Macroeconomics Final Exam

The aggregate demand curve is the relationship between the:

Price level and the purchasing of real domestic output

An increase in expected future income will:

Increase aggregate demand

When the price level falls:

Holders of financial assets with fixed money values increase their spending

Which would be one of the factors that shift the aggregate demand curve? A change in:

Profit expectations on investment projects

An increase in the real value of stock prices, which is independent of a change in the price level, would affect aggregate demand due to:

Wealth effect

The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

both input and output prices are fixed

A fall in prices of imported resources will cause aggregate:

supply to increase

Suppose that an economy produces 500 units of output. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this output. The per unit cost of production is:

$0.70

When the Federal government takes action to change taxes and spending to stimulate the economy such policy is:

Discretionary

Fiscal policy is enacted through changes in:

Taxation and government spending

Which group has a direct responsibility for providing analysis, advice and assistance to the U.S. president on economic matters?

The Council of economic advisors

Which are contractionary fiscal policies?

Increased taxation and decreased government spending

If the Congress passes legislation to cut taxes to counter the effects of a sever recession, then this would be an example of a:

Expansionary fiscal policy

A contractionary fiscal policy can be illustrated by a(n):

Decrease in aggregate demand

An economist who favors smaller government would recommend:

Tax cuts during recession and reductions in government spending during inflation

The functions of money are to serve as a:

Unit of account, store of value, and medium of exchange

When money serves as a means for determining the relative worth of goods, services and resources, it is functioning as a:

Unit of account

One major advantage of the medium of exchange function of money is that it allows society to:

Escape the complications of barter

Checkable deposits are:

Debts of commercial banks and savings institutions

The largest component of money supply (M1) is:

Currency

Cathy Rogers deposits $200 in currency in her checking account at a bank. This deposit is treated as:

No change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits

Which best describes the backing for money in the United States?

The acceptability of it as a medium of exchange

What "backs" money supply?

The U.S. government's ability to keep the value of money relative stable

The consumer price index was over 100 in one year and 330 ten years later. The value of the purchasing power of the dollar over the ten years fell by:

70 percent

How long is the term of office for members appointed to serve on the Board of Governors of the Federal Reserve System?

14 years

In which of the following U.S. cities is one of the twelve Federal Reserve Banks located?

San Fransisco

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:

Setting the Fed's monetary policy and directing the purchase and scale of government securities

The transactions demand for money will shift to the:

Left when nominal GDP decreases

When nominal GDP is $800 billion and, on average, each dollar is spent four times in the economy over a year, the quantity of money demanded for transactions purposes will be:

$200 Billion

A decrease in interest rate will cause a(n):

Increase in the amount of money held as an asset

A wealthy executive is holding money for a good time to invest in the stock market. This action would be an example of the:

Asset demand for money

The short run in macroeconomics is a period in which nominal wages:

Remain unresponsive as the price level changes

The economy enters the long-run once:

Sufficient time has elapsed for wage contracts to expire and nominal wage to adjust

The long-run aggregate supply curve is assumed to be:

Vertical

Inflation is most likely to result from a(n):

Increase in aggregate demand or decrease in aggregate supply

In the extended AD-AS model, cost-push inflation occurs because of:

An increase in nominal wages, resulting in a decrease in the short-run AS curve

If the government adopts a "hands off" approach to cost-push inflation in the economy, then there is likely to be:

A recession

Which product is a leading export of the United States?

Chemicals

A trade deficit refers to an excess of:

Goods imports over goods exports

Which nation has greatly increased its role in international trade in recent years?

China

The best example of land-intensive commodity is:

Wheat

Trade between individuals and between nations leads to:

Increased specialization

If there is no comparative advantage between two countries:

There are no gains from specialization and trade

According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are produced in nations where:

Domestic opportunity costs are the lowest