WorksheetsEcon 1.8 Test
Total questions: 40
Worksheet time: 1hrs 20mins
Name
Class
Date
1.
Q. An executive from Switzerland checked into a hotel room in Spain and was told by the hotel manager that 1 EUR will buy 1.2983 CHF. From the executive’s perspective, an indirect exchange rate quote would be:
a)
A. 0.7702 EUR per CHF.
b)
B. 0.7702 CHF per EUR.
c)
C. 1.2983 EUR per CHF.
2.
Cost–push inflation is least likely to be affected by an increase in:
a)
A. employee wages.
b)
B. finished goods prices.
c)
C. commodity prices.
3.
Q. The unemployment rate is considered a lagging indicator because:
a)
A. new job types must be defined to count their workers.
b)
B. multi-worker households change jobs at a slower pace.
c)
C. businesses are slow to hire and fire due to related costs.
4.
A liquidity trap is most closely associated with:
a)
A. deflation.
b)
B. an inelastic demand for money.
c)
C. a positive nominal central bank policy rate.
5.
a)
A. L.
b)
B. J.
c)
C. K + M.
6.
After noting positive changes in the aggregate index of coincident economic indicators, an increase in the ratio of consumer installment debt to income would most likely help confirm that an expansion is:
a)
A. forthcoming.
b)
B. underway.
c)
C. ending.
7.
Which of the following is least likely to be a valid function/characteristic of money? Money:
a)
A. provides a store of wealth.
b)
B. requires a double coincidence of wants.
c)
C. acts as a unit of account.
8.
a)
A. normal.
b)
B. substitutes.
c)
C. complements.
9.
Q. The short-term shutdown point of production for a firm operating under perfect competition will most likely occur when:
a)
A. price is equal to average total cost.
b)
B. marginal revenue is equal to marginal cost.
c)
C. marginal revenue is equal to average variable costs.
10.
Q. What will be the effect on a direct exchange rate quote if the domestic currency appreciates?
a)
A. Increase
b)
B. Decrease
c)
C. No change
11.
Q. Disinflation is best described as a:
a)
A. decline in price levels.
b)
B. negative inflation rate.
c)
C. decline in the inflation rate.
12.
Both monetary and fiscal policies can most likely be used by a government to:
a)
A. redistribute income and wealth.
b)
B. affect the level of interest rates.
c)
C. influence the level of economic activity.
13.
a)
A. Canada.
b)
B. Brazil.
c)
C. Mexico.
14.
Q. If the price elasticity coefficient of the demand curve for paper clips is equal to −1, demand is:
a)
A. elastic.
b)
B. inelastic.
c)
C. unit elastic.
15.
Q. An exchange rate:
a)
A. is most commonly quoted in real terms.
b)
B. is the price of one currency in terms of another.
c)
C. between two currencies ensures they are fully convertible.
16.
Q. The component least likely to be included in a measurement of gross domestic product (GDP) is:
a)
A. the value of owner occupied rent.
b)
B. the annual salary of a local police officer.
c)
C. environmental damage caused by production.
17.
Q. An exchange rate between two currencies has increased to 1.4500. If the base currency has appreciated by 8% against the price currency, the initial exchange rate between the two currencies was closest to:
a)
A. 1.3340.
b)
B. 1.3426.
c)
C. 1.5660.
18.
Q. The marketing director for a Swiss specialty equipment manufacturer estimates the firm can sell 200 units and earn total revenue of CHF500,000. However, if 250 units are sold, revenue will total CHF600,000. The marginal revenue per unit associated with marketing 250 units instead of 200 units is closest to:
a)
A. CHF 2,000.
b)
B. CHF 2,400.
c)
C. CHF 2,500.
19.
Q. The marginal revenue per unit sold for a firm doing business under conditions of perfect competition will most likely be:
a)
A. equal to average revenue.
b)
B. less than average revenue.
c)
C. greater than average revenue.
20.
A decrease in the price of a good will most likely be reflected in a:
a)
A. change in the intercept of the demand curve.
b)
B. change in the slope of the demand curve.
c)
C. downward movement along the demand curve.
21.
Q. A market structure characterized by many sellers with each having some pricing power and product differentiation is best described as:
a)
A. oligopoly.
b)
B. perfect competition.
c)
C. monopolistic competition.
22.
Q. The sale of mineral rights would be captured in which of the following balance of payments components?
a)
A. Capital account.
b)
B. Current account.
c)
C. Financial account.
23.
Which of the following statements is most accurate concerning the sum-of-value-added method used to determine GDP based on expenditures?
a)
A. The method involves summing the income created at each stage of the production and distribution process.
b)
B. The method shows a larger GDP value compared with the value-of-final-output method.
c)
C. The method is based on the prices consumers pay for the products and services.
24.
a)
A. ZAR 3671 per million SEK traded.
b)
B. SEK 4200 per million ZAR traded.
c)
C. ZAR 4200 per million SEK traded.
25.
Q. Which of the following statements is the most appropriate description of gross domestic product (GDP)?
a)
A. The total income earned by all households, firms, and the government whose value can be verified
b)
B. The total amount spent on all final goods and services produced within the economy during a given period
c)
C. The total market value of resalable and final goods and services produced within the economy during a given period
26.
A central bank announcement of a program to raise rates to moderate inflation will most likely lead to:
a)
A. a weaker domestic currency.
b)
B. revised interest rate expectations.
c)
C. higher asset prices.
27.
A developing country that maintains a fixed value for its currency relative to the US dollar is experiencing a decline in its economic activity, and its inflation rate falls below the level of inflation in the United States. The most likely result of the developing country’s actions to maintain the fixed exchange rate target is that its:
a)
A. foreign exchange reserves will decrease.
b)
B. short-term interest rates will fall.
c)
C. money supply will contract.
28.
Q. A market structure with relatively few sellers of a homogeneous or standardized product is best described as:
a)
A. oligopoly.
b)
B. monopoly.
c)
C. perfect competition.
29.
According to the Solow neoclassical growth model, sustained long-term growth in potential GDP is best explained by:
a)
A. capital deepening investments.
b)
B. technological change.
c)
C. growth in labor supply.
30.
Q. Raising the reserve requirement is most likely an example of which type of monetary policy?
a)
A. Neutral.
b)
B. Expansionary.
c)
C. Contractionary.
31.
The market structure in which a firm sells all of the product it produces at the market equilibrium price is best described as:
a)
A. oligopoly.
b)
B. perfect competition.
c)
C. monopolistic competition.
32.
Q. During an economic recovery, a lagging unemployment rate is most likely attributable to:
a)
A. businesses quickly rehiring workers.
b)
B. new job seekers entering the labor force.
c)
C. underemployed workers transitioning to higher-paying jobs.
33.
Which of the following is most likely a characteristic of a country that follows the dollarization exchange rate regime? The country:
a)
A. is able to monetize its domestic debt.
b)
B. has the currency credibility of the US dollar.
c)
C. has a term structure similar to that of the United States.
34.
Q. The short-term breakeven point of production for a firm operating under perfect competition will most likely occur when:
a)
A. price is equal to average total cost.
b)
B. marginal revenue is equal to marginal cost.
c)
C. marginal revenue is equal to average variable costs.
35.
In a country with a high level of income, as domestic income rises, it is most likely that an increase will occur in:
a)
A. the fiscal balance.
b)
B. private saving and investment.
c)
C. the trade balance.
36.
Higher than expected inflation will most likely lead to an increase in:
a)
A. the real wealth of borrowers.
b)
B. investment.
c)
C. the information content of market prices for economic agents.
37.
An exchange rate between two currencies has decreased to 1.3500. If the base currency has depreciated by 7% against the price currency, the initial exchange rate between the two currencies was closest to:
a)
A. 1.2617.
b)
B. 1.4445.
c)
C. 1.4516.
38.
Q. Companies most likely have a well-defined supply function when the market structure is:
a)
A. oligopoly.
b)
B. perfect competition.
c)
C. monopolistic competition.
39.
In theory, money neutrality holds in the long run if:
a)
A. the money supply is positively related to the velocity of circulation of money.
b)
B. increases in the money supply do not influence output and employment.
c)
C. price levels are unaffected by changes in the money supply.
40.
Q. The coefficient on the growth rate of labor (0.72) in this equation is best interpreted as:
a)
A. the labor force participation rate.
b)
B. the marginal productivity of labor.
c)
C. the share of income earned by labor.
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