ECO/372

Principles of Macroeconomics
The Latest Version A+ Study Guide

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ECO 372 Final Examination Link:

https://uopcourses.com/sd_product/eco-372-week-5-final-
examination/

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1
There is an increase in human capital when _____.

Samantha receives training in quality management after joining a new firm

Shiroh persuades the management of her company to offer more perks to

employees

Sue rents a laser printer to teach her employees how to fix it

Susie puts in more than 8 hours of work at her workplace every day

2
In the long run, a higher saving rate:

does not lead to a higher level of income because of deterioration in labor

productivity.

 always leads to a higher level of productivity because of increasing returns to

scale.

always leads to a higher growth rate of output because of improvement in the stock
of human capital.

does not always lead to a higher growth rate of output because of diminishing
returns to capital.

3
The Marions purchased a Persian rug worth $5,000 from an Iranian textile mill. Everything
else remaining unchanged, this will:

increase the gross domestic product of the domestic country by $5,000.

decrease the consumption expenditure in the domestic country by $5,000.

decrease the net imports of the domestic country by $5,000.

reduce the net exports of the domestic country by $5,000.

4
Suppose the net capital outflow from Zenovia is negative. This implies that:

the citizens of Zenovia are investing more in foreign assets than foreigners are
investing in assets in Zenovia.

the real interest rate in foreign countries is higher than in Zenovia.

foreigners are not interested in buying assets in Zenovia.

the real interest rate in Zenovia is high.

 5
The exhibit given below shows the short-run aggregate demand and supply curves in an
economy, AD1 and AS1, and the long-run aggregate supply curve, LRAS. The economy was
initially in equilibrium when there was a decrease in aggregate demand, causing a shift of the

aggregate demand curve from AD1 to AD2. Which of the following is true in this case?

The economy will move from point D to point A in the short run and then to point C
in the long run.

The economy will move from point B to point A in the short run and then to point C
in the long run.

The economy will move from point C to point B in the short run and then eventually
to point A.

The economy will move from point D to point C in the long run.

6
If the price level in an economy is 120 and the equilibrium price level is 100, _____.

the supply of money is likely to exceed the demand for money

 people will want to hold more money than is supplied by the central bank

the purchasing power of money will increase

the demand for money curve will shift to the left

7
Keynesian economists believe that when an economy is in a recession, the government
should:

increase the money supply in the economy so that interest rates decline, reducing
the cost of borrowing to finance new investment projects.

decrease tax rates rather than increase government spending because households
always view such tax cuts as permanent and increase their current consumption.

increase its purchases rather than decrease taxes because households save a part
of the increase in their income as a result of tax cuts.

increase the money supply in the economy so that an excess supply of money can
induce households to increase their consumption expenditure.

8
The buyers and sellers in the country of Perylia use corn as a medium of exchange. This
means that:

Perylia uses commodity money.

Perylia uses fiat money.

corn cannot be used as a store of value or as a unit of account in Perylia.

corn can be used as a store of value but not as a unit of account in Perylia.
 9
After retirement, Molly deposits $500,000 in a local bank in Merrina. At an interest rate of 4
percent, she will receive approximately _____ after 3 years.

$662,345

$750,000

$562,432

$608,326

10
The Phillips curve shows:

the positive relationship between the price level and aggregate supply.

the positive relationship between the interest rate and the supply of money.

the negative relationship between inflation and unemployment.

the negative relationship between the interest rate and the demand for money.

11
A decrease in the tax rates in an economy will cause a:

rightward shift of the aggregate demand curve if the crowding-out effect is larger
than the size of the tax multiplier.

leftward shift of the aggregate demand curve if the crowding-out effect is larger
than the size of the tax multiplier.

rightward shift of the aggregate demand curve if the crowding-out effect is equal to
the size of the tax multiplier.

 leftward shift of the aggregate demand curve if the crowding-out effect is smaller
than the size of the tax multiplier.

12
Which of the following is true according to the circular-flow diagram?

Households receive wages, rent, and profit from firms.

Firms receive income from households.

Firms receive wages, rent, and profit from the government.

Households receive revenue from the government.

13
In the country of Platonia, firms make the economic decisions of what to produce, how to
produce, and for whom to produce. Households decide where to work and how to spend their
income. Based on this information, it can be concluded that Platonia has a:

command economy.

mercantile economy.

market economy.

closed economy.

14
Ruth wants to calculate the present value of a sum of money that she will receive after the
demise of her grandparents. To calculate the present value, she should use the:

compounding method.

 discounting method.

expenditure method.

value-added method.

15
Amelia decides to buy 10 shares each of 5 companies instead of investing in 50 shares of a
big company. This is an attempt to:

discount the present value of the income from the stocks.

eliminate firm-specific risk though diversification.

discount the future value of the income from the stocks.

eliminate market risk though diversification.

16
The natural rate of unemployment in a country is 4 percent. This implies that:

4 percent of the labor force is unemployed at any given point of time.

the country has an unemployment rate of 4 percent in the short run.

the unemployment rate is constant at 4 percent over time.

the country has a 4 percent unemployment rate when the labor market is in
equilibrium.

17
 A recent survey showed the health benefits of cranberry juice for treating heart and other
respiratory disorders. The exhibit below shows that the initial demand curve for cranberry
juice is D1. Which of the following is likely to be a consequence of the publication of the

survey?

There will be a movement from point A to point B on D 1.

The demand curve will shift from D1 to D2.

There will be a movement from point A to point C on D1.

The demand curve will shift from D1 to D3.

18
Following the unexpected good performance of Leathex, all its employees were given a one-
time bonus. This consequently led to a rightward shift of the demand curve for shoes
manufactured by the company and a leftward shift of the demand curve for socks. This
shows that shoes are:

substitutes.

complementary goods.

inferior goods.

 normal goods.

19
Ephlon Inc., an Italian bike manufacturer, opens a factory in the United States. This is an
example of:

the catch-up effect.

a foreign portfolio investment.

the accumulation of human capital.

a foreign direct investment.

20
The circular-flow diagram shows that:

firms supply labor and other resources to the government in the factor market.

firms receive wages and profits from households in the products market.

households sell the factors of production to firms in the inputs market.

households supply resources to firms in the products market.

21
Scarcity occurs because of:

overutilization of labor.

the limited supply of resources.

the excess of quantity supplied over quantity demanded.



limited human needs and wants.

22
Suppose an economy is in long-run equilibrium. An increase in consumption expenditure will:

increase the price level in the long run but have no effect on real gross domestic
product.

shift the aggregate demand curve rightward and increase the real output in the long
run.

shift the short-run aggregate supply curve rightward and increase both the price
level and real output in the long run.

decrease both the price level and real gross domestic product in the long run.

23
If the real exchange rate in the United States is below the equilibrium level, _____.

the quantity of dollars supplied will exceed the quantity of dollars demanded

there will be a shortage of dollars

the value of dollar will fall

the demand for dollars by foreigners will balance the supply of dollars from
Americans

24
A difference between commodity money and fiat money is that:

 fiat money cannot be used as a unit of account.

commodity money cannot be used as a unit of account.

commodity money is used in a barter economy.

fiat money does not have any intrinsic value.

25
A higher interest rate in a country:

encourages citizens to buy foreign assets.

lowers saving in the country and decreases the quantity of loanable funds supplied.

makes domestic bonds less attractive to foreigners.

discourages investment and decreases the quantity of loanable funds demanded.

26
Martha lends $200 to a friend who promises to return it after a year. Instead of lending it to
her friend, Martha could have put the money in a bank where she could have earned an
interest rate of 2 percent per annum. Marthas opportunity cost of lending the money is
_____.

$204

$4

$2

$200
 27
The table given below shows the total amount of spending in the country of Mesodonia.

Mesodonias gross domestic product is:

$4,560 million.

$5,660 million.

$4,710 million.

$4,160 million.

28
Jack is an out-of-work sculptor. He has been looking for a job for the last two years. Unable
to find any, he has given up his job search. Which of the following is true in this case?

This is an example of frictional unemployment.

He is a discouraged worker and will not be included in the calculation of the

unemployment rate.

This is an example of structural unemployment.

He is a part of the unemployed labor force.

 29
The country of Merilya exported goods and services worth $1.2 million and imported goods
and services worth $2.7 million. The net exports of the country was _____.

$2 million, and it had a trade surplus

$1.5 million, and it had a trade deficit

$3.9 million, and it had a trade surplus

$3.9 million, and it had a trade deficit

30
Suppose the net foreign investment in Italy is positive. This implies that:

foreign direct investment in Italy is higher than foreign portfolio investment in the
country.

foreigners are buying relatively more Italian assets.

Italians are buying more foreign assets than foreigners are buying Italian assets.

Italy is experiencing a net capital inflow.

31
Suppose the Fed purchases government bonds through open-market operations. All other
things remaining equal, this is likely to:

decrease the price level and increase the real wealth of consumers.

decrease the price level and make domestic goods less expensive relative to
foreign goods.

 increase the price level and eventually decrease the interest rate and investment
spending.

increase the price level and eventually decrease the demand for money as well as
goods and services.

32
A rise in the price of bacon from $14 per pound to $16 per pound will reduce the purchasing
power of the dollar by:

0.55 pounds of bacons.

0.06 pounds of bacon.

5 pounds of bacon.

2 pounds of bacon.

33
Suppose the central bank of a country undertakes an expansionary monetary policy. Which
of the following is most likely to be the effect of such a policy, all other things remaining
unchanged?

An increase in the price level that reduces the real value of households money
holdings and stimulates consumer spending

An increase in the price level that stimulates spending on net exports and
increases the demand for money

A decrease in the price level that reduces the amount of money that people want to
hold and decreases the interest rate.

A decrease in the price level that reduces the interest rate and lowers the real
value of the domestic currency foreign-exchange market.
 34
As more capital is used in the production process, the amount of other inputs being fixed, the
production function becomes:

flat because the extra output produced from an additional unit of capital decreases.

steep because the extra output produced from an additional unit of capital
decreases.

steep because the extra output produced from an additional unit of capital
increases.

flat because the extra output produced from an additional unit of capital increases.