Final Exam

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Final Exam

Questions from Previous Versions of Final Examinations

1. The largest component of Aggregate Spending is (a) consumption. (b) wage income. (c) investment. (d) net exports. (e) government transfer payments.

|Fiscal policies likely to shift the Aggregate Demand curve from AD0 to AD1 would include an |[pic] | |increase in the: (a) level of government spending on national defense. (b) sale of U.S. | | |Treasury bonds by the Federal Reserve System. (c) marginal tax rates on corporate and personal | | |incomes. (d) reserves that banks are required to hold as percentages of their deposits. | | |Monetary policies likely to shift the Aggregate Demand curve from AD0 to AD1 would include an | | |increase in: (a) government spending on schools, roads, and interstate highways. (b) purchases | | |of U.S. Treasury bonds by the Federal Reserve System. (c) marginal tax rates on corporate and | | |personal incomes. (d) reserves that banks are required to hold as percentages of their | | |deposits. | |

2. Rising per capita income in the United States would probably result in a decrease in: (a) the number of yachts sold. (b) the demand for used tires. (c) the supply of unskilled labor. (d) federal budget surpluses. (e) autonomous net imports.

3. Firms are most likely to adopt an “efficiency wages” policy in attempts to: (a) offset workers’ desires to unionize. (b) increase the losses workers experience if they shirk and lose their jobs. (c) maximize the difference between the value of the marginal product of an individual worker and that worker’s marginal factor cost. (d) augment the human capital their workers possess.

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4. If the national government requires banks to keep reserves equal to 20% of deposits, and if the banking system was "fully loaned up" before Kermit deposited $1,000 cash into his checking account, then the excess reserves in Miss Piggy’s Bank would now equal: (a) $1,000. (b) $800. (c) $500. (d) $200. (e) zero.

5. Suppose the government requires banks to keep reserves equal to 20% of deposits and that the banking system was "fully loaned up" before Kermit deposited $1,000 cash into his checking account. Now suppose Miss Piggy’s Bank loans $500 to Oscar in the form of a demand deposit. Oscar then writes a $500 check to a different bank to pay off an earlier loan. After all these transactions have transpired, Miss Piggy’s Bank’s excess reserves will have grown by a net total of: (a) $900. (b) $500. (c) $300. (d) $100. (e) zero.

6. Economists increasingly apply the term “churn” to the process in which new technologies and products or freer international trade stimulate rapid increases in real national income, but some entrepreneurs and investors lose their incomes and occasionally, vast fortunes, while some workers lose their jobs. “Churn” is actually a synonym for: (a) dialectical materialism, which led Karl Marx to predict that capitalism would be replaced by socialism. (b) creative destruction, as described by Joseph Schumpeter. (c) animal spirits, which John Maynard Keynes referenced to explain swings in the stock market. (d) the invisible hand described by Adam Smith in his Wealth of Nations. (e) economic democracy, as described by Paul Wolfowitz.

|If equilibrium moves from point a to point b, the only market in this figure |[pic]...
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