Final Eco/372

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ECO/372– Principles of Macroeconomics – Final Exam Study Guide 2012

1. the market where business sell goods and services to households and the government is called a.goods market XXX
b.factor market
c.capital market
d.money market

2. Real gross domestic product is best defined as
a.the market value of intermediate goods and services produced in an economy including exports b.all goods and services produced in an economy, stated in prices in a given year and multiplied by quantity c.the market value of all final goods and services produced in an economy stated in the prices of a given year XXX d.the market value of goods and services produced in an economy stated in current year prices

3. underemployment includes
a.who work off the books to avoid paying taxes
b.who are working part time or not using all their skills at a fulltime job XXX c.who are tired of looking for a job so they quit looking but still want one d.whose skills are not in demand anymore

4. .The bureau of economic analysis is responsible for which of the following a.setting interest rates
b.managing the money supply
c.calculating the US gross domestic product XXX
d.paying unemployment benefits

5. The federal reserve provides which of the following data
a.federal funds rate XXX
b.stock price of GE
c.bond yields of corporation
d.debt to GDP of Ireland

6. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should have a.shifted the AD curve to the left XXX
b.shifted the AD curve to the right
c.made the AD curve flatter
7. The largest source of household income is in the U.S. is obtained a.stock dividends
b.wages and salaries XXX
c.interest earnings
d.rental income
8. If the depreciation of a country’s currency increases it aggregate expenditures by 20, the AD curve will a.shift right by more than 20 XXX
b.shift right by less than 20
c.shift right by exactly 20
d.not shift at all

9. Aggregate demand management policies are designed most directly to a.minimize unemployment
b.minimize inflation
c.control the aggregate level of spending in the economy XXX d.prevent budget deficits or surpluses

10. Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model a.an increase in government spending XXX

b.an increase in taxes
c.a reduction in government spending
d.no change in taxes or government spending.

11. According to Keynes, market economies

A. never experience significant declines in aggregate demand B. quickly recover after they experience a significant decline in aggregate demand C. may recover slowly after they experience a significant decline in aggregate demand XXX D. are constantly experiencing significant declines in aggregate demand

12. The laissez-faire policy prescription to eliminate unemployment was to

A. eliminate labor unions and government policies that hold real wages too high XXX B. strengthen unions and government regulations protecting unions and workers C. increase real wages so that people are encouraged to work D. have government guarantee jobs for everyone

13. In the AS/AD model, an expansionary monetary policy has the greatest effect on the price level when it

A. increases both nominal and real income XXX
B. increases real income but not nominal income
C. increases nominal income but not real income
D. doesn't increase real or nominal income

14. The Federal funds rate

A. is always slightly higher than the discount rate
B. can never be close to zero
C. may sometimes have to be targeted at zero XXX
D. is an intermediate target

15. What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1% to 1.25%?

A. Open-market operations
B. The discount...
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