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If a government supplies more money than the quantity people want to hold
Pregunta 1Resposta
a.
Spending will increase and the price level will rise.
b.
Spending will decrease and the price level will fall.
c.
Spending will remain constant but the price level will rise.
d.
There will be no change in the level of economic activity or prices; money is neutral.
a
Which of the following costs of inflation does not occur when inflation is constant and predictable?
a.
Arbitrary redistributions of wealth.
b.
Menu costs.
c.
Costs due to confusion and inconvenience.
d.
Shoeleather costs.
e.
Costs due to inflation induced tax distortions.
a
Which of the following statements is true about a country with a trade deficit?
Pregunta 3Resposta
a.
none of these answers
b.
Net exports are negative.
c.
Exports exceed imports.
d.
Net capital outflow must be positive.
e.
Net exports are positive.
b
The quantity theory of money concludes that an increase in the money supply causes a proportional
Pregunta 4Resposta
a.
Increase in velocity.
b.
Decrease in prices.
c.
Decrease in velocity.
d.
Increase in prices.
e.
Increase in real output.
d
In the long run, the demand for money is most dependent upon the
Pregunta 6Resposta
a.
Availability of credit cards.
b.
Level of prices.
c.
Availability of banking outlets.
d.
Interest rate.
b
Equilibrium in an open economy is characterized by
Pregunta 7Resposta
a.
Both a and c are correct.
b.
Domestic investment + net capital outflow = savings.
c.
Net exports + net capital outflow = savings.
d.
Net exports = net capital outflow.
a
Which of the following would not cause a shift in the long-run aggregate supply curve? An increase in:
Pregunta 8Trieu-ne una:
a.
the available capital
b.
the available labour
c.
price expectations
d.
the available technology
c
Which of the following would directly increase UK net capital outflow?
Pregunta 10Resposta
a.
The Japanese financial company Nomura buys shares in Vodafone.
b.
Honda builds a new plant in Swindon, England.
c.
Rolls Royce sells an aircraft engine to Boeing of the USA.
d.
BP builds a new oil rig in Venezuela.
d
Which of the following statement regarding the loanable funds market is true?
Pregunta 11Resposta
a.
An increase in the government budget deficit shifts the supply of loanable funds to the right.
b.
An increase in the government budget deficit shifts the supply of loanable funds to the left.
c.
An increase in private saving shifts the supply of loanable funds to the left.
d.
A decrease in the government budget deficit increases the real interest rate.
b
Suppose that, because of inflation, a business in Russia must calculate, print, and mail a new price list to its customers each month. This is an example of
Pregunta 12Resposta
a.
Shoeleather costs.
b.
Arbitrary redistributions of wealth.
c.
Costs due to inflation induced tax distortions.
d.
Menu costs.
e.
Costs due to confusion and inconvenience.
d
Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow?
Pregunta 13Resposta
a.
For a given amount of saving, an increase in net capital outflow must decrease domestic investment.
b.
An increase in saving associated with an equal increase in net capital outflow leaves domestic investment unchanged.
c.
For a given amount of saving, a decrease in net capital outflow must decrease domestic investment.
d.
Saving is the sum of investment and net capital outflow.
a
The exchange rate is the
Pregunta 14Resposta
a.
value of money.
b.
number of units of a foreign currency that can be bought with one unit of your own currency.
c.
quantity of euros, dollars, yen, etc., that are traded on currency markets.
d.
amount of foreign currency that is used to buy goods made in your country.
b
Suppose that, because of inflation, people in Zimbabwean go to the bank each day to withdraw their daily currency needs. This is an example of
a.
Costs due to inflation induced tax distortions.
b.
Costs due to confusion and inconvenience.
c.
Shoeleather costs.
d.
Menu costs.
e.
Costs due to inflation induced relative price variability which misallocates resources.
Suppose that, because of inflation, people in Zimbabwean go to the bank each day to withdraw their daily currency needs. This is an example of
Pregunta 15Resposta
a.
Costs due to inflation induced tax distortions.
b.
Costs due to confusion and inconvenience.
c.
Shoeleather costs.
d.
Menu costs.
e.
Costs due to inflation induced relative price variability which misallocates resources.
c
In which of the following situations would the multiplier effect on a country's economy of a tax cut implemented by that country's government be greatest?
Pregunta 17Trieu-ne una:
a.
The country's citizens are affluent and tend to save a relatively high proportion of their income.
b.
The country's citizens have relatively low incomes and spend little on foreign holidays or imported goods.
c.
The country is very open to international trade and imports are high relative to GDP.
d.
The country's citizens are cautious and sceptical, leading them to assume that the tax cut will soon be reversed.
b
Marjorie maintains that she can predict when the economy is going to move up or down in a business cycle. In fact:
a.
Business cycles are irregular and unpredictable in the short run.
b.
The business cycle is quite regular, with a new phase beginning every 24 months.
c.
Only the World Bank can predict moves in the business cycle.
d.
Most economists can predict the business cycle.
a
If a country has a high savings rate relative to other countries, then the
Pregunta 19Resposta
a.
Supply of loanable funds is larger, interest rates are lower, and net capital outflow is higher for that country than for others.
b.
Supply of loanable funds is smaller, interest rates are higher, and net capital outflow is lower for that country than for others.
c.
Government must subsidize production in order to encourage international trade.
d.
Demand for loanable funds is larger, interest rates are higher, and net capital outflow is lower for that country than for others.
a
When more euros are needed to buy a unit of Japanese yen, the euro
a.
has inflated.
b.
has appreciated.
c.
has depreciated.
d.
has deflated.
c
Which of the following is equivalent to the trade deficit?
a.
net exports - imports
b.
net capital inflow
c.
imports ÷ exports
d.
exports + imports
b
Which of the following is not a reason why the aggregate demand curve slopes downward?
a.
The wealth effect.
b.
All of these answers are reasons why the aggregate-demand curve slopes downward.
Incorrect
c.
The classical dichotomy/monetary neutrality effects.
d.
The exchange-rate effect
e.
The interest-rate effect
c
Which of the following statements about trade policy is true?
Pregunta 23Resposta
a.
A restrictive import quota decreases a country's net exports.
b.
None of these answers.
c.
A restrictive import quota increases a country's net exports.
d.
A country's trade policy has no impact on the size of its trade balance.
d
The short-run effect of an increase in aggregate demand is an increase in output and an increase in the price level.
Vertader
Fals
v
Which of the following statements regarding the market for foreign currency exchange is true?
Pregunta 25Resposta
a.
An increase in UK net capital outflow increases the supply of pounds and the pound appreciates.
b.
An increase in UK net capital outflow increases the demand for pounds and the pound depreciates.
c.
An increase in UK net capital outflow increases the demand for pounds and the pound appreciates.
d.
An increase in UK net capital outflow increases the supply of pounds and the pound depreciates.
d
Economists agree that
a.
Both high and moderate inflation are quite costly.
b.
High inflation is costly, but they disagree about the costs of moderate inflation.
c.
Moderate inflation is as costly as high inflation.
d.
Neither high inflation nor moderate inflation is very costly.
b
If a country experiences a tremendous increase in the demand for loanable funds as many new infrastructure building projects are initiated, then the interest rate will
a.
Rise, there will be a decrease in net capital outflow, and the real exchange rate will rise.
b.
Fall, there will be an increase in net capital outflow, and the real exchange rate will rise.
c.
Fall, there will be an increase in net capital outflow, and the real exchange rate will fall.
d.
Rise, there will be a decrease in net capital outflow, and the real exchange rate will fall
a
With the value of money on the vertical axis, the money supply curve is
Pregunta 28Resposta
a.
horizontal because we assume the central bank controls the money supply
b.
Upward sloping because people supply a larger quantity of money when the value of money increases.
c.
Vertical if we assume the central bank controls the money supply.
d.
Downward sloping because people supply a larger quantity of money when the value of money decreases
c
Which of the following statements is true about a situation where real incomes are rising at 3 per cent per year.
a.
If money is neutral, an increase in the money supply will not alter the rate of growth of real income.
b.
If inflation were 0 per cent, people should receive raises of about 3 per cent.
c.
All of these answers (apart from a.) are true.
d.
If inflation were 5 per cent, people should receive raises of about 8 per cent per year.
e.
None of these answers is true.
c
The supply of money is determined by
a.
The price level.
b.
The Central Bank and the pace of lending in the economy
c.
The demand for money.
d.
The Treasury and Congressional Budget Office.
b
In the long run, an increase in government spending tends to increase output and prices.
Vertader
Fals
f
Which of the following statements is NOT true?
a.
The quantity theory states that the primary cause of inflation is growth in the supply of money.
b.
Inflation is an economy-wide phenomenon that concerns, first and foremost, the value of the economy's medium of exchange.
c.
The so-called inflation tax does not affect those people whose incomes do not rise with inflation.
d.
Some inflation in any economy is desirable because it is a sign that demand is present, that there is a reason to produce and invest, and that there is reward to be gained from enterprise.
c
An increase in the government budget deficit
a.
None of these answers
b.
Decreases the real interest rate and crowds out investment.
c.
Has no impact on the real interest rate and fails to crowd out investment because foreigners buy assets in the deficit country.
d.
Increases the real interest rate and crowds out investment.
b
If the EU imposes a quota on the importing of clothing produced in China, so reducing UK imports of clothing, which of the following is true regarding the market for foreign currency exchange?
a.
The demand for pounds increases and the pound appreciates.
b.
The demand for pounds decreases and the pound depreciates.
c.
The supply of pounds increases and the pound depreciates.
d.
The supply of pounds decreases and the pound appreciates.
a
Which of the following would be recorded as an UK merchandise export?
a.
A French car hire firm purchases a fleet of new Honda cars built at Honda's factory in the UK.
b.
A UK resident receives a £50 dividend on shares she owns in a business in Germany.
c.
A UK tourist spends 10,000 euros on vacation in the south of France.
d.
A machine shop in Nottingham purchases a grinder made in Italy.
a
Unanticipated inflation benefits
a.
Investors at the expense of savers.
b.
Borrowers at the expense of lenders.
c.
Taxpayers at the expense of government.
d.
Publicly quoted companies at the expense of private partnerships.
b
Which of the following statements is true regarding the long-run aggregate supply curve? The long-run aggregate supply curve
Pregunta 37Trieu-ne una:
a.
shifts right when the government raises the minimum wage.
b.
is positively sloped because price expectations and wages tend to be fixed in the long run.
c.
is vertical because an equal change in all prices and wages leaves output unaffected.
Correct
d.
shifts left when the natural rate of unemployment falls.
c
The term hyperinflation refers to
a.
A decrease in the inflation rate.
b.
Inflation accompanied by a recession.
c.
A period of very high inflation.
d.
The spread of inflation from one country to others.
c
The most accurate measure of the international value of the UK pound is
Pregunta 39Resposta
a.
an exchange rate index that accounts for many exchange rates.
b.
the Swiss franc/pound exchange rate.
c.
the euro/pound exchange rate.
d.
the pound/dollar exchange rate.
e.
the yen/pound exchange rate.
a
If a country's government wants to eliminate a trade deficit, its most effective policy would be to
Pregunta 41Resposta
a.
Impose quotas on imports.
b.
Reduce tariffs.
c.
Encourage imports.
d.
Reduce its budget deficit.
Note 
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