Macroeconomics Quiz
SuperClass1. Suppose there is a policy mix of expansionary monetary policy and expansionary fiscal policy. This combination of policies must cause:
| a.
| an increase in the interest rate (i)
|
| b.
| a reduction in i
|
| c.
| an increase in output (Y)
|
| d.
| a reduction in Y
|
2. Suppose the consumption equation is represented by the following: C = 100 + .75(Y-T). The multiplier in this economy is ________.
| a.
| 0.25
|
| b.
| 2
|
| c.
| 4
|
| d.
| 1.33
|
3. Suppose the public only hold currency (i.e. there are no banks). The demand for money is given by
Money demand = $Y(0.4 - i)
The nominal income is $100 and interest rate is held fixed by the central bank at 10% (or 0.1). Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will require the central bank to increase the supply of money from ________ to ________ .
| a.
| 100; 125
|
| b.
| 300; 375
|
| c.
| 30; 37.5
|
| d.
| 40; 50
|
4. Use the following information to answer the question below.
C = 1000 + .8(Y-T)
I = 800
G = 1800
T = 1000
The equilibrium level of GDP for the above economy equals:
| a.
| 10000
|
| b.
| 14000
|
| c.
| 16000
|
| d.
| 20000
|
5. Suppose a bond offers to pay $1000 in one year and currently sells for $900. Given this information, we know that the interest rate on the bond is:
| a.
| 9%.
|
| b.
| 10%.
|
| c.
| 11.1%
|
| d.
| 90%
|
| e.
| 110%
|
6. Suppose the economy is currently operating on both the LM curve and the IS curve. Given this information, we know that:
| a.
| the goods market is in equilibrium
|
| b.
| the bond market is in equilibrium
|
| c.
| the money market is in equilibrium
|
| d.
| financial markets are in equilibrium
|
| e.
| all of the above
|
7. The four components of national income are
| A
| consumption spending, savings, government purchases, net exports.
|
| B
| consumption spending, investment spending, government purchases, gross exports.
|
| C
| consumption spending, investment spending, tax revenue, net exports.
|
| D
| consumption spending, investment spending, government purchases, net exports.
|
8. When the central bank controls the interest rate, the aggregate demand (AD) curve is downward sloping because:
a. a reduction in the money supply (M) will cause an increase in the interest rate, a reduction in investment, and a reduction in output.
b. a reduction in the aggregate price level (P) will cause the central bank to reduce the interest rate and thus increase output.
c. a reduction in P will cause an increase in the real wage, a reduction in employment, and a reduction in output.
d. as P increases, goods and services become relatively more expensive and individuals respond by reducing the quantity demanded of goods and services.
9. Suppose there is a reduction in the price of oil. This change in the price of oil will cause which of the following in the short run?
| a.
| an increase in output
|
| b.
| a reduction in the price level
|
| c.
| a reduction in the interest rate
|
| d.
| all of the above
|
| e.
| none of the above
|
10. A reduction in the minimum wage will tend to cause which of the following?
| A
| an upward shift in the wage setting curve
|
| B
| a downward shift in the wage setting curve
|
| C
| an upward shift in the price setting curve
|
| D
| a downward shift in the price setting curve
|
| d
| none of the above |
- 8 years ago
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