I need help for my ECON homework

Please submit JUST your answers, not a copy of the entire exam with the answers filled in. Failure to follow these instructions will result in an automatic 10 point deduction. A complete exam should contain answers for 75 multiple-choice questions, 2 short essays, and 1 long essay.

Formula list:

Slope= (y2-y1)/(x2-x1)

GDP= C + Ig + G + Xn

Xn= X – M

MPC + MPS = 1

Reserve ratio= (commercial bank’s required reserves)/(commercial bank’s checkable-deposit liabilities)

Excess reserves= actual reserves – required reserves

Sa + M + T = Ig + Xn + G

Current account + capital and financial account = 0

Multiple-choice questions

These questions are worth 2 points each.

1.       When we look at the whole economy or its major aggregates, our analysis would be at the level of

a. Microeconomics

b. Macroeconomics

c. Positive economics

d. Normative economics

2.       Sandra states that “there is a high correlation between consumption and income”. Arthur replies that the correlation occurs because “people consume too much of their income and don’t save enough”.

a. Both Sandra’s and Arthur’s statements are positive

b. Both Sandra’s and Arthur’s statements are normative

c. Sandra’s statement is positive and Arthur’s statement is normative

d. Sandra’s statement is normative and Arthur’s statement is positive

3.       Assume that a consumer can buy only two goods, A and B, and has an income of $100. The price of A is $10 and the price of B is $20. The maximum amount of A the consumer is able to purchase is

a. 5

b. 10

c. 20

d. 30

4.       Assume that a consumer can buy only two goods, A and B, and has an income of $100. The price of A is $10 and the price of B is $20. What is the slope of the budget line if A is measured horizontally and B is measured vertically?

a. -0.5

b. -1.0

c. -2.0

d. -4.0

5.       If the economy is producing a production alternative C, the opportunity cost of 60 more units of consumer goods is:

	A	B	C	D	E	F
C apital goods	100	95	85	70	50	0
Consumer goods	0	100	180	240	280	300

a. 5 units of capital goods

b. 10 units of capital goods

c. 15 units of capital goods

d. 20 units of capital goods

6.       Referring to the same table as question 5, the law of increasing opportunity costs is suggested by the fact that

a. Capital goods are relatively more scarce than consumer goods

b. Greater and greater quantities of consumer goods must be given up o get more capital goods

c. Smaller and smaller quantities of consumer goods must be given up to get more capital goods

d. The production possibilities curve will eventually shift outward as the economy expands

7.       Unemployment and productive inefficiency would best be represented on the following graph by

a. A

b. B

c. C

d. D

8.       There are two sets of x, y points on a straight line in a two-variable graph, with y on the vertical axis and x on the horizontal axis. If one set of points was (0,5) and the other set (5,20) the l inear equation for the line would be

a. Y = 5x

b. Y = 5 + 3x

c. Y = 5 + 15x

d. Y = 5 + 0.33x

9.       There is an inverse relationship between the independent and dependent variables in data sets

1	2	3	4
A	B	C	D	E	F	G	H
0	1	0	12	4	5	0	4
3	2	5	8	6	10	1	3
6	3	10	4	8	15	2	2
9	4	15	0	10	20	3	1

a. 1 and 4

b. 2 and 3

c. 1 and 3

d. 2 and 4

10.       If you know that the equation relating to consumption (C) to income (Y) is C = $7,500 + 0.2Y, then

a. Consumption is inversely related to income

b. Consumption is the independent variable and income is the dependent variable

c. If income is $15,000 then consumption is $10,500

d. If consumption is $30,000 then income is $10,000

11.       The income of a consumer decreases and the consumer’s demand for a particular good increases. It can be concluded that the good is

a. Normal

b. Inferior

c. A substitute

d. A complement

12.       If two products, A and B, are complements, then

a. An increase in the price of A will decrease the demand for B

b. An increase in the price of A will increase the demand for B

c. An increase in the price of A will have no significant effect on the price of B

d. A decrease in the price of A will decrease the demand for B

13.       Consider the following supply and demand schedules for bushels of corn.

Price	Quantity demanded	Quantity supplied
$20	395	200
22	375	250
24	350	290
26	320	320
28	280	345
30	235	365

The equilibrium price in this market is

a. $22

b. $24

c. $26

d. $28

14.       Referring to the same table as question 13, an increase in the cost of labor lowers the quantity supplied by 65 bushels at each price. The new equilibrium price would be

a. $22

b. $24

c. $26

d. $28

15.       An increase in demand and a decrease in supply will

a. Increase price and decrease the quantity exchanged

b. Decrease price and increase the quantity exchanged

c. Increase price and affect the quantity exchanged in an indeterminate way

d. Affect price in an indeterminate way and decrease the quantity exchanged

16.       Gross domestic product (GDP) is defined as

a. Personal consumption expenditures and gross private domestic investment

b. The sum of wage and salary compensation of employees, corporate profits, and interest income

c. The market value of final goods and services produced within a country in one year

d. The market value of all final and intermediate goods and services produced by the economy in one year

17.       To include the value of the parts used in producing the automobiles turned out during a year in gross domestic product for that year would be an example of

a. Including a nonmarket transaction

b. Including a nonproduction transaction

c. Including a noninvestment transaction

d. Multiple counting

18.       GDP in an economy is $3452 billion. Consumer expenditures are $2343 billion, government purchases are $865 billion, and gross investment is $379 billion. Net exports are

a. +$93 billion

b. +$123 billion

c. -$45 billion

d. -$135 billion

19.       In an economy, the total expenditure for a market basket of goods in year 1 (the base year) was $4000 billion. In year 2, the total expenditure for the same market basket of goods was $4500 billion. What was the GDP price index for the economy in year 2?

a. 0.88

b. 1.13

c. 188

d. 113

20.       A price index one year was 145, and the next year it was 167. What is the approximate percentage change in the price level from one year to the next as measured by that index?

a. 12%

b. 13%

c. 14%

d. 15%

21.       If the real output of an economy were to increase from $2000 billion to $2100 billion in one year, the rate of growth of real output during that year would be

a. 1%

b. 5%

c. 10%

d. 50%

22.       Which concept would be associated with sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime?

a. Increasing returns

b. Economies of scale

c. Growth accounting

d. Modern economic growth

23.       A supply factor in economic growth would be

a. An increase in the efficient use of resources

b. A decline in the rate of resource depletion

c. An improvement in the quality of labor

d. An increase in consumption spending

24.       Which is a demand factor in economic growth?

a. An increase in the purchasing power of the economy

b. An increase in the economy’s stock of capital goods

c. More natural resources

d. Technological progress

25.       Economists call the knowledge and skills that make a productive worker

a. The labor-force participation rate

b. Learning by doing

c. Human capital

d. Infrastructure

26.       Which is one of the four phases of a business cycle?

a. Inflation

b. Recession

c. Unemployment

d. Hyperinflation

27.       The full-employment unemployment rate in the economy has been achieved when

a. Frictional unemployment is zero

b. Structural unemployment is zero

c. Cyclical unemployment is zero

d. The natural rate of unemployment is zero

28.       Which has helped decrease the natural rate of unemployment in the United States since 1980?

a. A smaller proportion of young workers in the labor force

b. The increased size of benefits for the unemployed

c. Less competition in product and labor markets

d. More workers covered by unemployment programs

29.       If the Consumer Price Index was 110 in one year and 117 in the next year, thenthe rate of inflation from one year to the next was

a. 3.5%

b. 4.7%

c. 6.4%

d. 7.1%

30.       If the average level of nominal income in a nation is $21,000 and the price level index is 154, the average real income would be about

a. $12,546

b. $13,636

c. $15,299

d. $17,823

31.       An increase in wealth shifts the consumption schedule

a. Downward and the saving schedule upward

b. Upward and the saving schedule downward

c. Downward and the saving schedule downward

d. Upward and the saving schedule upward

32.       The slope of the consumption schedule or line for a given economy is the

a. Marginal propensity to consume

b. Average propensity to consume

c. Marginal propensity to save

d. Average propensity to save

33.       Higher real interest rates are likely to

a. Increase consumption and saving

b. Decrease consumption and saving

c. Decrease consumption and increase saving

d. Increase consumption and decrease saving

34.       Which would increase investment demand?

a. An increase in business taxes

b. An increase in planned inventories

c. A decrease in the rate of technological change

d. An increase in the cost of acquiring capital goods

35.       If there was a change in investment spending of $10 and the marginal propensity to save was 0.25, then real GDP would increase by

a. $10

b. $20

c. $25

d. $40

36.       If saving is greater than planned investment

a. Saving will tend to increase

b. Businesses will be motivated to increase their investment plus consumption

c. Real GDP will be greater than planned investment plus consumption

d. Aggregate expenditures will be greater than the real domestic output

Questions 37 and 38 are based on the following table for a private, closed economy. All figures are in billions of dollars.

Real Rate of Return	Investment	Consumption	GDP
10%	$0	$200	$200
8	50	250	300
6	100	300	400
4	150	350	500
2	200	400	600
0	250	450	700

37.       If the real rate of interest is 4%, then the equilibrium level of GDP will be

a. $300 billion

b. $400 billion

c. $500 billion

d. $600 billion

38.       An increase in the real interest rate by 4% will

a. Increase the equilibrium level of GDP by $200 billion

b. Decrease the equilibrium level of GDP by $200 billion

c. Decrease the equilibrium level of GDP by $100 billion

d. Increase the equilibrium level of GDP by $100 billion

39.       Compared with a closed economy, aggregate expenditures and GDP will

a. Increase when net exports are positive

b. Decrease when net exports are positive

c. Increase when net exports are negative

d. Decrease when net exports are zero

40.       Other things remaining constant, which would increase an economy’s real GDP and employment?

a. An increase in the exchange rate for foreign currencies

b. The imposition of tariffs on goods imported from abroad

c. An appreciation of the dollar relative to foreign currencies

d. An increase in the level of national income among the trading partners for this economy

41.       The aggregate demand curve is the relationship between the

a. Price level and what producers will supply

b. Price level and the real domestic output purchased

c. Price level and the real domestic output produced

d. Real domestic output purchased and the real domestic output produced

42.       The aggregate supply curve is the relationship between the

a. Price level and the real domestic output purchased

b. Price level and the real domestic output produced

c. Price level that producers are willing to accept and the price level purchasers are willing to pay

d. Real domestic output purchased and the real domestic output produced

43.       If at a particular level, real domestic output from producers is less than real domestic output desired by buyers, there will be a

a. Surplus and the price level will rise

b. Surplus and the price level will fall

c. Shortage and the price level will rise

d. Shortage and the price level will fall

Questions 44 and 45 refer to the following aggregated demand – aggregate supply schedule for a hypothetical economy.

Real domestic output demanded (in billions)	Price level	Real domestic output supplied (in billions)
$1500	175	$4500
2000	150	4000
2500	125	3500
3000	100	3000
3500	75	2500
4000	50	2000

44.       The equilibrium price level and quantity of real domestic output will be

a. 100 and $2500

b. 100 and $3000

c. 125 and $3500

d. 150 and $4000

45.       If the quantity of real domestic output demanded increased by $2000 at each price level, the new equilibrium price level and quantity of real domestic output would be

a. 175 and $4000

b. 150 and $4000

c. 125 and $3500

d. 100 and $3000

46.       Which combination of fiscal policies would be the most contractionary?

a. An increase in government spending and taxes

b. A decrease in government spending and taxes

c. An increase in government spending and a decrease in taxes

d. A decrease in government spending and an increase in taxes

Question 47 is based on the following table which shows the standardized budget deficit or surplus as a percentage of GDP over a five-year period.

Year	Deficit (-) Surplus (+)
1	-2.1%
2	-3.0
3	-1.5
4	+0.5
5	+1.0

47.       In which year was the fiscal policy expansionary?

a. Year 2

b. Year 3

c. Year 4

d. Year 5

48.       If the standardized budget shows a deficit of about $200 billion and the actual budget shows a deficit of about $250 billion over a several-year period, it can be concluded that there is a

a. Cyclical deficit

b. Recognition lag

c. Crowding-out effect

d. Political business cycle

49.       The public debt is the sum of all previous

a. Expenditures of the Federal government

b. Budget deficits of the Federal government

c. Budget deficits minus any budget surpluses of the Federal government

d. Budget surpluses less the current budget deficit of the Federal government

50.       A major reason that a public debt cannot bankrupt the Federal government is because the Federal government has

a. An annually balanced budget

b. The Social Security trust fund

c. The power to levy taxes

d. A strong military defense

51.       Which of the following would be excluded from M1 and other measures of the money supply?

a. Coins held by the public

b. Currency held by banks

c. Federal Reserve Notes held by the public

d. Checkable deposits of individuals at commercial banks

52.       Which constitutes the largest element in the M2 money supply?

a. Savings deposits

b. Small time deposits

c. Checkable deposits

d. Money market mutual funds held by individuals

53.       High rates of inflation in an economy will

a. Increase the purchasing power of money

b. Decrease the conversion of money to gold

c. Increase the use of money as a measure of value

d. Decrease the use of money as a medium of exchange

54.       The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily responsible for

a. Supervising the operation of banks to make sure they follow regulations and monitoring banks so they do not engage in fraud

b. Handling the Fed’s collection of checks and adjusting legal reserves among banks

c. Setting the Fed’s monetary policy and directing the buying and selling of government securities

d. Acting as the fiscal agent for the Federal government and issuing currency

55.       The Federal Reserve is responsible for

a. Supervising all banks and thrifts

b. Printing currency for banks and thrifts

c. Collecting Federal taxes from banks and thrifts

d. Holding the required reserves of banks and thrifts

56.       A commercial bank has actual reserves of $9000 and liabilities of $30,000, and the required reserve ratio is 20%. The excess reserves of the bank are

a. $3000

b. $6000

c. $7500

d. $9000

57.       Reserves that a commercial bank deposits at a Federal Reserve Bank are

a. An asset to the Federal Reserve Bank and a liability of the commercial bank

b. An asset of the commercial bank and a liability of the Federal Reserve Bank

c. Used as insurance funds for the Federal Deposit Insurance Corporation

d. Used as insurance for the National Credit Union Administration

58.       A bank that has a check drawn and collected against it will

a. Lose to the recipient bank both reserves and deposits

b. Gain from the recipient bank both reserves and deposits

c. Lose to the recipient bank reserves, but gain deposits

d. Gain for the recipient bank reserves, but lose deposits

59.       The commercial banking system, because of a recent change in the required reserve ratio from 20% to 30%, finds that it is $60 million short of reserve. If it is unable to obtain any additional reserves it must decrease the money supply by

a. $60 million

b. $180 million

c. $200 million

d. $300 million

60.       If the dollar amount of loans made in some period is less than the dollar amount of loans paid off, checkable deposits will

a. Expand and the money supply will increase

b. Expand and the money supply will decrease

c. Contract and the money supply will decrease

d. Contract and the money supply will increase

61.       An increase in the rate of interest would increase

a. The opportunity cost of holding money

b. The transactions demand for money

c. The asset demand for money

d. The prices of bonds

62.       The total quantity of money demanded is

a. Directly related to nominal GDP and the rate of interest

b. Directly related to nominal GDP and inversely related to the rate of interest

c. Inversely related to nominal GDP and directly related to the rate of interest

d. Inversely related to nominal GDP and the rate of interest

63.       Lowering the reserve ratio

a. Changes required reserves to excess reserves

b. Increases the amount of excess reserves banks must keep

c. Increases the discount rate

d. Decreases the discount rate

64.       When the Federal Reserve uses open-market operations to reduce the Federal funds rate several times over a year it is pursuing

a. An expansionary monetary policy

b. A restrictive monetary policy

c. A prime interest rate policy

d. A discretionary fiscal policy

65.       The economy is experiencing inflation and the Federal Reserve decides to pursue a restrictive monetary policy. Which set of actions by the Fed would be most consistent with this policy?

a. Buying government securities and lowering the discount rate

b. Buying government securities and lowering the reserve ratio

c. Selling government securities and raising the discount rate

d. Selling government securities and lowering the discount rate

Questions 66 through 68 refer to the following tables.

Nepal Production Possibilities Table
	Production alternatives
Product	A	B	C	D	E	F
Yak fat	0	4	8	12	16	20
Camel hides	40	32	24	16	8	0

Kashmir Production Possibilities Table
	Production alternatives
Product	A	B	C	D	E	F
Yak fat	0	3	6	9	12	15
Camel hides	60	48	36	24	12	0

66.       The data in the table shows that production in

a. Both Nepal and Kashmir are subject to increasing opportunity costs

b. Both Nepal and Kashmir are subject to constant opportunity costs

c. Nepal is subject to increasing opportunity costs and Kashmir to constant opportunity costs

d. Kashmir is subject to increasing opportunity costs and Nepal to constant opportunity costs

67.       If Nepal and Kashmir engage in trade, the terms of trade will be

a. Between 2 and 4 camel hides for 1 unit of yak fat

b. Between 1/3 and 1/2 units of yak fat for 1 camel hide

c. Between 3 and 4 unites of yak fat for 1 camel hide

d. Between 2 and 4 unites of yak fat for 1 camel hide

68.       Assume that prior to specialization and trade Nepal and Kashmir both choose production possibility C. Now if each specializes according to its comparative advantage, the resulting gains from specialization and trade will be

a. 6 units of yak fat

b. 8 units of yak fat

c. 6 units of yak fat and 8 camel hides

d. 8 units of yak fat and 6 camel hides

69.       Tariffs and quotas are costly to consumers because

a. The price of the imported good rises

b. The supply of the imported good increases

c. Import competition increases for domestically produced goods

d. Consumers shift purchases away from domestically produced goods

70.       Which is a likely result of imposing tariffs to increase domestic employment?

a. A short-run increase in domestic employment in import industries

b. A decrease in the tariff rates of foreign nations

c. A long-run reallocation of workers from export industries to protected domestic industries

d. A decrease in consumer prices

71.       Which of the following would be a credit in the current account?

a. U.S. imports of goods

b. U.S. exports of services

c. U.S. purchases of assets abroad

d. U.S. interest payments for foreign capital invested in the United States

72.       In a flexible- or floating-exchange-rate system, when the U.S. dollar price of a British pound rises, this means that the dollar has

a. Appreciated relative to the pound and the pound has appreciated relative to the dollar

b. Appreciated relative to the pound and the pound has depreciated relative to the dollar

c. Depreciated relative to the pound and the pound has appreciated relative to the dollar

d. Depreciated relative to the pound and the pound has depreciated relative to the dollar

73.       Under a flexible-exchange-rate-system, a nation may be able to correct or eliminate a persistent (long-term) balance-of-payments deficit by

a. Lowering the barriers on imported goods

b. Reducing the international value of its currency

c. Expanding its national income

d. Reducing its official reserves

74.       The use of exchange controls to eliminate a nation’s balance-of-payments deficit results in decreasing the nation’s

a. Imports

b. Exports

c. Price level

d. Income

75.       A system of managed floating exchange rates

a. Allows nations to stabilize exchange rates in the short term

b. Requires nations to stabilize exchange rates in the long term

c. Entails stable exchange rates in both the short and long term

d. Fixes exchange rates at market levels

Short essay questions

Please answer two of the three short essay questions below. Essays should be in sentence/paragraph form. Make sure you answer all parts of the questions you chose, and feel free to add any information to your answer which you feel may improve your argument. Your essay answers will be worth 25 points each.

76. What is nominal GDP, what is real GDP, and what is GDP per capita? How do they differ? How can these numbers be used to tell whether an economy is growing or shrinking? Give an example of a historically poor country and a historically rich country, and state whether you suspect that their economy is growing or shrinking (you do not have to be absolutely correct on this) and why. Can we assume that all poor countries grow fast? What factors (social, political, economic, etc) may prevent a poor country from growing economically? Should we assume that countries with lower levels of GDP per person will automatically be able to catch up with living standards in rich countries?

77. What is the Federal Reserve Beige Book? List one area of current economic strength, and one area of current economic weakness (either from the district you studied or from the nation as a whole). How do these areas fit in with the state of the current economy? What actions can the Federal Reserve and Federal Open Market Committee take to influence the economy, and what actions have these groups taken recently? In the Fed’s opinion, how has the economy been performing, and what is the prognosis for the future? What other indicators are useful in determining the state of the economy?

78. What are the positive and negative effects of international trade? What is the World Trade Organization (WTO)? Why might a government put tariffs and quotas in place, and who do these measures benefit and harm? Evaluate the effects of increase global competition on U.S. firms, workers, and consumers. How do exchange rates come into play regarding foreign trade and the global economy? What does it mean when a currency appreciates, and what does it mean when a currency depreciates for consumers and producers?

Long essay question

This essay question is worth 50 points. This is meant to be a well thought out, academic essay. Proper spelling and full sentences are expected, as this should be more formal than a mini-assignment answer from the course or a short answer from your assignments.

79. In your opinion, what is the state of the US economy currently? In what direction is the economy moving? Your analysis should include a discussion of several economic areas, including (but not limited to) employment, housing, exchange rates, etc. There are no right or wrong answers to this question as long as you support your viewpoint. You can use any sources you want- the Beige Book, Federal Reserve statements, currency relationships and fluctuations, news sources (as long as they are reputable),economic indicators, etc. While anecdotal evidence is fine, please do not solely rely on “people I know have a hard time buying a house” or “it’s expensive to shop in Europe” unless as a supplement to factual evidence.

Tractors, number

Wheat, tons

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B

D

C

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