Wednesday, April 25, 2018

2018 FINAL REVIEW


1.    How will the following affect AD?
a.    Decrease in interest rates
b.    Increase in global supply
c.    Open market purchase of bonds
d.    Increase in pay and benefits for government employees

2. For Chasity’s graduation gift, Chasity’s grandma gives her $100 or $104 at the end of one year.
a.             What is the interest rate

3. If AD increases what happens to
a.             Unemployment
b.             The price level
c.             Real interest rate if there is no change in the supply of money

4. If people think a country is a safe place to invest their money, what will happen to the value of that country’s currency?

5. Calculate the real interest rate under the following conditions

Nominal
Inflation
Real
6
2
7
4
3
2

6. Describe what happens with the short run phillips curve as a result of the following changes.
a.             AD shifts left
b.             AS shifts left
c.             AD shifts right
d.             AS shifts right

7. What happens to the natural rate of unemployment in the long run if the long run inflation rate goes from 6% to 20%?

8. If we use contractionary fiscal policy, what will happen to the following in the short run?
a.             Unemployment
b.             Output
c.             Price level
d.             Real interest rates

9. Define crowding out.

10. If a nation’s real GDP grows at a slower rate than its population, what happens to real GDP per capita?

11. We have an increase in inflation, are the following groups hurt or helped?
a.             Lenders
b.             Borrowers
c.             Borrowers with a variable interest rate
d.             People living on a fixed income

12. We have an increase in deflation, are the following groups hurt or helped?
a.             Lenders
b.             Borrowers
c.             Borrowers with a variable interest rate
d.             People living on a fixed income

13. The demand curve for money shifts which way under the following circumstances?
a.             The supply of money increases
b.             The government runs a larger than expected deficit
c.             AD shifts left
d.             Inflation increases but the money supply stays constant
e.             The velocity of money increases

14.
Exports
Imports
Current Account
Capital Account
120
50
110
200
65
34
175
60

15. What happens to interest rates, investment, and output under the following conditions?
a.             Fed. buys bonds
b.             Fed. raises the discount rate
c.             Easy money policy
d.             Tight money policy









16.
Reserve Req.
Deposit size
Maximum change in money supply
.2
$10,000
.1
$20,000
.25
$50,000
.2
$25,000

17. Will the following cause recession or inflation?
a.             Imports increase
b.             Interest rates go down
c.             Consumer confidence increases
d.             Exports go up
e.             Money supply decreases
f.               AS shifts left









18.
Pl
Q
M
V
$10,000
10
5
$10,000
3
$5,000
$20,000
$10,000
8
$40,000
7
$14,000


19. What will happen to the following if a country reduces business taxes?
a.            AD
b.            AS
c.            Investment
d.            Business profits

20. Inventories are part of what segment of GDP? C, I, G, or Xn?

21. What happens to bank reserves when the following actions are taken by the central bank?
a.            Sell bonds
b.            Raise reserve req.
c.            Buy bonds



22.
Base year CPI
Next year CPI
Inflation rate
100
104
200
210
100
8%

23. How do the following policies affect long run economic growth?
a.            Increasing the investment tax credit
b.            Increasing the money supply
c.            Increasing education and investment in human capital
d.            Decreasing funding for college education
e.            Fed reserve sells bonds

24. Which of the following transactions would increase the U.S. current account surplus?
a.            A U.S. investor buys stock in a Japanese company
b.            A Ford plant based in Mexico exports more to China
c.            A Toyota plant based in North Carolina sells more Toyotas to California
d.            A German owned BMW plant in South Carolina exports BMWs to Japan

25. If two countries trade two different goods and services, what has to be true?

26. Suppose Mexico trades auto engines with the U.S. in exchange for jet engines, what has to be true?

27. If the government invests more in human capital, what happens to LRAS?

28. Distinguish between demand pull and cost push inflation.

29. Determine how the following policy actions will impact the money supply.
a.            Fed reserve sells bonds
b.            Fed reserve raises the reserve req.
c.            Fed reserve buys bonds
d.            Fed reserve lowers discount rate
e.            Fed reserve lowers the fed fund rate

30. The exchange rate is the value of one country’s currency priced in another country’s currency.
31. Unemployment formula: looking/looking+working (labor force)

32. Determine whether or not the following people are unemployed.
a.            A housewife not looking for a job
b.            A housewife looking for a job
c.            A part time student looking for a job
d.            A volunteer worker working at the pound for free and not looking for a job

33. Assume the government's’ budget deficit increases. What happens to the following?
a.            Bond prices
b.            Real interest rates
c.            Investment

34.
MPC
Exports
Imports
Change in GDP