WorksheetsMacro Econ 04-08
Total questions: 46
Worksheet time: 23mins
Property rights refer to
the ability of people to exercise authority over the resources they own.
the right of the government to exercise authority over property owners.
the fact that some countries have greater natural resources.
a document stating the rights of ownership that accompany owning property.
Suppose that Congress were to repeal an investment tax credit. What would happen in the market for loanable funds?
a. The demand and supply of loanable funds would shift right.
b.The demand and supply of loanable funds would shift left.
c. The supply of loanable funds would shift right.
d.The demand for loanable funds would shift left
Which of the following is correct?
Policies designed to prevent imports from other countries generally increase economic growth.
Gary’s Becker proposal to pay mothers in developing countries to keep their children in school has not worked very well in practice.
Political instability can reduce foreign investment, reducing growth.
All of the above are correct.
Outward-oriented policies
None of the above are correct.
receive little support from economists, despite such policies’ success.
have generally led to high growth for the countries that pursued them
prevent countries from taking advantage of gains from trade.
Which of the following statements is FALSE?
Investment in poor countries from rich countries is one way poor countries can learn new technologies.
Adam Smith argued that peace, light taxes and a tolerable administration of justice are the keys to growth.
Malthus argued that charity and government aid was an effective way to reduce poverty.
The catch-up effect is based on the assumption of diminishing returns to capital.
On the basis of theory and empirical evidence economists have concluded several things concerning growth. Which of the following is NOT one of these conclusions?
A relatively simple way to increase growth rates permanently is to increase a country’s saving rate.
Well-established property rights that are enforced by fair and efficient courts are important to economic growth.
Growth is generally inhibited rather than promoted by policies like protective tariffs.
Countries with few natural resources still have opportunities for economic growth.
If natural resources were becoming scarcer, then we would expect their
known quantities to be falling, but they have not been.
prices to be rising relative to other prices, as they have been.
prices to be rising relative to other prices, but this has not occurred.
known quantities to be falling, as they have been.
If the production function for an economy had constant returns to scale, the labor force doubled, and all other inputs stayed the same, then real GDP would
double
stay the same
increase but by something less than double
increase by 50 percent
Y/L is
productivity
the amount of human capital
output
the availability of natural resources
Across countries, investment and growth rates are
positively related.
negatively related.
positively related for rich countries, but negatively related for poor countries.
negatively related for rich countries, but positively related for poor countries.
If there are diminishing returns to capital,
increases in the capital stock eventually decrease output.
capital produces fewer goods as it ages.
increases in the capital stock increase output by ever smaller amounts.
new ideas are not as useful as old ideas.
The logic behind the catch-up effect is that
New capital adds more to production in a country that doesn’t have much capital than in a country that already has much capital.
workers in countries with low incomes will work more hours than workers in countries with high incomes.
None of above are correct
The capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital
Henry buys a bond issued by Ralston Purina, which uses the funds to buy new machinery for one of its factories
Henry and Ralston Purina are both investing
Henry and Ralston Purina are both saving.
c. Henry is investing; Ralston Purina is saving.
d.Henry is saving; Ralston Purina is investing
The source of the supply of loanable funds
is saving and the source of demand for loanable funds is investment.
is investment and the source of demand for loanable funds is saving.
and the demand for loanable funds is saving.
and the demand for loanable funds is investment
The slope of the demand for loanable funds curve represents the
positive relation between the real interest rate and investment.
negative relation between the real interest rate and investment.
c. positive relation between the real interest rate and saving.
d.negative relation between the real interest rate and saving
The slope of the supply of loanable funds curve represents the
positive relation between the real interest rate and investment.
positive relation between the real interest rate and saving.
negative relation between the real interest rate and investment.
negative relation between the real interest rate and saving.
A higher interest rate induces people t
save more, so the supply of loanable funds slopes upward.
b.save less, so the supply of loanable funds slopes downward.
c. invest more, so the supply of loanable funds slopes upward.
invest less, so the supply of loanable funds slopes downward
If there is surplus of loanable funds, then
a. the supply for loanable funds shifts right and the demand shifts left.
b.the supply for loanable funds shifts left and the demand shifts right.
c. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases
as the interest rate rises to equilibrium.
d.neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases
as the interest rate falls to equilibrium
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest
income?
a. The supply of and demand for loanable funds would shift right.
b.The supply of and demand for loanable funds would shift left.
c. The supply of loanable funds would shift right and the demand for loanable funds would shift left.
d.None of the above are correct
a. The supply of and demand for loanable funds would shift right.
b.The supply of and demand for loanable funds would shift left.
c. The supply of loanable funds would shift right and the demand for loanable funds would shift left.
d.None of the above are correct
An increase in the budget deficit
a. changes the supply of loanable funds.
b.changes the demand for loanable funds.
c. changes both the supply of and demand for loanable funds.
d.does not influence the supply of or the demand for loanable funds.
A high price-earnings ratio indicates that either the stock i
undervalued or people have become more optimistic about the corporation’s prospects.
b.overvalued or people have become more optimistic about the corporation’s prospects.
c. overvalued or people have become less optimistic about the corporation’s prospects.
d.undervalued or people have become less optimistic about the corporation’s prospects.
If the minimum wage was currently above the equilibrium wage, than a decrease in the minimum wage would
decrease the quantity of labor demanded and increase the quantity supplied.
increase both the quantity demanded and the quantity supplied of labor.
increase the quantity of labor demanded and decrease the quantity supplied.
decrease both the quantity demanded and the quantity supplied of labor
When a union bargains successfully with an employer, in that industry
unemployment and wages increase.
unemployment and wages decrease.
unemployment increases and wages decrease.
unemployment decreases and wages increase.
The theory of efficiency wages explains why
setting wages at the equilibrium level may increase unemployment.
the most efficient way to pay workers is to pay them according to their skills.
it is efficient for firms to set wages at the equilibrium level.
it may be in the best interest of firms to offer wages that are above the equilibrium level.
Cyclical unemployment refers to
long-term trends in unemployment.
the relation between the probability of unemployment and a worker’s changing level of experience.
how often a worker is likely to be employed during her lifetime
year-to-year fluctuations of unemployment around its natural rate.
Which of the following is not a reason actual labor markets experience unemployment
flexible wages
job search
unions
minimum-wage legislation
We would predict that the more generous unemployment compensation a country has,
the longer the duration of each spell of unemployment, and the lower the unemployment rate.
the shorter the duration of each spell of unemployment, and the lower the unemployment rate.
the longer the duration of each spell of unemployment, and the higher the unemployment rate.
the shorter the duration of each spell of unemployment, and the higher the unemployment rate.
To increase the money supply, the Fed could
decrease the discount rate.
None of the above is correct.
increase the reserve requirement.
sell government bonds.
At one time, the country of Aquilonia had no banks, but had currency of $10 million. Then a banking system was established with a reserve requirement of 20 percent. The people of Aquilonia deposited half of their currency into the banking system. If banks do not hold excess reserves, what is Aquilonia’s money supply now?
25
10
30
12
If the reserve ratio is 10 percent, and banks do not hold excess reserves, when the Fed sells $10 million dollars of bonds to the public, bank reserves
increase by $1 million and the money supply eventually increases by $10 million.
increase by $10 million and the money supply eventually increases by $100 million.
decrease by $1 million and the money supply eventually increases by $10 million.
decrease by $10 million and the money supply eventually decreases by $100 million.
Which of the following is included in the M2 definition of the money supply?
money market mutual funds
large time deposits
Corporate bonds
credit cards
When the Fed conducts open market purchases,
it lends money to member banks, which decreases the money supply.
it buys Treasury securities, which decreases the money supply.
it borrows from member banks, which increases the money supply.
it buys Treasury securities, which increases the money supply.
In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent. Other things the same this should have
increased the money multiplier and decreased the money supply.
increased both the money multiplier and the money supply.
decreased the money multiplier and increased the money supply.
decreased both the money multiplier and the money supply
Which list contains only actions that increase the money supply
make open market sales, raise the reserve requirement ratio
make open market purchases, lower the reserve requirement ratio
make open market purchases, raise the reserve requirement ratio
make open market sales, lower the reserve requirement ratio
The quantity theory of money
All of the above are correct.
is a fairly recent addition to economic theory
argues that inflation is caused by too little money in the economy.
can explain both moderate and hyperinflations.
If a country had deflation,
the real interest rate would be greater than the nominal interest rate.
the real interest rate would equal the nominal interest rate.
the nominal interest rate would be greater than the real interest rate
None of the above are necessarily correct.
The Fisher effect says that
real variables are heavily influenced by the monetary system.
the growth rate of the money supply determines the inflation rate.
the nominal interest rate adjusts one for one with the inflation rate.
All of the above are correct.
If the money supply growth rate permanently increased from 5 percent to 25 percent, we would expect that inflation and nominal interest rates would both
increase by 20
increase less than 20
none of above are correct
increase more than 20
The shoeleather cost of inflation refers to
the fall in real income associated with inflation.
the time spent searching for low prices when inflation rises
the waste of resources used to maintain lower money holdings.
the increased cost to the government of printing more money.
When the money market is drawn with the value of money on the vertical axis, the value of money increases if
money demand shifts left or money supply shifts right.
either money demand or money supply shifts left.
either money demand or money supply shifts right.
money demand shifts right or money supply shifts left.
Open-market purchases by the Fed make the money supply
and the value of money increase.
decrease, which makes the value of money increase.
increase, which makes the value of money decrease.
and the value of money decrease.
Interest rates adjusted for the effects of inflation are
dichotomous variables
nominal variables
classical variables
real variables
According to the classical dichotomy, which of the following is influenced by monetary factors
nominal interest rate
unemployment
real GDP
all of the above are correct
Monetary neutrality implies that an increase in the quantity of money will
increase the price level
not affect the price level
increase the incentive to save
increase unemployment
Velocity in the country of Aquilonia is always stable. In 2002, the money supply was $100 billion, nominal GDP was $500 billion, and the real interest rate was 3 percent. In 2003, the money supply was $105 billion and real GDP did not change from its level in 2002. The nominal interest rate in 2003 was approximately
5
8
11
3
The inflation tax
taxes most those who hold the most money.
is an alternative to income taxes and government borrowing.
is the revenue created when the government prints money.
All of the above are correct.
