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ECO 372 Week 5 Final Exam (2017 Newest Version)
ECO 372 Week 5 Final Exam (2017 Newest Version)
Principles of Macroeconomics
The Latest Version A+ Study Guide
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examination/
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1
There is an increase in human capital when _____.
Susie puts in more than 8 hours of work at her workplace every day
2
In the long run, a higher saving rate:
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:
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.
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, _____.
people will want to hold more money than is supplied by the central bank
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:
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 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?
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:
16
The natural rate of unemployment in a country is 4 percent. This implies that:
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?
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:
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.
21
Scarcity occurs because of:
overutilization of labor.
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
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:
25
A higher interest rate in a country:
lowers saving in the country and decreases the quantity of loanable funds supplied.
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.
$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?
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.
Italians are buying more foreign assets than foreigners are buying Italian assets.
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:
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.