ECO 372 FINAL EXAM
1) ECO 372 FINAL EXAM The
largest source of householdincome in the U.S. is obtained from
A. stock dividends
B. wages and salaries
C. interest earnings
D. rental income
2) The market where business sellgoods and services to households and the government is called the
2) The market where business sellgoods and services to households and the government is called the
A. goods market
B. factor market
C. capital market
D. money market
3) Real gross domestic product
isbest defined as
A. the market value of intermediate
goods and services produced in an economy, including exports
B. all goods and services produced
in an economy, stated in the prices of a given year and multiplied by quantity
C. the market value of all final
goods and services produced in an economy, stated in the prices of a given year
D. the market value of goods and
services produced in an economy, stated in current-year prices
4) Underemployment includes people
A. who work
"off-the-books" to avoid tax liabilities
B. who are working part time, or not
using all their skills at a full-time job
C. who are tired of looking for a
job, so they quit looking, but still want one
D. whose skills are not in demand
anymore
5) The Bureau of Economic Analysisis
responsible for which of the following?
A. Setting interest rates
B. Managing the money supply
C. Calculating U.S. gross domestic
product]
D. Paying unemployment benefits
6) The Federal Reserve provideswhich
of the following data?
A. Federal funds rate
B. Stock price of GE
C. Bond yields of corporations
D. Debt to GDP of Ireland
7) Consider if the
governmentinstituted a 10 percent income tax surcharge. In terms of the AS/AD
model, thischange should have
A. shifted the AD curve to the left
B. shifted the AD curve to the right
C. made the AD curve flatter
D. made the AD curve steeper
8) If the depreciation of acountry's
currency increases its aggregate expenditures by 20, the AD curvewill
A. shift right by more than 20
B. shift right by less than 20
C. shift right by exactly 20
D. not shift at all
ECO 372 Final Exam
9) Aggregate demand
managementpolicies are designed most directly to
A. minimize unemployment
B. minimize inflation
C. control the aggregate level of
spending in the economy
D. prevent budget deficits or
surpluses
10) Suppose that consumer spendingis
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/ADmodel?
A. An increase in government
spending
B. An increase in taxes
C. A reduction in government
spending
D. No change in taxes or government
spending
11) According to Keynes, market
economies
A. never experience significant
declines in aggregate demand
B. quickly recover after they
experience a significant decline in aggregate demand
C. may recover slowly after they
experience a significant decline in aggregate demand
D. are constantly experiencing
significant declines in aggregate demand
12) The laissez-faire policy
prescription to eliminate unemployment was to
A. eliminate labor unions and
government policies that hold real wages too high
B. strengthen unions and government
regulations protecting unions and workers
C. increase real wages so that
people are encouraged to work
D. have government guarantee jobs
for everyone
ECO 372 ECO372 Final Exam
13) In the AS/AD model, an
expansionary monetary policy has the greatest effect on the price level when it
A. increases both nominal and real
income
B. increases real income but not
nominal income
C. increases nominal income but not
real income
D. doesn't increase real or nominal
income
14) The Federal funds rate
A. is always slightly higher than
the discount rate
B. can never be close to zero
C. may sometimes have to be targeted
at zero
D. is an intermediate target
15) What tool of monetary policy
will the Federal Reserve use to increase the federal funds rate from 1% to
1.25%?
A. Open-market operations
B. The discount rate
C. A change in reserve requirements
D. Margin requirements
ECO372 Final Exam
16) If the Federal Reserve increases the required reserves,
financial institutions will likely lend out
A. more than before, increasing the
money supply
B. less than before, decreasing the
money supply
C. more than before, decreasing the
money supply
D. less than before, increasing the
money supply
17) 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 should
A. reduce the discount rate by 3
percentage points
B. reduce the discount rate by 10
percentage points
C. raise the discount rate by 3
percentage points
D. raise the discount rate by 10
percentage points
18) If the Federal Reserve reduced
its reserve requirement from 6.5 percent to 5 percent. This policy would most
likely
A. increase both the money
multiplier and the money supply
B. increase the money multiplier but
decrease the money supply
C. decrease the money multiplier but
increase the money supply
D. decrease both the money
multiplier and the money supply
19) A country can have a trade
deficit as long as it can
A. purchase foreign assets
B. make loans to other countries
C. borrow from or sell assets to
foreigners
D. produce more than it consumes.
20) A weaker dollar
A. raises inflation and contracts
the economy.
B. reduces inflation and contracts
the economy
C. raises inflation and expands the
economy
D. reduces inflation and expands the
economy
21) In the short run, a trade
deficit allows more consumption, but in the long run, a trade deficit is a
problem because
A. the country eventually will
consume more and produce less
B. the country eventually will sell
all its financial assets to foreigners
C. the domestic currency will
appreciate
D. the country eventually has to
produce more than it consumes in order to pay foreigners their profits
22) Considering an economy with a
current trade deficit and considering only the direct effect on income, an
expansionary monetary policy tends to
A. decrease the exchange rate and
increase the trade deficit
B. increase the exchange rate and
increase the trade deficit
C. decrease the exchange rate and
decrease the trade deficit
D. increase the exchange rate and
decrease the trade deficit
23) The balance of trade measures
the
A. difference between the value of
imports and exports
B. share of U.S. imports coming from
various regions of the world
C. share of U.S. exports going to
various regions of the world
D. exchange rate needed to make imports equal exports
24) 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
to
A. raise U.S. income, increase U.S.
imports, and increase the trade deficit
B. raise U.S. income, increase U.S.
imports, and lower the trade deficit
C. lower U.S. income, reduce U.S.
imports, and increase the trade deficit
D. lower U.S. income, reduce U.S.
imports, and lower the trade deficit
26) In considering the net effect of
expansionary fiscal policy on the trade deficit, the
A. income effect offsets the price
effect
B. price effect offsets the income
effect
C. income and price effects work in
the same direction, so the trade deficit is decreased
D. income and price effects work in
the same direction, so the trade deficit is increased
27) If U.S. interest rates fall
relative to Japanese interest rates and Japanese inflation falls relative to
U.S. inflation, then the
A. dollar will lose value in terms
of yen
B. dollar will gain value in terms
of yen
D. change in the dollar's value
cannot be determined
28) Expansionary monetary policy
tends to
A. lower the U.S. interest rate and
increase the U.S. exchange rate
B. lower the U.S. interest rate and
decrease the U.S. exchange rate
C. increase the U.S. interest rate
and decrease the U.S. exchange rate
D. increase the U.S. interest rate
and increase the U.S. exchange rate
29) The U.S. has limits on Chinese
textile imports. Such limits are an example of
A. a tariff
B. a quota
C. a regulatory trade restriction
D. an embargo
30) Duties imposed by the U.S.
government on imported Chinese frozen and canned shrimp are an example of
A. tariffs
B. quotas
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