MACROECONOMICS

Macroeco.rtfd/TXT.rtf

1 - Tax increases A. and increases in government expenditures shift aggregate demand right.

B. shift aggregate demand right while increases in government expenditures shift aggregate demand left.

C. and increases in government expenditures shift aggregate demand left.

D. shift aggregate demand left while increases in government expenditures shift aggregate demand right

2 - Paper dollars A. are commodity money and gold coins are fiat money.

B. and gold coins are both fiat monies.

C. and gold coins are both commodity monies.

D. are fiat money and gold coins are commodity money.

mank07t.237.033.1.png ¬ 3- Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to A. Z in the long run.

B. W in the long run.

C. X in the long run.

D. V in the long run.

4- Shoeleather cost refers to A. the distortion in resource allocation created by distortions in relative prices due to inflation.

B. the tendency to expend more effort searching for the lowest price when inflation is high.

C. resources used to maintain lower money holdings when inflation is high.

D. the cost of more frequent price changes induced by higher inflation.

5- Scenario 29-1. The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits. Refer to Scenario 29-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks? A. 875 million dias

B. 625 million dias

C. 1,125 million dias

D. None of the above is correct.

6- The primary difference between commodity money and fiat money is that A. commodity money has intrinsic value but fiat money does not.

B. commodity money is a medium of exchange but fiat money is not.

C. fiat money is a medium of exchange but commodity money is not.

D. fiat money has intrinsic value but commodity money does not.

7- Which of the following statements is true? A. Technological knowledge and human capital are closely related.

B. Over long periods of time, the prices of most natural resources are stable or falling, relative to other prices.

C. The quantity of natural resources per worker can influence productivity.

D. All of the above are correct.

8- Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about A. $44,100.

B. $40,091.

C. $37,838.

D. $40,000.

9- If the consumer price index is 120 in 2009 and 139.2 in 2010, then the rate of inflation for 2010 is 39.2 percent. a. TRUEb. FALSE

10- Like physical capital, human capital is a produced factor of production. a. TRUEb. FALSE

11- Assume the MPC is 0.625. Assume there is a multiplier effect and that the total crowding-out effect is $12 billion. An increase in government purchases of $30 billion will shift aggregate demand to the A. right by $36 billion.

B. left by $36 billion.

C. right by $68 billion.

D. left by $60 billion 12- When the Fed lowers the growth rate of the money supply, it must take into account

A. the long-run effect on inflation as well as the short-run effect on production.

B. only the short-run effects on inflation and production.

C. only the long-run effect on inflation.

D. only the short-run effect on production 13-For a country such as the U.S., the wealth effect exerts a very important influence on the slope of the aggregate-demand curve, since U.S. wealth is large relative to wealth in most other countries. A- true B- false 14-Sometimes, changes in monetary policy and/or fiscal policy are intended to offset changes to aggregate demand over which policymakers have little or no control.

a. TRUEb. FALSE