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AP Macroeconomics Review

Total questions: 208

Worksheet time: 3hrs 11mins

Name
Class
Date
1.
When one decision is made, the next best alternative not selected is called
a)
economic resource
b)
opportunity cost
c)
scarcity
d)
comparative advantage
2.
Workers agree to a 10% wage increase.  Everything else remaining constant, this will cause the _______ curve to shift _____. 
a)
demand; right
b)
demand; left
c)
supply; right
d)
supply; left
3.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

4.

The current state of the economy of Te Rehunga is represented in the graph shown above.

Let point B in the options below represent the current combination of inflation and the unemployment rate.

Which of the following graphs best depicts the Phillips curve model of Te Rehunga based on this AD-AS model?

a)
b)
c)
d)
e)
5.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

6.

Tax Multiplier =

a)

MPC/MPS

b)

-1/MPS

c)

MPC/1

d)

-MPC/MPS

7.

Money or Loan Multiplier =

a)

1/rr

b)

1/ER

c)

1/DD

d)

RR

8.

The​ ​Consumer​ ​Price​ ​Index​ ​(CPI)​ ​can​ ​be​ ​defined​ ​as

a)

The​ ​market​ ​value​ ​of​ ​all​ ​final​ ​goods​ ​and​ ​services

b)

A​ ​measure​ ​of​ ​inflation​ ​based​ ​on​ ​the​ ​cost​ ​of​ ​a​ ​fixed​ ​“market​ ​basket”

9.
Which of the following people would be considered unemployed?
a)
A person who quits work to care for aging parents
b)
A person who stayed home to raise his children and now starts looking for a job
c)
A person who is qualified to teach but is driving a bus until a teaching job is available
d)
A person who works two part-time jobs but is looking for a full-time job
10.

Assume that the velocity of money in Theopolis is 3 and the aggregate supply curve is vertical at $100 million.

What impact will an increase in the money supply have on real output?

a)

Real output will increase by 30%

b)

Real output will increase by 10%

c)

Real output will increase by 3%

d)

Real output will increase by 3/10%

e)

There will be no impact on real output

11.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

12.

The natural rate of unemployment in Mithrim is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

a)

Increasing taxes; lower the discount rate

b)

Decreasing taxes; buy bonds

c)

Increase government spending; sell bonds

d)

Increasing taxes; increasing government spending

e)

Increasing taxes; open market sales

13.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

14.

The economy of Rivendell experienced the AD shock shown in this graph.

Which of the following combinations of monetary and fiscal policy would be appropriate to combat the effect on the price level shown in this graph?

a)

Increase taxes; open market sales

b)

Sell bonds; increase the reserve requirement

c)

Decrease taxes; increase government spending

d)

Decrease taxes; decrease the reserve requirement

e)

Increase taxes; decrease the reserve requirement

15.
What type of GDP is calculated with the current year's prices?
a)
Nominal GDP
b)
Real GDP
c)
GDP per capita
d)
Base Year GDP
16.

This graph shows the trade-offs facing an economy that produces only two goods.

a)

Production possibilities curve

b)

Business cycle

c)

AD/AS graph

d)

Phillips Curve

17.

Point ___ is impossible with existing resources and technology.

a)

A

b)

B

c)

C

d)

D

e)

X

18.

Which of the following is included in the calculation of GDP?

a)

taxes

b)

intermediate goods

c)

used goods

d)

domestically produced capital goods

19.
The short-run aggregate supply curve will shift to the right when
a)
energy prices increase
b)
government regulation increases
c)
prices of inputs decrease
d)
productivity rates decrease
20.

If Mr. Woodward's disposable income increases from $600 to $650 and her level of personal consumption expenditures increase from $480 to $520, you may conclude that her marginal propensity to

a)

consume is 0.8

b)

consume is 0.4

c)

save is 0.8

d)

save is 0.4

21.
In the Keynesian aggregate-expenditure model, if the MPC is 0.75 and gross investment increases by $6 billion, equilibrium GDP will increase by
a)
$6 billion
b)
$8 billion
c)
$1.25 billion
d)
$24 billion
22.
An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the shortrun?
a)
Decrease Real GDP; Decrease Price Level
b)
Increase Real GDP; Decrease Price Level
c)
Decrease Real GDP; Increase Price Level
d)
Increase Real GDP; Increase Price Level
23.

This group is responsible for implementing fiscal policy

a)

Supreme Court

b)

Federal Reserve Board

c)

Council of Economic Advisors

d)

U.S. Congress

24.
Which would be least appropriate for expansionary fiscal policy
a)
Increase taxes
b)
Decrease taxes
c)
Increase government spending
d)
Combination of decreasing taxes and increasing spending
25.
The goal of fiscal policy is to achieve full employment by shifting this curve:
a)
Long Run Aggregate Supply
b)
Aggregate Demand
c)
Short Run Aggregate Supply
d)
Phillips
26.

If the MPC is .80, the government spending multiplier is:

a)

4

b)

5

c)

3

d)

2

27.
Why will government have to change taxes by a larger magnitude than they would change spending.
a)
Some spending leaks out of the economy through international trade
b)
Some portions of tax cuts are saved and not spent
c)
Government spending is too inefficient a process
d)
Tax cuts are always superior to government spending
28.
Workers agree to a 10% wage increase.  Everything else remaining constant, this will cause the _______ curve to shift _____. 
a)
demand; right
b)
demand; left
c)
supply; right
d)
supply; left
29.

The current state of the economy of Te Rehunga is represented in the graph shown above.

Let point B in the options below represent the current combination of inflation and the unemployment rate.

Which of the following graphs best depicts the Phillips curve model of Te Rehunga based on this AD-AS model?

a)
b)
c)
d)
e)
30.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

31.

Tax Multiplier =

a)

MPC/MPS

b)

-1/MPS

c)

MPC/1

d)

-MPC/MPS

32.

Money or Loan Multiplier =

a)

1/rr

b)

1/ER

c)

1/DD

d)

RR

33.
Which of the following people would be considered unemployed?
a)
A person who quits work to care for aging parents
b)
A person who stayed home to raise his children and now starts looking for a job
c)
A person who is qualified to teach but is driving a bus until a teaching job is available
d)
A person who works two part-time jobs but is looking for a full-time job
34.

The natural rate of unemployment in Mithrim is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

a)

Increasing taxes; lower the discount rate

b)

Decreasing taxes; buy bonds

c)

Increase government spending; sell bonds

d)

Increasing taxes; increasing government spending

e)

Increasing taxes; open market sales

35.

The economy of Rivendell experienced the AD shock shown in this graph.

Which of the following combinations of monetary and fiscal policy would be appropriate to combat the effect on the price level shown in this graph?

a)

Increase taxes; open market sales

b)

Sell bonds; increase the reserve requirement

c)

Decrease taxes; increase government spending

d)

Decrease taxes; decrease the reserve requirement

e)

Increase taxes; decrease the reserve requirement

36.

If Mr. Woodward's disposable income increases from $600 to $650 and her level of personal consumption expenditures increase from $480 to $520, you may conclude that her marginal propensity to

a)

consume is 0.8

b)

consume is 0.4

c)

save is 0.8

d)

save is 0.4

37.
An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the shortrun?
a)
Decrease Real GDP; Decrease Price Level
b)
Increase Real GDP; Decrease Price Level
c)
Decrease Real GDP; Increase Price Level
d)
Increase Real GDP; Increase Price Level
38.

This group is responsible for implementing fiscal policy

a)

Supreme Court

b)

Federal Reserve Board

c)

Council of Economic Advisors

d)

U.S. Congress

39.
Which would be least appropriate for expansionary fiscal policy
a)
Increase taxes
b)
Decrease taxes
c)
Increase government spending
d)
Combination of decreasing taxes and increasing spending
40.
Why will government have to change taxes by a larger magnitude than they would change spending.
a)
Some spending leaks out of the economy through international trade
b)
Some portions of tax cuts are saved and not spent
c)
Government spending is too inefficient a process
d)
Tax cuts are always superior to government spending
41.
Each individual on food stamps in Delaware can receive up to $194 a month.  Is this included in government spending?
a)
Yes - Government spending
b)
Yes - Consumer Spending
c)
No - Intermediate Goods
d)
No - Tranfer Payment
42.
Who is most likely to be hurt by inflation?
a)
someone who borrowed money
b)
a retiree on a fixed income
c)
a business owner
d)
the U.S. government
43.
Which of the following would not affect the size of real GDP?
a)
Consumer purchase of a new car for personal use.
b)
Government purchase of a new car for the military
c)
Consumer purchase of a rare renaissance painting. 
d)
Business purchase of a new car for a delivery vehicle.
44.
Which of the following people would be considered structurally unemployed? 
a)
Unemployed auto assembly line factory worker during a recession.
b)
A high school student who mows lawns during the summer, but is out of work because it is winter
c)
An auto assembly line worker who quit her job to go back to school full-time to improve her job skills
d)
Unemployed auto assembly line factory worker who was replaced with a robot
45.
Which of the following will most likely occur during the expansionary phase of the business cycle? 
a)
Real GDP rises and unemployment falls.
b)
Real GDP rises and unemployment rises. 
c)
Real GDP declines and inflation rises.
d)
Interest rates rise and the number of business failures rise. 
46.

The value of the final goods and services produced in a given year expressed in terms of the prices in a reference base year.

a)

Real GDP

b)

Gross Domestic Product

c)

Business Cycle

d)

Nominal GDP

47.

The economy of Mithrim is experiencing a severe recession. As a result, the government is conducting expansionary fiscal policy. The central bank of Mithrim is considering expansionary monetary policy to aid in the recovery efforts.

Which of the following is an example of a monetary policy action that would work with the expansionary fiscal policy to close the output gap?

a)

Increasing government spending

b)

Increasing the discount rate

c)

Increase taxes

d)

Selling bonds

e)

Open market purchases

48.

Assume that the velocity of money in Theopolis is 3 and the aggregate supply curve is vertical at $100 million.

What impact will an increase in the money supply have on real output?

a)

Real output will increase by 30%

b)

Real output will increase by 10%

c)

Real output will increase by 3%

d)

Real output will increase by 3/10%

e)

There will be no impact on real output

49.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

50.

The natural rate of unemployment in Mithrim is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

a)

Increasing taxes; lower the discount rate

b)

Decreasing taxes; buy bonds

c)

Increase government spending; sell bonds

d)

Increasing taxes; increasing government spending

e)

Increasing taxes; open market sales

51.

The current state of the economy of Te Rehunga is represented in the graph shown above.

Let point B in the options below represent the current combination of inflation and the unemployment rate.

Which of the following graphs best depicts the Phillips curve model of Te Rehunga based on this AD-AS model?

a)
b)
c)
d)
e)
52.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

53.

The economy of Burginville has experienced high rates of inflation over the past 10 years.

According to the quantity theory of money, which of the following is the most likely explanation for the sustained inflation during this period?

a)

Better banking technology that has decreased the velocity of money

b)

Contractionary monetary policy

c)

Expansionary monetary policy

d)

Strong economic growth

e)

A money supply that has increased at the same pace as real output

54.

What is the primary cause of deflation according to monetarist theory?

a)

A stable quantity velocity of money

b)

Any decrease in the money supply.

c)

A rapidly changing velocity of money

d)

The money supply decreases faster than real output decreases.

e)

The money supply increases too rapidly for a long time.

55.

The economy of Rivendell experienced the AD shock shown in this graph.

Which of the following combinations of monetary and fiscal policy would be appropriate to combat the effect on the price level shown in this graph?

a)

Increase taxes; open market sales

b)

Sell bonds; increase the reserve requirement

c)

Decrease taxes; increase government spending

d)

Decrease taxes; decrease the reserve requirement

e)

Increase taxes; decrease the reserve requirement

56.

The economy of Mithrim is experiencing a severe recession. As a result, the government is conducting expansionary fiscal policy. The central bank of Mithrim is considering expansionary monetary policy to aid in the recovery efforts.

Which of the following is an example of a monetary policy action that would work with the expansionary fiscal policy to close the output gap?

a)

Increasing government spending

b)

Increasing the discount rate

c)

Increase taxes

d)

Selling bonds

e)

Open market purchases

57.

King Thranduil of the Woodland Realm is trying to rescue the kingdom from a severe recession by engaging in expansionary fiscal policy. As a result of the expansionary fiscal policy, the Woodland Realm now has a budget deficit. Meanwhile, the president of the central bank is Smaug, who wants to maintain a steady interest rate.

What is the appropriate action for the central bank to take in order to reduce the impact of the expansionary fiscal policy on interest rates?

a)

Increase taxes

b)

Decrease taxes

c)

Increase the reserve requirement

d)

Buy bonds

e)

Sell bonds

58.

The economy of Isengard is experiencing high inflation and a rate of unemployment below the natural rate.

Which of the following combination of fiscal and monetary policy actions would be the most appropriate response to this output gap?

a)

Decrease government spending; decrease the money supply

b)

Buy bonds; decrease the reserve ratio

c)

Increase government spending; decrease taxes

d)

Decrease taxes; increase the money supply

e)

Increase taxes; buy bonds

59.

Which of the following actions would most likely lead to a shift to the left of the short-run Phillips curve, or SRPC?

a)

A strong central bank commitment to reducing inflation

b)

A strong central bank commitment to decreasing cyclical unemployment

c)

A strong government commitment to engage in expansionary fiscal policy

d)

A strong central bank commitment to increasing the money supply

e)

A strong government commitment to reducing structural unemployment

60.

Which of the following represents how a positive aggregate demand shock would impact the Phillips curve model?

a)
b)
c)
d)
e)
61.

What causes the long-run Phillips curve to shift?

a)

Changes in cyclical unemployment

b)

Changes in expectations about inflation

c)

Changes in structural or frictional unemployment

d)

Shifts in the short-run aggregate supply (SRAS) curve

e)

Shifts in the aggregate demand curve

62.

The natural rate of unemployment in Elizaland is 5%. The citizens of Elizaland expected inflation to be 2% and unemployment to be 5% during 2018. However, inflation turned out to be 6% and unemployment 1.5%.

What happens in the long run as people begin to expect a permanantly higher rate of inflation?

a)

The short-run Phillips curve (SPRC) shifts to the left.

b)

The long-run Phillips curve (LRPC) shifts to the left

c)

The long-run Phillips curve (LRPC) shifts to the right

d)

A movement to the right along the short-run Phillips curve (SRPC)

e)

The short-run Phillips curve (SRPC) shifts to the right

63.

According to the quantity theory of money, changes in which variable(s) from the equation of exchange determine(s) the rate of inflation in the long run?

a)

Y only

b)

V only

c)

Y and V

d)

M only

e)

P only

64.

According to monetarist theory, what happens if the money supply increases more rapidly than real output?

a)

The velocity of money increases.

b)

Deflation occurs.

c)

The velocity of money decreases.

d)

Inflation occurs.

e)

Nominal output decreases.

65.

Assume that wages and prices are fully flexible and all inflation is correctly anticipated.

According to the quantity theory of money, what would be the impact of expansionary monetary policy on real output and the price level?

a)

Real output increases, no impact on price level

b)

Real output decreases, price level decreases

c)

Real output increases, price level increases

d)

No impact on real output, price level increases

e)

No impact on real output, no impact on the price level

66.

According to the quantity theory of money, which of the following best describes what determines the rate of inflation in the long run?

a)

The rate of change of the velocity of money

b)

The rate of growth of the money supply

c)

The growth of the price level

d)

The growth of real GDP per capita

e)

The rate of inflation is constant in the long-run

67.

The economy of Burginville has been running budget deficits which it paid for by borrowing.

What is the likely impact of government borrowing on spending on capital goods and economic growth in Burginville?

a)

Increase in spending on capital goods; no effect on economic growth

b)

A decrease in spending on capital goods; a decrease in economic growth

c)

Increase in spending on capital goods; an increase in economic growth

d)

No effect on spending on capital goods or economic growth

e)

A decrease in spending on capital goods; no effect on economic growth

68.

An economy has a budget deficit, and you want to show the impact of the budget deficit on the real interest rate.

What model would you use, and what would be the impact on the interest rate?

a)

The AD-AS model; the real interest rate is not impacted

b)

The money market; the real interest rate decreases

c)

The money market; the real interest rate is not impacted

d)

The loanable funds market; real interest rate decreases

e)

The loanable funds market; real interest rate increases

69.

The government of Tatooine had a balanced budget last year. However, an unanticipated recession triggered by the wanton destruction of Jabba’s Palace leads to a decrease in tax revenues, even though government spending and transfer payments did not change.

What happens to the budget balance and national debt in Tatooine as a result of the decrease in tax revenues?

a)

There is a budget deficit; the debt will increase

b)

There is a budget deficit; no impact on national debt

c)

There is a budget surplus; no impact on national debt

d)

There is a budget surplus; national debt will decrease

e)

There is a balanced budget; national debt will increase

70.

Which of the following changes would cause a balanced budget to move to a budget surplus?

a)

An increase in transfer payments

b)

A decrease in transfer payments

c)

An increase in government spending

d)

A decrease in tax revenue

e)

A decrease in national income

71.

The AD-AS model of Snaximus changed as shown in the graph above.

Which of the following illustrates what would also be occuring in Snaximus’ production possibilities curve?

a)
b)
c)
d)
e)
72.

The average years of education per person in Islandia increased by 3 years over the period 2010 - 2015.

What determinant of productivity changed, and how would that impact Islandia’s long-run aggregate supply curve (LRAS)?

a)

Technology increased; no impact on LRAS

b)

Technology increased; LRAS increased

c)

Human capital increased; LRAS shifts right

d)

Labor increased; no impact on LRAS

e)

Capital increased; LRAS increased

73.

Which of the following measures is typically used to approximate the productivity of an individual unit of labor in a country?

a)

The consumer price index (CPI)

b)

Real GDP

c)

Real GDP per capita

d)

Nominal GDP

e)

The unemployment rate

74.

The aggregate production function is used to describe which of the following relationships?

a)

The tradeoff between the production of capital goods and consumption goods

b)

The relationship between output supplied and the price level

c)

The relationship between unemployment and inflation in the long run

d)

The tradeoff between unemployment and inflation in the short run

e)

The relationship between output and inputs (labor, capital, and technology)

75.

Winterfell and Dorne have no restrictions on the flow of financial capital. An increase in business optimism in Dorne has lead to a higher real interest rate in Dorne.

What effect does this have on real interest rates and long-run economic growth in Winterfell?

a)

Lower interest rates and higher economic growth in Winterfell.

b)

Higher interest rates and lower economic growth

c)

Lower interest rates and lower economic growth.

d)

Neither interest rates nor economic growth in Winterfell are affected.

e)

Higher interest rates and higher economic growth

76.

Which of the following is LEAST likely to be associated with a higher rate of economic growth?

a)

strong protection of property rights

b)

encouraging the replenishment of natural resources

c)

higher consumption

d)

taxes on savings and investment

e)

policies that discourage immigration

77.

Which of the following is the most likely effect of a government policy that leads to more development of technology used by firms throughout an economy?

a)

a negative supply shock and a higher price level

b)

a positive demand shock and a lower growth rate

c)

a positive supply shock and higher growth rate

d)

a positive supply shock and a higher price level

e)

a negative demand shock and a lower price level

78.

Higher taxes have reduced disposable income in Fredland.

What happens to household savings and the real interest rate in the short run, and potential output in the long run?

a)

Household saving increases; the real interest rate decreases, and potential output increases.

b)

Household saving decreases; the real interest rate decreases, and potential output increases.

c)

Household saving decreases; the real interest rate decreases, and potential output increases.

d)

Household saving decreases; the real interest rate increases, and potential output decreases.

e)

Household saving increases; the real interest rate decreases, and potential output is unaffected.

79.

Which of the following policies is most likely to increase potential output in the long run?

a)

Policies that encourage more household spending.

b)

Policies that encourage more saving for retirement.

c)

Taxes on business investment.

d)

Weakening protections on intellectual property

e)

Taxes on the gains from the sale of assets.

80.

The current rate of unemployment in Hamiltonia is 7%. Economists estimate that frictional unemployment is 4% and structural unemployment is 1%.

Which of the following best describes the amount of cyclical unemployment in Hamiltonia and current output in the economy?

a)

Cyclical unemployment is 2%; output is more than full employment output.

b)

Cyclical unemployment is 0%; output is less than full employment output.

c)

Cyclical unemployment is 2%; output is less than full employment output.

d)

Cyclical unemployment is 0%; output is equal to full employment output.

e)

Cyclical unemployment is 7%; output is equal to full employment output.

81.

Before experiencing the supply shock shown in this graph, Maxistan was in long-run equilibrium. The marginal propensity to consume (MPC) Maxistan is 0.75.

Which of the following is a fiscal policy action that would be the best choice to return the economy to full employment output?

a)

increase taxes by $75 million

b)

decrease taxes by $25 million

c)

decrease government spending by $25 million

d)

increase government spending by $25 million

e)

decrease government spending by $75

82.

Justinia is a country that produces three goods: guitars, physics books, and sandals.

Which of the following would definitely cause an increase in nominal GDP but not a change real GDP in Justinia?

a)

The quantity of goods produced increases; prices stay the same

b)

The quantity of goods produced increases; prices decrease

c)

The quantity of goods produced increases; prices increase

d)

The quantity of goods produced decreases; prices stay the same

e)

The quantity of goods produced stays the same; prices increase

83.

Which of the following would be the FIRST change to occur when a central bank conducts open market purchases of bonds?

a)

Aggregate demand increases

b)

Bank reserves increase

c)

The money supply increases

d)

The monetary supply decreases

e)

The interest rate decreases

84.

Ygritte loaned Mans $100. Mans paid her back $110

one year later. The annual rate of inflation was

3%.

What was the real interest rate that Ygritte earned on this loan?

a)

$10

b)

10%

c)

$100

d)

7%

e)

3%

85.

You borrow $200 from the First Bank of Westeros to purchase Kraken repellant. The bank charges a fixed nominal interest rate of 18% per year and you will repay them in one year. You and the bank both anticipate that there will be 7% inflation. However, after the loan agreement is signed, the rate of inflation turns out to be 9%.

Who is hurt by this unanticipated inflation, and why are they hurt by it?

a)

The bank is hurt because the value of what is repaid has decreased

b)

You are hurt because the value of what is repaid has decreased

c)

The bank is hurt because the value of what is repaid has increased

d)

You are hurt because the value of what is repaid has increased

e)

We cannot tell without more information

86.

Which of the following would cause the value of a nation's GDP to increase in a given year?

a)

An increase in sale of illegal goods in the economy

b)

Households spend more on domestic air travel

c)

An increase in the sale of used cars

d)

More people choose to stay at home to raise their children rather than using paid childcare

e)

An increase in volunteer work

87.

Which of the following best describes why the money supply curve is vertical?

a)

Individuals hold less money when interest rates increase

b)

The central bank responds to increases in the interest rate by increasing the quantity of money supplied

c)

Central banks determine the monetary base independent of the interest rate

d)

Savers want to supply more money when interest rates are high

e)

The central bank sets interest rates and changes the quantity of money accordingly

88.

How does a decrease in the price level affect real wealth and aggregate demand?

a)

Real wealth increases; the quantity of aggregate demand decreases

b)

Real wealth decreases; aggregate demand increases

c)

Real wealth increases; aggregate demand increases

d)

Real wealth increases; the quantity of aggregate demand increases

e)

Real wealth decreases; the quantity of aggregate demand increases

89.

The figure above shows the result of a change in the market for loanable funds.

Which of the following is the most likely to have caused the shift shown here?

a)

Firms invest less in plant and equipment

b)

Foreign savers view this country as a desirable place to send assets.

c)

Optimism by firms increases investment in physical capital.

d)

Domestic saving decreases.

e)

The government runs a budget surplus.

90.

A banking innovation has made it easier for people in Hamsterville to convert their assets into money. As a result, the demand for money has decreased, and this has changed the nominal interest rate.

If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that?

a)

Buy bonds.

b)

Increase the reserve requirement.

c)

Decrease taxes.

d)

Sell bonds.

e)

Lower the discount rate.

91.

If unemployed workers decide to stop looking for a job and instead enroll in further education, how will the number of employed workers and the unemployment rate change?

a)

The number of employed workers does not change; the unemployment rate decreases

b)

The number of employed workers does not change; the unemployment rate does not change

c)

The number of employed workers increases; the unemployment rate decreases

d)

The number of employed workers decreases; the unemployment rate increases

e)

The number of employed workers does not change; the unemployment rate increases

92.

What is included in the monetary base?

a)

All deposits in banks and money in circulation

b)

Money held in bank vaults and money held by the public

c)

Any asset of any value including cash, stocks, and bonds

d)

Only paper currency and coins

e)

Only money held by the public

93.

Which of the following best describes what will happen to this economy in the long run?

a)

The LRAS curve will shift out and full employment output will increase from Yf to Y1.

​

b)

Wages and prices will decrease and the full employment level of output will increase

c)

Wages and prices will decrease and output will decrease from

Y1 to Yf.

​

d)

Wages and prices will decrease and output will increase from

Y1 to Yf.

e)

Wages and prices will increase and output will remain at

Y1.

94.

Assume that milk is an inferior good.

Assuming all other factors remain constant, if the income of milk buyers increases, what will happen to the equilibrium price and quantity of milk?

a)

We cannot determine what happens to price, but quantity will increase

b)

Price will decrease and quantity will increase

c)

Price will decrease and quantity will decrease

d)

Price will increase, but we cannot determine what happens to quantity

e)

Price will increase and quantity will decrease

95.
a)

P increased


Q unknown

​

b)

P decreased


Q unknown

​

c)

P increased


Q stays the same

​

d)

P increased


Q increased

​

e)

Q increased


P stays the same

​

96.

a)

Neither country would be willing to buy or sell boats given these terms of trade because the prices of these goods are not given in money.

b)

Country A would want to buy boats, and Country B would want to sell boats.

c)

Country A would want to sell boats, and Country B would want to buy boats.

d)

Both countries would want to sell given these terms of trade, so there will be no exchange.

e)

Neither country would be willing to sell given these terms of trade because neither country has the comparative advantage in either good.

97.
When one decision is made, the next best alternative not selected is called
a)
economic resource
b)
opportunity cost
c)
scarcity
d)
comparative advantage
98.
Workers agree to a 10% wage increase.  Everything else remaining constant, this will cause the _______ curve to shift _____. 
a)
demand; right
b)
demand; left
c)
supply; right
d)
supply; left
99.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

100.

The current state of the economy of Te Rehunga is represented in the graph shown above.

Let point B in the options below represent the current combination of inflation and the unemployment rate.

Which of the following graphs best depicts the Phillips curve model of Te Rehunga based on this AD-AS model?

a)
b)
c)
d)
e)
101.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

102.

Tax Multiplier =

a)

MPC/MPS

b)

-1/MPS

c)

MPC/1

d)

-MPC/MPS

103.

Money or Loan Multiplier =

a)

1/rr

b)

1/ER

c)

1/DD

d)

RR

104.

The​ ​Consumer​ ​Price​ ​Index​ ​(CPI)​ ​can​ ​be​ ​defined​ ​as

a)

The​ ​market​ ​value​ ​of​ ​all​ ​final​ ​goods​ ​and​ ​services

b)

A​ ​measure​ ​of​ ​inflation​ ​based​ ​on​ ​the​ ​cost​ ​of​ ​a​ ​fixed​ ​“market​ ​basket”

105.
Which of the following people would be considered unemployed?
a)
A person who quits work to care for aging parents
b)
A person who stayed home to raise his children and now starts looking for a job
c)
A person who is qualified to teach but is driving a bus until a teaching job is available
d)
A person who works two part-time jobs but is looking for a full-time job
106.

Assume that the velocity of money in Theopolis is 3 and the aggregate supply curve is vertical at $100 million.

What impact will an increase in the money supply have on real output?

a)

Real output will increase by 30%

b)

Real output will increase by 10%

c)

Real output will increase by 3%

d)

Real output will increase by 3/10%

e)

There will be no impact on real output

107.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

108.

The natural rate of unemployment in Mithrim is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

a)

Increasing taxes; lower the discount rate

b)

Decreasing taxes; buy bonds

c)

Increase government spending; sell bonds

d)

Increasing taxes; increasing government spending

e)

Increasing taxes; open market sales

109.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

110.

The economy of Rivendell experienced the AD shock shown in this graph.

Which of the following combinations of monetary and fiscal policy would be appropriate to combat the effect on the price level shown in this graph?

a)

Increase taxes; open market sales

b)

Sell bonds; increase the reserve requirement

c)

Decrease taxes; increase government spending

d)

Decrease taxes; decrease the reserve requirement

e)

Increase taxes; decrease the reserve requirement

111.
What type of GDP is calculated with the current year's prices?
a)
Nominal GDP
b)
Real GDP
c)
GDP per capita
d)
Base Year GDP
112.

This graph shows the trade-offs facing an economy that produces only two goods.

a)

Production possibilities curve

b)

Business cycle

c)

AD/AS graph

d)

Phillips Curve

113.

Point ___ is impossible with existing resources and technology.

a)

A

b)

B

c)

C

d)

D

e)

X

114.

Which of the following is included in the calculation of GDP?

a)

taxes

b)

intermediate goods

c)

used goods

d)

domestically produced capital goods

115.
The short-run aggregate supply curve will shift to the right when
a)
energy prices increase
b)
government regulation increases
c)
prices of inputs decrease
d)
productivity rates decrease
116.

If Mr. Woodward's disposable income increases from $600 to $650 and her level of personal consumption expenditures increase from $480 to $520, you may conclude that her marginal propensity to

a)

consume is 0.8

b)

consume is 0.4

c)

save is 0.8

d)

save is 0.4

117.
In the Keynesian aggregate-expenditure model, if the MPC is 0.75 and gross investment increases by $6 billion, equilibrium GDP will increase by
a)
$6 billion
b)
$8 billion
c)
$1.25 billion
d)
$24 billion
118.
An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the shortrun?
a)
Decrease Real GDP; Decrease Price Level
b)
Increase Real GDP; Decrease Price Level
c)
Decrease Real GDP; Increase Price Level
d)
Increase Real GDP; Increase Price Level
119.

This group is responsible for implementing fiscal policy

a)

Supreme Court

b)

Federal Reserve Board

c)

Council of Economic Advisors

d)

U.S. Congress

120.
Which would be least appropriate for expansionary fiscal policy
a)
Increase taxes
b)
Decrease taxes
c)
Increase government spending
d)
Combination of decreasing taxes and increasing spending
121.
The goal of fiscal policy is to achieve full employment by shifting this curve:
a)
Long Run Aggregate Supply
b)
Aggregate Demand
c)
Short Run Aggregate Supply
d)
Phillips
122.

If the MPC is .80, the government spending multiplier is:

a)

4

b)

5

c)

3

d)

2

123.
Why will government have to change taxes by a larger magnitude than they would change spending.
a)
Some spending leaks out of the economy through international trade
b)
Some portions of tax cuts are saved and not spent
c)
Government spending is too inefficient a process
d)
Tax cuts are always superior to government spending
124.
The cost of borrowed money, usually expressed as a percentage.
a)
interest
b)
savings plan
c)
scarce
d)
purchase
125.
Amount of money originally borrowed
a)
Mortgage
b)
Principal 
c)
Annual percentage rate (APR)
d)
Finance company
126.
What does CD stand for when talking about investments?
a)
Calculated Dividend
b)
Certificate of Deposit
c)
Central Dollar
d)
Current Deposit
127.
A mutual fund allows investments to be ___________.
a)
Secured
b)
Guaranteed
c)
Diversified
d)
Minimal
128.
Because mutual funds spread your investment around in multiple stocks and bonds, they are a great example of this term
a)
diversification
b)
overdraft
c)
debt
d)
beneficiary
129.
This term refers to the original amount of a loan OR the original amount of money invested. 
a)
Principal
b)
Interest
c)
Rebate
d)
Fixed Rate
130.
This is just a savings account with a slightly higher interest rate because the saver commits to a longer saving period for a set amount deposited.
a)
C.D.
b)
debt
c)
beneficiary
131.
This is an obligation of repayment, usually including principal plus interest; any time you owe someone money.
a)
compound interest
b)
emergency fund
c)
APR
d)
debt
132.
The availability of money; how quickly you can convert it into cash in your hand is its _______.
a)
diversity
b)
liquidity
c)
yield
d)
gratuity
133.
Something of value used to secure a loan 
a)
Finance charge
b)
Unsecured loan
c)
Collateral
d)
Interest
134.
Amount of money a borrower must pay for the usage of someone else’s money
a)
Finance charge
b)
Unsecured loan
c)
Collateral 
d)
Interest
135.
What happens if you do not pay a credit card bill on time?
a)
Use your debit card
b)
You go into debt
c)
Declare bankrupty
d)
Pay interest
136.
Which card takes the money out of your account immediately?
a)
Credit 
b)
Debit
137.
Which bank account earns you the most interest?
a)
Savings
b)
Checking
c)
Certificate of Deposit
138.
Who pays interest on a loan?
a)
The borrower
b)
The bank
139.
Who pays interest when you deposit money in the bank?
a)
The depositor
b)
The bank
140.
To measure the stock market as a whole people look to 
a)
Dow Jones
b)
Stockbrokers
c)
Individual stocks
d)
Unemployment rate
141.
Stock brokers can a portion of the profit they make, this is called
a)
Commutation
b)
Interest
c)
Commission
d)
S&P 500
142.
Bad credit can affect your ability to 
a)
Buy a home
b)
Get a job
c)
Get a loan
d)
All of the above
143.
What will you pay back if you borrow $
a)
principal only
b)
interest only
c)
interest and finance charges
d)
principal + interest
144.
The least amount of money you can pay on a credit card per month.
a)
Credit Limit
b)
Minimum Payment
c)
Annual Percentage Rate
d)
Opportunity Cost
145.
What do debit cards and checks have in common? 
a)
The money comes directly out of your account
b)
You can pay the full amount later
c)
You are really taking out a small loan
146.
Which of the following best describes what dividends are?
a)
The increased value of a stock.
b)
A periodic payment to the owners of a stock.
c)
A reward for selecting good stocks.
147.
Money owed to a person or a business
a)
Debit
b)
Credit
c)
Debt
d)
Late Fee
148.
In general, the higher the potential return on an investment, the riskier the investment.
a)
True
b)
False
149.
If a bank pays 3% interest on savings, how much interest will it charge for loans?
a)
3%
b)
less than 3%
c)
more than 3%
d)
the discount rate
150.

Eric purchased a movie ticket with his card. This money will come straight out of his checking account. What card did he use?

a)

Credit Card

b)

Debit Card

c)

Gift Card

d)

Rewards Card

151.

In the past 12 months, Mia has made 4 late payments on her credit card. How will this affect her credit score?

a)

Her score will go up

b)

Her score will stay the same.

c)

She will likely get more credit card offers.

d)

Her credit score will go down.

152.
The advantage of a 30 year mortgage over a 15 year mortgage is that you pay less over the life of a loan
a)
True
b)
False 
c)
Maybe
153.
Which is an asset?
a)
Mortgage
b)
Balance on a credit card or loan
c)
Boat loan
d)
Stocks you own
154.
Example of a Liability:
a)
Boat
b)
Insurance Payment
c)
Electric Bill
d)
Snowmobile Loan
155.
Interest is:  
a)
The cost of borrowing money 
b)
A good thing to have to pay
c)
The amount of money that you borrow to buy something 
d)
 A word that we used in class but has no real meaning 
156.
Maria and Sara borrow $15,000 from the same bank to buy the same kind of car. Maria's credit score is 732 and Sara's credit score is 588. Who is likely to pay the lower finance charge?
a)
They will pay the same because they are borrowing from the same bank
b)
Maria
c)
Sara
d)
They will pay the same because they are buying the same kind of car
157.
Choose the best suggestion for building and maintaining a good credit score
a)
Have money in savings and protected against identity theft
b)
Keep debt low and pay bills on time
c)
Make safe investments and set clear financial goals
d)
Comparison shop and follow a budget
158.
A loan can be denied by a lender because of a person's-
a)
education
b)
health
c)
credit history
d)
gender
159.
The U.S. can produce 10 ipads or 20 phones.  China can produce 20 ipads or 30 phones. Who should produce what?
a)
U.S.-ipads
China- phones
b)
U.S. phones
China- ipads
c)
both should produce ipads
d)
they should not specialize
160.
The US can produce 1 ton of sugar using 4 acres of land, or they can produce 1 ton of avocados using 6 acres. 
Ecuador can produce 1 ton of sugar using 5 acres of land or 1 ton of avocados using 4 acres. 
Which country should produce avocados? 
a)
Ecuador
b)
US
c)
not enough information
161.
The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the absolute advantage in producing airplanes? 
a)
Japan
b)
US
162.
Country X can manufacture a particular product better and at a lower cost than country Y can.
What conclusion can be drawn from this situation?
a)
Country X has solved the problem of scarcity.
b)
Country X should discontinue making that product.
c)
Country Y should try to produce the same product. 
d)
Country X should sell that product to Country Y.
163.
Suppose that in one week Sam can knit 5 sweaters or make 4 blankets and Rob can knit 10 sweaters or make 6 blankets. Which of the following is true?
a)
Sam has an absolute advantage in making blankets
b)
Sam has neither a comparative nor an absolute advantage in knitting sweaters or making blankets
c)
Sam has a comparative advantage in making blankets
d)
Sam has a comparative advantage in knitting sweaters
164.
The diagram shows the production possibilities curve for Country Y. Which of the following statements is true?
a)
If Country Y is producing at point C, it is using all its resources efficiently
b)
The opportunity cost of producing more machines is constant
c)
Country Y cannot produce at point E
d)
The most efficient point of production is point D
165.
The simplified production possibilities curves for country A and B are shown. Which one of the following statements is correct?
a)
Country A has the comparative advantage in both goods
b)
Country A has the comparative advantage in chairs & Country B has the comparative advantage in shirts
c)
Country B has the absolute advantage in shirts only
d)
Country A has the comparative advantage in shirts & Country B has the comparative advantage in chairs
166.
Improvements in technology for producing all goods must result in:
a)
An inward shift in the production possibilities curve 
b)
A flatter production possibilities curve 
c)
An outward shift in the production possibilities curve 
d)
A steeper production possibilities curve 
167.
If nations specialize according to their comparative advantage and engage in trade with each other, each nation can:
a)
Consume outside its production possibilities curve 
b)
Produce outside its production possibilities curve 
c)
Shift its production possibilities curve to the right 
d)
Produce more of all goods 
168.
Based on the table provided, which one of the following statements is correct?
a)
Japan has the absolute advantage in producing cars
b)
Japan has the comparative advantage in producing cars
c)
The United States has the absolute advantage in producing both cars and computers
d)
The opportunity cost of producing a car in Japan is 1/2 a computer
169.
The more valuable currency has
a)
depreciated
b)
appreciated
c)
depleted
d)
amortizes
170.
When a country's currency appreciates, its exports ____
a)
double
b)
become cheaper
c)
become more expensive
d)
Drop by at least 1/2
171.
Difference between sale of assets to foreigners and purchases of assets from foreigners is called_____
a)
financial account
b)
exchange account
c)
international trade
d)
current account
172.
A country's ____ accounts are a summary of their transactions with other countries
a)
Exchange
b)
Balance of payment
c)
Income statement
d)
line of credit
173.
The price of one nation's currency expressed in terms of another's currency is called
a)
world price
b)
exchange rate
c)
purchasing power parity
d)
terms of trade
174.

What is a 'Fixed Exchange Rate'

a)

the government/central bank entirely or predominantly determines the exchange rate.

b)

the forex market entirely or predominantly determines the exchange rate.

c)

the trading partners entirely or predominantly determines the exchange rate.

d)

the importing countries entirely or predominantly determines the rate.

175.

A floating exchange rate is a regime where the currency price is set by the

a)

forex market based on demand for the currency compared with other currencies.

b)

forex market based on supply and demand compared with other currencies.

c)

central banking authority

d)

the country who is trading with our country

176.

What is the difference between a fixed and a floating exchange rate?

a)

A fixed exchange rate is set by the monetary authority with respect to a foreign currency or a basket of foreign currencies, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.

b)

There is no difference between them, both determined by the central bank.

c)

A fixed exchange rate is better than the floating exchange rate in determining the exchange rate of a particular country's currency.

d)

All of the answers above.

177.
if 1 $ = Rs. 50, and if rises to 1 $ = Rs. 60 it will be called
a)
appreciation
b)
depreciation
c)
revaluation
d)
all the above
178.
If 1 $ = Rs. 50 and now it becomes 1 $ = Rs 40 it will be called 
a)
Depreciation
b)
appreciation
c)
devaluation
d)
none of the above
179.

The graph shows a(n)

a)

depreciation of the dollar and appreciation of the Euro.

b)

appreciation of the dollar and depreciation of the Euro.

c)

appreciation of the dollar and appreciation of the Euro.

d)

depreciation of the dollar and depreciation of the Euro.

180.

The shift in the graph could be caused by

a)

an increase in the Supply of Euros.

b)

an increase in the Demand for Euros.

c)

a decrease in the Supply of Euros.

d)

the crowding out effect.

181.

The shift in the graph could be caused by

a)

an increase in the Supply of dollars.

b)

deflation in Europe.

c)

people in Europe become wealthier.

d)

inflation in the US.

e)

European companies launch new popular products.

182.

The shift in the graph could be caused by

a)

interest rates rising in Mexico.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

the launch of a popular product by an American company.

e)

inflation in the US.

183.

All of the following could cause the shift in the graphs for the Japanese Yen and US Dollar except:

a)

an increase in interest rates in the US.

b)

the release of hot new video game console by Japanese producer Nintendo.

c)

speculators desiring Japanese currency.

d)

inflation in the US.

e)

an increase in GDP in the US.

184.

What could cause the shift in the graphs for the Japanese Yen and US Dollar?

a)

deflation in the US.

b)

inflation in Japan.

c)

Japanese company Sony creates a holographic TV system.

d)

a decrease in Japenese interest rates.

e)

an increase in the Japanese GDP.

185.

The shift in the graph would cause

a)

a US trade deficit.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

an appreciation of the dollar.

e)

inflation in the US.

186.

An increase in interest rates in the US would cause

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

187.

A recession in the US would cause

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

188.

Speculators for-see a future increase in the Brazilian GDP we would expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

189.

Brazilians decide to travel in massive tours at Orlando area theme parks, we expect the following in the ForEx market

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

190.

Massive inflation strikes the US, we expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

191.

A large increase in the value of real estate occurs in Brazil making Brazilians feel wealthier. We expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

192.

Real incomes rise in the US, we expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

193.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
The U.S. increase imports of tractor wheels from Canada. 
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
194.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
A Ukrainian businesswoman buys a majority share of ownership in a U.S. clothing company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
195.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
An American working in Saudi Arabia sends his wife, who lives in Atlanta, money so she can buy a new car.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
196.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
An American receives quarterly dividend payments (profits) from stock she owns in a German company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
197.
An increase in price level in the U.S. relative it its trading partners will cause the U.S. dollar to __________ on the foreign exchange market, and Americans will __________ the purchase of foreign made goods.  
a)
appreciate, increase
b)
appreciate, decrease
c)
depreciate, decrease
d)
depreciate, increase
198.
If Americans want to purchase more South Korean cars, the supply of dollars in the foreign exchange market will __________ and demand for the Won, the South Korean currency, will __________.
a)
increase, decrease
b)
increase, increase
c)
decrease, decrease
d)
decrease, increase
199.
An increase in stock market profits in Europe will cause the dollar to ______________ and the euro, the currency of the European Union, to __________.
a)
depreciate, depreciate
b)
depreciate, appreciate
c)
appreciate, appreciate
d)
appreciate, depreciate
200.
An increase in US deficit spending will cause a(n) __________ in domestic U.S. business investment and a(n) __________ of the U.S. dollar in foreign exchange markets. 
a)
increase, appreciation
b)
decrease, depreciation
c)
decrease, appreciation
d)
increase, depreciation
201.
The sale of U.S. treasury bonds on the open market will cause a(n) __________ in the U.S. price level and a(n) __________ of the U.S. dollar in the foreign exchange market.
a)
decrease, appreciation
b)
decrease, depreciation
c)
increase, appreciation
d)
increase, depreciation
202.
Imports involve
a)
Goods in, money in, positive in Current Account
b)
Goods in, money out, negative in Current Account
c)
Goods in, money in, positive in Financial Account
d)
Goods in, money out, negative in Financial Account
203.
Exports involve
a)
Goods out, money out, positive in Current Account
b)
Goods out, money in, positive in Current Account
c)
Goods out, money in, positive in Financial Account
d)
Goods out, money out, negative in Current Account
204.
Financial Account transactions include items such as
a)
Imports
b)
Exports
c)
Transfers & Remittances
d)
Purchase and sale of stocks and bonds
205.
Currency depreciation could be caused by
a)
Supply Increase or Demand Increase
b)
Supply Increase or Demand Decrease
c)
Supply Decrease or Demand Decrease
d)
Supply Decrease or Demand Increase
206.
Currency appreciation could be caused by
a)
Supply Increase or Demand Increase
b)
Supply Increase or Demand Decrease
c)
Supply Decrease or Demand Decrease
d)
Supply Decrease or Demand Increase
207.
Currency appreciation results in
a)
Increased exports, increased imports
b)
Decreased exports, decreased imports
c)
Increased exports, decreased imports
d)
Decreased exports, increased imports
208.
Currency depreciation results in
a)
Increased exports, increased imports
b)
Decreased exports, decreased imports
c)
Increased exports, decreased imports
d)
Decreased exports, increased imports