AGEC 105 Test 3 Spring 2012

Transcription

1 AGEC 105 Test 3 Spring 2012 Name There is only ONE correct answer per multiple choice question. Please put your answer on the attached sheet. DO NOT RIP THE ANSWER SHEET FROM THE TEST. 1. are domestically produced goods that are sold in the markets of foreign countries. a. imports b. exports c. services d. tariff e. strategic good 2. in the production of a good or service means that a country can produce that good with relatively greater productive efficiency. a. comparative advantage b. absolute advantage c. competitive advantage d. trade e. world price 3. Macroeconomics deals with a. imperfectly competitive markets b. the long run adjustments to equilibrium in the economies c. a nation s economy as a whole d. individual units within the economy e. all of the above 4. If the reserve requirement in a fractional reserve banking system is 5 percent, what is the total change in the money supply from each $1,000 increase in new total reserves supplied by the FED in open-market operations (assuming all available funds have been utilized)? a. $1,000 b. $5,000 c. $15,000 d. $20,000 e. $9,500

2 5. Which of the following is not a function of money? a. a medium of exchange to end barter b. a unit of account used to quantify the economic value of goods and services c. a cheap way to store value d. a way to encourage barter e. none of the above they are all functions of money 6. The exchange rate is a. is the price of domestic currency in terms of a foreign currency b. can be determined in a market in which international investors trade c. can be fixed by a government d. is a major determinant of imports and exports e. all of the above 7 U.S. gross domestic product (GDP) is the market value of all the final goods a. produced domestically b. produced by domestic factors of production c. produced by all factors of production owned by U.S. companies d. consumed by U.S. consumers e. consumed by U.S. consumers and producers 8. Free trade based on comparative advantage is economically beneficial because a. it promotes efficient use of world resources b. it increases competition c. it provides consumers with a wider array of products d. increases net benefits in both countries e. all of the above 9. If I can produce 1 computer or 4 bicycles in a week and you can produce 2 computers or 10 bicycles in a week, then according to the comparative advantage principle, who should produce which products? Assume the economy wants both goods. a. I should produce computers and you bicycles b. I should produce bicycles and you computers c. We should both produce computers and bicycles d. Depends on opportunity costs that are not presented that is not enough information is given e. Since you can produce more of both in a week than I can, you should do the producing of computers and bicycles

3 10. Increasing oil prices may be an example of which type of inflation? a. demand pull b. supply drag c. producer price feed d. cost push e. demand drag 11. Why do economists use weights in developing the consumer price index (CPI)? a. to balance supply and demand b. to reflect the fact that people spend different amounts on different goods c. to ensure the index grows at the appropriate rate d. to compensate for seasonal changes e. to allow the index to be compared across nations 12. Which of the following is not a predecessor to crowding out? a. Government spending exceeds taxes b. US Treasury issues more government securities c. Interest rates fall d. Private capital available to finance investment expenditures is reduced e. None of the above 13. Use the following economy to answer the questions below. All numbers are in billions of dollars. C= (Y T); G = 240; I= 60: T= 200; Y FE = 960 a. What is the autonomous consumption? b. What is the marginal propensity to consume? c. What is the government deficit? 14. On Saturday April 21, CNN reported 177,000 women are no longer seeking work in the U.S. The U.S. unemployment rate will a. decrease as the number of people in the work force decreases b. decrease as the number of people who have found employment has increased c. increase as the women are unemployed d. increase because the number of people who have found employment increased e. will have no effect on the unemployment rate as the population has not changed

4 15. Aggregate supply is the total amount a. of labor supplied by all households b. of goods and services produced by the government c. of goods and services produced in an economy d. of products produced by a given industry e. of goods and services produced in the private sector 16. Which of your following purchases is not part of U.S. GDP this year? a. January rent payment to the private sector b. tuition paid to Texas A&M in January c. purchase of used text books in January to the private sector d. January electricity payment to the city of College Station, the public sector e. the meals you purchased on last Saturday s date 17. According to the video, In Plain English, which of the following is (are) not main responsibilities of the Fed? a. conducting monetary policy b. providing financial services c. supervising and regulating banks d. managing foreign exchange rate e. all are functions of the Fed 18. In response to the federal government passing a law in the 1970 s that all states must have a 55 mph speed limit to be eligible for federal highway funds, Montana passed the 55 mph speed limit but no fine was originally associated with the law. The Montana Highway Patrol (MHP) had the rights to ticket speeders but drivers did not slow down. This is an example of which characteristic of well-defined property rights being violated. a. exclusivity b. enforceability c. specificity d. transferability e. as the law was passed and the MHP could ticket drivers, all characteristics are well defined. 19. Keeping extra cash on hand to pay for potential repairs of your automobile is an example of the following reason to demand money a. Money Multiplier b. Reserve Requirement c. Transaction d. Speculative e. Precautionary

5 Given the following figure of economic growth in the U.S., answer questions 20 and What phase of the business cycle was the U.S. experiencing for most of the early and middle years of the 1980 s? a. expansion b. trough c. peak d. recession e. recessionary gap 21. Since 2007, Congress has passed at least three economic stimulus bills to pull the U.S. economy out of a recession. These actions would be consistent with what theory of business cycles? a. technological shocks b. exogenous shocks c. Keynesian theory d. political change e. monetary policy 22. California has imposed The Electronic Waste Recycling Fee which is a fee imposed by the state on new purchases of electronic products with viewable screens to help pay for the disposal and recycling of e-waste. This fee is an example of a. Coase Theorem b. positive externality c. negative externality d. Pigovian Tax e. public good

6 23. The Swedish municipality of Sandviken came up with a unique solution to rid its town of a biker gang. The municipality paid approximately $45,000 to the biker gang to voluntarily leave the municipality. Ignoring any political ramifications, this is an example of a. Coase Theorem b. positive externality c. negative externality d. Pigovian Tax e. public good 24. Both fiscal and monetary policies are useful for eliminating both inflationary and recessionary gaps. The use of expansionary policies to push (increase) aggregate demand will do the following: a. Increase real GDP b. Reduce general price level c. Increase general price level d. a and b e. a and c 25. The City of College Station has decided to implement a mosquito control program this spring because of the increased number of mosquitos. The City of Bryan does not implement such a program, but the number of mosquitos in Bryan decreases because of College Station s program. This is an example of a. free riding by Bryan citizens b. free riding by College Station citizens c. free riding by both citizens as the city is paying for the program d. public good because the program is funded by public funds e. social pressure on elected representatives 26. The main differences between public and private goods is a public good is one that is, whereas, a private good is a good that is. a. provided by the government; provided by the private market b. provided by the private market; provided by the government; c. nonexcludable and nonrival in consumption; excludable and rival in consumption d. excludable and rival in consumption; nonexcludable and nonrival in consumption e. characterized by the presence of free riders; characterized by the absence of free riders

7 27. Obama and congress are both attempting to decrease the unemployment rate to boost the economy. The Phillip curves suggests that a. in the long run unemployment decreases are associated with high levels of inflation b. in the short run decreases in unemployment will be accompanied by decreases in the inflation rate c. in the long run unemployment decreases are associated with low levels of inflation d. in the short run unemployment and the inflation rate are not related e. in the short run decreases in unemployment will be accompanied by increases in the inflation rate 28. Employees at TAMU have negotiated a 5 percent increase in wages for the next year. If the actual inflation is 4 percent over the next year, which of the following will occur? a. inflation will be 5 percent the following year b. the decrease in inflation is expected c. real wages for university employees will rise d. unemployment of university employees will fall e. real wages for university employees will decrease 29. Sugar sold to Betty Crocker division of General Mills is excluded from GDP because a. it is an intermediate good b. double counting would occur if it were included c. it is an input used to produce a final product d. all of the above e. none of the above it would be in GDP 30. Small increases in output are associated with very large increases in the price level in which area of the aggregate supply curve a. inelastic area b. downward sloping area c. depression or Keynesian area d. normal area e. classical 31. As a result of the war in Afghanistan, the population of Afghanistan as well as their capital stock was reduced. This can be illustrated by aggregate supply curve a. shifting outward b. becoming flatter c. shifting inward d. becoming more elastic e. should not affect aggregate supply but affects aggregate demand

8 Use the following table to answer questions Price Level (dollars) 3, ,900 3, ,000 3, ,150 3, ,250 3, ,400 Aggregate Quantity Demanded (billions dollars) Aggregate Quantity Supplied (billions dollars) 32. For the economy depicted in the above table, what is the equilibrium level of real output and the equilibrium price? a. $3,100 output and a price of 75 b. $3,250 output and a price of 110 c. $3,350 output and a price of 90 d. $3,400 output and a price of 75 e. $3,100 output and a price of If full employment occurs at $3,100 billion, then at the equilibrium from equestion 32 a. the economy is experiencing a recessionary gap of $150 billion b. the economy is experiencing a recessionary gap of $250 billion c. the economy is experiencing an inflationary gap of $150 billion d. the economy is experiencing an inflationary gap of $250 billion e. the economy is at full employment 34. If the economy moved from a price level of 75 in year 2010 to a price level of 90 in 2011, what is the inflation rate? a. 5% b. 10% c. 15% d. 20% e. 25% 35. An item that is intrinsically worthless, but is deemed money because it is backed by the government s word is called a. Federal Reserve notes b. treasury bills c. M1 money supply d. gold standard money e. fiat money

9 36. Most cities require building permits to be purchased before construction of new homes begins. The number of new building permits would be what type of indicator? a. leading b. coincident c. lagging d. contemporaneous e. simultaneous The following is a list of policies the Fed and U.S. government can undertake. Use this list to answer questions 37 and 38. Item Number Policy 1 Raising the personal tax rate 2 Decreasing the personal tax rate 3 Buying securities on the open market 4 Selling securities on the open market 5 Increasing the discount rate 6 Decreasing the discount rate 7 Increased National Defense Spending 8 Decreased National Defense Spending 9 Increase the reserve requirement 10 Decrease the reserve requirement 11 Increased U.S. govt. R&D spending at TAMU 12 Decreased U.S. govt. R&D spending at TAMU 37. Which item numbers correspond to expansionary monetary policies? a. 1, 2, 5 b. 2, 5, 10 c. 4, 6, 9 d. 2, 7, 12 e. 3, 6, Which item numbers correspond to contractionary fiscal policies? a. 1, 8, 12 b. 2, 7, 11 c. 4, 6, 9 d. 2, 7, 6 e. 4, 6, 10

10 39. If the money multiplier is 10 and the Fed increases total reserves by $1,000, assuming all loans are made, what is the increase in loans and reserve requirement in the economy? a. $10,000; $1,000 b. $1,000; $10,000 c. $11,000; $10,000 d. $9,000; $1,000 e. Need to know the number of banks in the economy 40. During an expansionary period in the business cycle, what is usually happening to the economy? a. GDP is increasing b. Unemployment rate is decreasing c. Percent capacity of unused capital is decreasing d. Inflation rate is decreasing e. a, b, c above 41. The exchange rate between the Iceland Krona and the U.S. dollar was 900 Krona / dollar in In 2010, the exchange rate was 1200 Krona / dollar. Which of the following is a current statement? a. A dollar in 2009 could buy more Icelandic goods than a dollar in 2010 b. A dollar in 2009 could buy less Icelandic goods than a dollar in 2010 c. A dollar in 2009 could buy the same amount of Icelandic goods than a dollar in 2010 d. Real GDP has increased between 2009 and 2010 e. Both b and d are correct

11 There are 41 questions, only 40 will be graded. Please pick the one question you do not want graded by placing XXX in the answer line. If you do not pick a question to not be graded, question 1 will not be graded on your exam. Test Version 1 Name Question Answer Question Answer a. 34 b. c Grade

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