Final Exam In Tutorial Library

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TITLE: Final Exam

UNIVERSITY / INSTITUTE: Saint Leo University



Final Exam:

 1. Question : U.S. economic growth in output since about 1890 has averaged:
  Student Answer: 0 to 1 percent. 
  1 to 2.5 percent. 
 2.5 to 3.5 percent. 
  5 to 5.5 percent. 
 2. Question : Fluctuations around the long-term growth rate are called:
  Student Answer: recessions. 
 business cycles. 
 3. Question : Which of the following statements best characterizes the Classical view of business cycles? 
  Student Answer:
 Fluctuations in business activity where the expansion always lasts as long as the recession, so the effect on the economy is null. 
 Fluctuations in business activity that can be expected, and accepted without government involvement. 
  Expansions and recessions are symptoms of underlying problems and should be addressed by macroeconomic policy. 
  The appropriate macroeconomic policy can eliminate fluctuations in business activity. 
 4. Question : The top of the business cycle is called:
  Student Answer: an expansion. 
  a recession. 
  an upturn. 
 a peak 
 5. Question : Underemployment includes:
  Student Answer: people who work "off-the-books" to avoid tax liabilities. 
 people who are working part time, or not using all their skills at a full-time job. 
  people who are tired of looking for a job, so they quit looking, but still want one. 
  people whose skills are not in demand anymore. 
 6. Question : The number of people looking for a job, divided by the labor force, is known as the:
  Student Answer: labor force. 
  labor force participation rate. 
 unemployment rate. 
  employment rate. 
 7. Question : According to Okun's rule of thumb, an increase in the rate of unemployment from 6 percent to 8 percent would be expected to cause income in the economy to:
  Student Answer:
 fall by 4 percent. 
  rise by 4 percent. 
  fall by 2 percent. 
  rise by 2 percent. 
 8. Question : A situation in which the price level increases at an extremely high rate is called:
  Student Answer:
 9. Question : The average price of the components of GDP, relative to a base year, is called the:
  Student Answer:
 the price level. 
  producer price index. 
  consumer price index. 
 GDP deflator. 
 10. Question : Net foreign factor income is:
  Student Answer: the income earned from the domestic economy by foreign factors. 
  the income earned abroad by domestic factors. 
 the difference between the income earned abroad by domestic factors and the income earned domestically by foreign factors. 
  the difference between the value of a country's exports and imports. 
 11. Question : If nominal output is $4.4 trillion and the GDP deflator is 110, then real output is:
  Student Answer: $4.84 trillion. 
  $4.4 trillion. 
 $4 trillion. 
  $3.84 trillion. 
 12. Question : If output is below potential output, it is most likely that the economy:
  Student Answer: is experiencing inflation. 
  is in a boom. 
  is near a peak. 
 is near a trough. 
 13. Question : Gross domestic product equals the sum of consumption, investment, and government purchase.
  Student Answer: True. 
 14. Question : Discouraged workers are people who:
  Student Answer: get discouraged about how full-time work is so full of drudgery and petty backbiting. 
 get discouraged when they can't find a job, and stop looking for one, even though they still want a job. 
  are looking for a job at some other firm because they were discouraged from trying to climb the corporate ladder at their current job. 
  are looking to change jobs because they were part of a failed effort to install a union at their old job. 
 15. Question : The largest component of national income is:
  Student Answer: interest. 
 employee compensation. 
 16. Question : Which of the following factors will shift the long-run aggregate supply curve?
  Student Answer: A change in aggregate demand. 
 A change in available resources. 
  A change in the price level. 
  A change in sales or excise taxes. 
 17. Question : Small differences in economic growth rates can eventually produce large differences in living standards because of compounding.
  Student Answer:
 18. Question : The difference between personal income and disposable personal income is:
  Student Answer: social security taxes. 
 personal taxes. 
  corporate taxes. 
  indirect business taxes. 
19. Question : Laissez-faire economists believe:
  Student Answer: government policies do not affect economic activity. 
  government can implement policy proposals that can positively impact the economy. 
 most government policies would probably make things worse. 
  government intervention in the market is necessary for a smoothly operating economy. 
 20. Question : An increase in the aggregate demand curve will, in the long run, change:
  Student Answer: output but not price level. 
 the price level but not output. 
  both output and the price level. 
  neither output nor the price level. 
 21. Question : Calculate net exports using the information below. 
  Student Answer:
 22. Question : A fall in the U.S. price level will cause foreigners to:
  Student Answer:
 substitute U.S. goods instead of their own domestically-produced goods. 
  substitute their own domestically-produced goods instead of U.S. goods. 
  buy more of their own domestically-produced goods. 
  buy fewer U.S. goods. 
 23. Question : Refer to the graph below. Which of the graphs correctly labels the axes of the AS/AD model? 
  Student Answer:
 24. Question : All of the following effects cause the AD curve to slope downward except the:
  Student Answer: international effect. 
  interest rate effect. 
 substitution effect. 
  wealth effect. 
 25. Question : Net exports are defined as:
  Student Answer: GDP minus exports. 
 exports minus imports. 
  imports minus exports. 
  exports plus imports. 
 26. Question : The Rule of 72 implies that a country with a growth rate of 8 percent will double its income in about:
  Student Answer: 4 years. 
  6 years. 
 9 years. 
  12 years. 
 27. Question : Calculate GDP using the table below. 
  Student Answer: 5570 
28. Question : The paradox of thrift occurs when:
  Student Answer: an increase in saving raises output. 
 an increase in saving reduces output. 
  saving is unrelated to output. 
  a decrease in saving reduces output. 
 29. Question : National income is the sum of:
  Student Answer: employee compensation and profits. 
  employee compensation, rent, and profits. 
 employee compensation, rent, profits, and interest. 
 employee compensation, rent, profits, interest, and transfer payments. 
30. Question : The long-run aggregate supply curve plays an important role in determining:
  Student Answer: the price level in the short-run. 
  output in the short-run. 
  output in the short-run and long-run. 
 output in the long-run. 
 31. Question : If the reserves in U.S. banks totaled $8,000 and total deposits were $100,000, the banking system's reserve ratio would be:
  Student Answer:
 32. Question : If the Fed purchases government securities from commercial banks, the reserves of the banking system will
  Student Answer:
  remain constant 
  All of the above can happen 
33. Question : M1 consists primarily of cash in the hands of the public and:
  Student Answer: savings account balances. 
  commercial paper. 
 demand (checking) deposits. 
  certificates of deposit. 
 34. Question : If productivity growth is 5 percent and nominal wages increase at a rate of 6 percent, then inflation will most likely be:
  Student Answer: -11 percent. 
  -1 percent. 
 1 percent. 
  11 percent. 
35. Question : If the Fed increases required reserves, financial institutions will likely lend out:
  Student Answer: more than before, increasing the money supply. 
 less than before, decreasing the money supply. 
  more than before, decreasing the money supply. 
  less than before, increasing the money supply. 
 36. Question : What is exchanged in the financial sector?
  Student Answer: money only. 
 goods and services. 
 all financial assets. 
  all assets with a money price. 
37. Question : Deflation is a problem for all of the following reasons except it: 
  Student Answer: is often associated with large falls in asset prices. 
 may prevent a central bank from lowering the real interest rate as much as it would like. 
  can undermine a country's financial system. 
 can lead to excessive increases in aggregate demand. 
38. Question : Rational expectations, strictly speaking, are expectations based on:
  Student Answer:
 the predictions of economic models. 
  what has happened in the past. 
  models of human behavior. 
 the continuation of past trends. 
 39. Question : A bank has a reserve requirement of 0.10. If it has demand deposits of $100,000 and is holding $12,000 in reserves:
  Student Answer:
 all the bank's reserves are excess reserves. 
  the bank is not meeting its reserve requirement. 
 the bank is holding $2,000 in excess reserves. 
  all reserves are required reserves. 
40. Question : Bank A has deposits of $8,000 and total reserves of $2,000. If the required reserve ratio is 15%, the bank has required reserves of
  Student Answer: $4,000. 
 41. Question : The Federal funds rate is the rate banks charge one another for overnight loans.
  Student Answer:
 42. Question : In order to function as a medium of exchange, money must:
  Student Answer: be backed by gold. 
 maintain a constant value over an extended period of time. 
  be backed by some precious commodity. 
 be generally accepted in exchange for goods and services. 
43. Question : If expected inflation is greater than zero, then the real interest rate is:
  Student Answer: positive. 
  greater than the nominal interest rate. 
 less than the nominal interest rate. 
 44. Question : The long-run Phillips curve is:
  Student Answer: downward-sloping, implying a trade-off between unemployment and inflation. 
  downward-sloping, implying that the unemployment rate always returns to its natural rate in the long-run. 
  vertical, implying a long-run trade-off between unemployment and inflation. 
 vertical, implying that the unemployment rate always returns to its target rate in the long-run. 
 45. Question : Monetary policy is one of the two main macroeconomic tools governments use to control the aggregate economy, the other being:
  Student Answer:
 fiscal policy. 
  foreign policy. 
  trade policy. 
  immigration policy. 
 46. Question : The Board of Governors of the Federal Reserve is part of a larger policy-making group called the
  Student Answer: Senate Banking Committee. 
  Federal Deposit Insurance Corporation. 
  American Banking Association. 
 Federal Open Market Committee. 
47. Question : As the interest rate rises, businesses invest __________ and the AD curve shifts to the __________.
  Student Answer: more; right 
  more; left 
  less; right 
 less; left 
 48. Question : In an inflationary gap, if the Fed wanted to enact contractionary monetary policy it would
  Student Answer: Purchase government securities 
 Sell government securities 
  Increase government spending 
  Decrease government spending 
 49. Question : The purchase of a government security by the Fed
  Student Answer: decreases the supply of money. 
 increases the supply of money. 
  increases the federal funds rate. 
  increases the discount rate. 
 50. Question : If the Fed printed too little money, the value of money (what it is worth) would:
  Student Answer: fall, which is a way of saying there would be inflation. 
 rise, which is a way of saying there would be deflation. 
  fall, which is a way of saying there would be deflation. 
  rise, which is a way of saying there would be inflation. 

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