ECON 212 Final Practice Test Fall 2016, Fall 2016

Question 1 Which of the following instruments is used by the Federal Reserve to change the money supply? Incorrect Select one: Mark O out of 1 a. the discount rate vy Remove flag * b. the required reserve ratio X c. open market operations d. all of the choices The correct answer is: all of the choices Question 2 The presence of automatic stabilizers means that the federal deficit is than it otherwise Incorrect would be in a recession and than it otherwise would be in an expansion. Mark O out of 1 Select one: vr Flag question a. larger; smaller * b. smaller; larger X c. smaller; smaller d. larger; larger The correct answer is: larger; smaller Question 3 The aggregate demand curve slopes downward because at higher price level the purchasing power Correct of consumers’ assets and consumption Mark 1 out of 1 Select one: ev Flag question * a. decreases; decreases b. increases; increases c. decreases; increases d. increases; decreases The correct answer is: decreases; decreases Question 4 Refer to Figure 13.3. This economy is most likely experiencing excess capacity at aggregate output ESTE! levels: Mark 1 out of 1 A AS Flag question | v 9 Price level 600 800 1,200 Aggregate output ($ billion) Select one: a. above $1,200 billion. b. between $800 billion and $1,200 billion. c. between $600 billion and $800 billion. « d. below $600 billion. ~ The correct answer is: below $600 billion. Question 5 year price of pork price of corn Incorrect 2003 $20 $20 Mark 0 out of 1 2004 $20 $30 Flag question v gq Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the consumer price index for 2004 if the base year is 2003? Select one: > a.100 X b. 105 c. 115 d. 120 Question 6 Incorrect Mark 0 out of 1 v Flag question Question 7 Correct Mark 1 out of 1 vr Flag question The correct answer is: 120 If the unemployment rate is below the NAIRU, which of the following is most correct: Select one: a. The price level will increase b. The change in the inflation rate will be negative c. The price level will accelerate » d. The price level will decelerate X The correct answer is: The price level will accelerate The deviation of unemployment from its natural rate is: Select one: * a. cyclical unemployment / b. structural unemployment c. frictional unemployment d. none of the above The correct answer is: cyclical unemployment Question 8 You are given the balance sheet of the Central Bank below. Assume that the banking system does Incorrect not hold excess reserves, and the required reserve ratio is 20%. What is the money supply? ESOC RGIe Assets Liabilities & Net Worth p Flag question Government Securities $200 Reserves $100 Currrency 100 Select one: a. 100 * b. 200 X c. 500 d. 600 The correct answer is: 600 Question 9 In country A, all wage contracts are fully indexed to inflation. In country B, wages are not indexed Incorrect to inflation but are negotiated in 3-year contracts. Mark 0 out of 1 Select one: v Remove flag a. In country B, the AS curve is vertical. Question 9 Incorrect Mark 0 out of 1 v Remove flag Question 10 Incorrect Mark 0 out of 1 v Flag question In country A, all wage contracts are fully indexed to inflation. In country B, wages are not indexed to inflation but are negotiated in 3-year contracts. Select one: a. In country B, the AS curve is vertical. b. In country A, expansionary monetary policy has a bigger effect on output than in country B. c. In country B, expansionary monetary policy has a bigger effect on output than in country A. » d. Wages in tend to be more sticky in country A than in country B. X The correct answer is: In country B, expansionary monetary policy has a bigger effect on output than in country A. If firms don't know what the market-clearing wage is, they may simply set wages wrong. Which explanation of unemployment refers to this argument? Select one: * a. The efficiency wage theory. X b. Social, or implicit, contracts. c. The relative-wage explanation. d. Imperfect information. The correct answer is: Imperfect information. Question 11 Given below the equations for the demand and supply curves in the labor market: St QD = 220 - 15w Mark 1 out of 1 QS = 10W- 20 : 7 Where W is the wage in $/hour and Q is the number of workers. v jag question At a wage of $11/ hour, which of the following is correct: Select one: a. There is full-employment « b. The unemployment rate is 39% / c. The size of the labor force is 55 workers d. None of the above The correct answer is: The unemployment rate is 39% Question 12 Refer to Figure 11.2. An increase in income could be represented by a movement from Point See to Point Mark 1 out of 1 v Flag question 4 Question 12 Refer to Figure 11.2. An increase in income could be represented by a movement from Point suse! to Point Mark 1 out of 1 v Flag question A E7% yo 2 ry é ig aa 35% ef 2? My | | i } > 100 150 200 300 Money ($ million) Select one: a. A; C *) bASB ¥ c.B; A d.B; D The correct answer is: A; B Question 13 The theory of efficiency wages explains why Incorrect Select one: Mark 0 out of 1 = it ie efficient far firme tn cet wanec at the eniilihriim level %¢ ss Incorrect Mark 0 out of 1 Flag question ev gq Question 14 Correct Mark 1 out of 1 a Flag question ine theory or erriciency wages explains wny Select one: * a. it is efficient for firms to set wages at the equilibrium level. X b. it may be in the best interest of firms to offer wages that are above the equilibrium level. c. the most efficient way to pay workers is to pay them according to their skills. d. None of the above The correct answer is: it may be in the best interest of firms to offer wages that are above the equilibrium level. Given full-employment output = $2,800, equilibrium output = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of national output? Select one: a. $300 decrease in taxes. « b. $75 increase in government spending. / c. $75 decrease in taxes. d. $300 increase in government spending. The correct answer is: $75 increase in government spending. Question p B-) Correct Mark 1 out of 1 ev Flag question Question 16 Incorrect Mark 0 out of 1 vr Flag question Thomas transfers $4,500 from his checking account to his savings account. This transaction will: Select one: a. not change M1 and decrease M2. » b. decrease M1 and not change M2. c. increase both M1 and M2. d. decrease both M1 and M2. The correct answer is: decrease M1 and not change M2. Refer to Figure 13.1. If the money demand curve shifts from Md1 to MdO: ra M* 2 %& = % 8- 2 2 ~ 2 3 ——— M# & 6 | —> > Mi Lal Money M Select one: a. planned investment will decrease and aggregate output will decrease. b. planned investment will decrease and aggregate output will increase. c. planned investment will increase and aggregate output will decrease.