
What is....C...?
300
An economy is currently in short-run equilibrium, and real output is below the full-employment level of output. Which of the following market adjustments is most likely to occur in the long run? (hint:SRAS)
What is... in the short run, wages decrease, SRAS shifts right?
300
A - $100, B - $102, C - $112, D - $1000, E - $1120
What is....E?
300
What can cause a movement from point X to point Y along the short-run Phillips curve (SRPC) that is shown in the graph above?
what is...Higher AD?
300
Assuming real income in the US increases while real income in South Africa stays the same, what will occur to the actual unemployment in South Africa in the short run? Give a reason why.
Decrease - due to higher income in the US, there will be more imports from South Africa into the US, thus increasing the AD of SA, lowering the U%
400
Assume an economy produces two goods, capital goods and consumer goods. If the production of capital goods increases in the current period, which of the following will occur for the current and future production possibilities curve (PPC) for consumer goods and capital goods?
A - A movement along the current PPC and a leftward shift of the future PPC
B - A movement along the current PPC and a rightward shift of the future PPC
C - A rightward shift of the current PPC and a leftward shift of the future PPC
D - A rightward shift of the current PPC and a rightward shift of the future PPC
E - A movement along the current PPC with no shift of the future PPC
What is...B?
400
The nation of Turboland produces only two goods, X and Y. The prices and final quantities produced of the two goods in 1993 and the base year of 1992 are shown in the table below.
What are the nominal and real GDP in 1993?
A - Nominal GDP is $90, Real GDP is $96
B - Nominal GDP is $74, Real GDP is $96
C - Nominal GDP is $70, Real GDP is $96
D - Nominal GDP is $96, Real GDP is $90
E - Nominal GDP is $96, Real GDP is $74
What is....D?
400
Which of the following statements best describes the concept of an automatic stabilizer?
A - It is nondiscretionary fiscal policy that mitigates business cycles by increasing aggregate demand during recessions and decreasing aggregate demand during expansions.
B - It is discretionary fiscal policy that increases government spending during recessions and decreases government spending during expansions.
C - It is a measure of the effect that a change in government spending and investment has on the gross domestic product.
D - It is a description of how total income is always equal to total expenditures as a measure of gross domestic product.
E- It is the process whereby surpluses lead to falling prices and shortages lead to rising prices to stabilize market equilibrium.
What is....A?
400
What specific monetary policy could have caused the shift the aggregate demand curve in the direction shown in the diagram above? Tools for both limited and ample reserves is an option.
What is....lower rates, buying bonds, lowering rr etc?
400
What is...SRPC will shift left because SRAS shifts right.
400
If country A has been experiencing a higher inflation rate than Country B over the past decade, which of the following is true?
A - A's currency will have appreciated relative to B's currency.
B- A's currency will have depreciated relative to B's currency.
C - A will have had lower nominal interest rates than B.
D - A will ahve had slower growth in the money supply than Beta
E - A's economy will have grown at a faster rate than Beta's
What is.....B?
500
The table shows that Home Nation can produce five autos or one hundred computers using all its available resources in a year. Foreign Nation can produce five autos or fifty computers using all its available resources in a year.
Based on the information provided above, which of the following are mutually beneficial terms of trade at which both Home and Foreign Nation will be willing to specialize and exchange?
A - 1 auto for 1 computer
B - 1 auto for 10 computers
C - 1 auto for 17 computers
D - 1 auto for 20 computers
E - 1 auto for 25 computers
What is....C?
500
The table above shows aggregate statistical data for Country X in 2018. Assume the GDP deflator is 160.
Calculate nominal GDP in 2018 --you may use income or spending approach.
What is...1600 million?
500
Hint: for Cii - simply add your maximum change in RGDP to the answer in part a
What is...1500, 0.6, 250, and 1750?
500
The loanable funds market in Country Z is in equilibrium.
(a) Draw a correctly labeled graph of the loanable funds market showing the equilibrium real interest rate and the equilibrium quantity of loanable funds.
(b) Assume household savings in Country Z increases. Will this cause a shortage or a surplus in the loanable funds market at the current equilibrium real interest rate - assuming the rate doesn't budge, but something else does?
What is a - labeled correctly, and b - surplus.
500
Draw the short and long run Philip's Curve for an economy experiencing output levels higher than the natural rate. Label the current economic state X. Be sure to label properly: (pi)1, u1, (pi)e, nru, SRPC, LRPC, and axes.
Next, draw what would occur in the long run, if no other policies are in place to fix this economic issue. Label with new (pi), u, and another line if applicable.
What is...see graph...x is farther left of the LRPC...then, because of eventual higher prices, the SRPC will shift right as inflation increases, thus increasing expected inflation.
500
Assume Country X has a cyclical unemployment rate of 4%, a balanced CFA, and that it trades with the USA. To try to fix this, the government of X uses expansionary fiscal policy. Draw a correctly labeled graph of the FOREX market for X's currency (lira) relative to the USD, and show the effect of change real interest rate and net exports on the supply of lira and the international value of the lira.
what is....*graph*? - must show that S has shifted left.