WorksheetsTEST BANK TCQT Final
Total questions: 71
Worksheet time: 41mins
For most macroeconomists
national income accounts and national output accounts are equal to each other.
national income accounts exceed national output accounts.
national output accounts exceed national income accounts.
it is impossible to tell whether national income accounts are equal to national output accounts.
None of the above.
For most macroeconomists,
gross national income and gross national product are the same.
gross national income exceeds gross national product.
gross national product exceeds gross national product.
it is hard to tell whether gross national income equals gross national product.
None of the above.
The highest component of GNP is
the current account.
investment.
government purchases
consumption.
None of the above.
The sale of
a used textbook does enter GNP.
a used textbook does not enter GNP, but the sale of a used house does.
both a used textbook and a used house do not enter GNP.
a used house does not enter GNP, but the sale of a used book does.
None of the above.
Which one of the following statements is the most accurate?
The sale of a used textbook does generate income for factors of production.
The sale of a used textbook does not generate income for any factor of production.
The sale of a used textbook sometimes does and sometimes does not generate income for factors of production.
It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production.
None of the above.
Which one of the following statements is the most accurate?
GNP plus depreciation is called net national product (NNP).
GNP less depreciation is called net national product (NNP).
GNP less depreciation is called net factor product (NFP).
Answers A and C are both correct.
None of the above.
National income equals GNP
less depreciation, less net unilateral transfers, less indirect business taxes.
less depreciation, plus net unilateral transfers, plus indirect business taxes.
less depreciation, less net unilateral transfers, plus indirect business taxes.
plus depreciation, plus net unilateral transfers, less indirect business taxes.
less depreciation, plus net unilateral transfers, less indirect business taxes.
GDP is supposed to measure
the volume of production within a country’s borders.
the volume of services generated within a country’s borders.
the volume of production of a country’s output.
GNP plus depreciation.
None of the above.
GNP equals GDP
minus net receipts of factor income from the rest of the world.
plus receipts of factor income from the rest of the world.
minus receipts of factor income from the rest of the world.
plus net receipts of factor income from the rest of the world.
None of the above.
Movements in GDP
and GNP usually do not differ greatly.
and GNP usually do not differ greatly, as a practical matter.
and GNP usually do differ greatly.
are usually smaller than those of GNP movements, in practice.
None of the above.
In open economies,
saving and investment are necessarily equal.
as in a closed economy, saving and investment are not necessarily equal.
saving and investment are not necessarily equal as they are in a closed economy.
saving and investment are necessarily equal contrary to the case of a closed economy.
None of the above.
Purchases of inventories by
firms are not counted in investment spending.
firms are also counted in investment spending.
households are also counted in investment spending.
households and firms are also counted in investment spending.
None of the above.
Investment is usually
more variable than consumption.
less variable than consumption.
as variable as consumption.
It is hard to tell from the data whether investment is more or less variable than consumption.
None of the above.
Any goods
purchased by federal, state, or local governments are classified as government purchases.
and services purchased only by federal government are classified as government purchases.
Government transfer payments such as social security and unemployment benefits are
included in government purchases.
not included in government purchases.
not included in government purchases, but they are included in the consumption component of GNP.
not included in government purchases, but they are part of the investment component of GNP.
None of the above.
A country’s current account
balance equals the change in its net foreign wealth.
balance equals the change in its foreign wealth.
surplus equals the change in its foreign wealth.
deficit equals the change in its foreign wealth.
None of the above.
The CA is equal to
Y – (C-I+G).
Y + (C+I+G).
Y – (C+I+G).
Y – (C+I-G).
Y – (C+I+G) = -CA, (i.e., minus the CA).
Which one of the following statements is the most accurate?
It is not hard to measure accurately a country’s net foreign wealth.
It is surprisingly hard to measure accurately a country’s net foreign wealth.
It is surprisingly hard to measure a country’s foreign wealth.
It is surprisingly hard to measure accurately a country’s foreign transactions.
None of the above.
For open economies,
S = I.
S = I +CA.
S = I – CA.
S > I + CA.
S < I + CA.
An open economy
can save only by building up its capital stock.
can save only by acquiring foreign wealth.
cannot save either by building up its capital stock or by acquiring foreign wealth.
can save either by building up its capital stock or by acquiring foreign wealth.
None of the above.
A closed economy
can save either by building up its capital stock or by acquiring foreign wealth.
can save only by building up its capital stock.
can save only by acquiring foreign wealth.
cannot save either by building up its capital stock or by acquiring foreign wealth.
None of the above.
When economists refer to the word government, they usually mean
only the federal government.
only the federal and state governments.
the federal, state, and local governments.
only the federal and local governments.
None of the above.
Disposable income is National income
less taxes collected from households and firms by the government.
plus net taxes collected from households and firms by the government.
less net taxes collected from households and firms by the government.
less net taxes collected from households by the government.
less net taxes collected from households and firms by the government.
Government savings, Sg is equal to
T – G.
T + G.
T = G.
T + G – I.
None of the above.
In a closed economy, private saving, Sp is equal to
I - (G – T).
I + (G – T).
I + (G + T).
I - (G + T).
I + (G – T) + C.
In an open economy, private saving, Sp is equal to
I - CA + (G - T).
I + CA - (G - T).
I + CA + (G - T).
I - CA - (G - T).
I + CA + (G + T).
Ricardian equivalence argues that when the government cuts taxes and raises its deficit,
consumers anticipate that they will face lower taxes later to pay for the resulting government debt.
consumers anticipate that they will receive better services from the government.
consumers anticipate that they will face higher taxes later to pay for the resulting government debt.
consumers anticipate it will affect their future taxes, in general in the direction of lowing future taxes.
None of the above.
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound?
50 dollars
60 dollars
70 dollars
62.5 dollars
40 British pounds
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.50 dollars per one British pound?
50 dollars
60 dollars
70 dollars
80 dollars
75 dollars
What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 pounds in London?
1.5 dollars per British pound
0.5 dollars per British pound
2.5 dollars per British pound
3.5 dollars per British pound
2 dollars per British pound
What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 60 dollars in New York and 30 pounds in London?
1.5 dollars per British pound
0.5 dollars per British pound
2.5 dollars per British pound
3.5 dollars per British pound
2 dollars per British pound
When a country’s currency depreciates,
foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive.
foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper.
foreigners find that its exports are cheaper; however, domestic residents are not affected.
foreigners are not affected, but domestic residents find that imports from abroad are more expensive.
None of the above.
An appreciation of a country’s currency
decreases the relative price of its exports and lowers the relative price of its imports.
raises the relative price of its exports and raises the relative price of its imports.
lowers the relative price of its exports and raises the relative price of its imports.
raises the relative price of its exports and lowers the relative price of its imports.
None of the above.
Which one of the following statements is the most accurate?
A depreciation of a country’s currency makes its goods cheaper for foreigners.
A depreciation of a country’s currency makes its goods more expensive for foreigners.
A depreciation of a country’s currency makes its goods cheaper for its own residents.
A depreciation of a country’s currency makes its goods cheaper.
None of the above.
Which one of the following statements is the most accurate? The term spot exchange rate is
misleading because even spot exchanges usually become effective only three days after a deal is struck.
misleading because even spot exchanges usually become effective only four days after a deal is struck.
misleading because even spot exchanges usually become effective only five days after a deal is struck.
misleading because even spot exchanges usually become effective only six days after a deal is struck.
misleading because even spot exchanges usually become effective only two days after a deal is struck.
Which one of the following statements is the most accurate? Trades of U.S. dollars for Canadian dollars in New York are executed with
a one-day lag.
a two-day lag.
a three-day lag.
a four-day lag.
a zero-day lag.
for Canadian dollars in New York are executed with
a one-day lag.
a two-day lag.
a three-day lag.
a four-day lag.
a zero-day lag.
Forward and spot exchange rates
are necessarily equal
do not move closely together
The forward exchange rate is always above the spot exchange rate.
while not necessarily equal, do move closely together.
None of the above.
A foreign exchange swap
is a spot sale of a currency.
is a forward repurchase of the currency.
is a spot sale of a currency combined with a forward repurchase of the currency.
is a spot sale of a currency combined with a forward sale of the currency.
None of the above.
An American put option on foreign exchange
gives the buyer the right to sell the foreign currency at a known exchange rate at any time during the period of the option.
gives the seller the right to sell the foreign currency at a known exchange rate at any time during the period of the option.
gives the buyer the right to sell the foreign currency at a known exchange rate at a specific time in the future.
obligates the buyer to sell the foreign currency at a known exchange rate at any time during the period of the option.
None of the above.
An American call option on foreign exchange
obligates you to buy foreign currency at a known price at any time during the period of the option.
gives you the right to buy foreign currency at a known price at any time during the period of the option.
gives you the right to buy foreign currency at a known price at a specific day in the future.
gives you the right to sell foreign currency at a known price at any time during the period of the option.
None of the above.
The exchange rate between currencies depends on
the interest rate that can be earned on deposits of those currencies.
the expected future exchange rate.
the interest rate that can be earned on deposits of those currencies and the expected future exchange rate.
national output.
None of the above.
Which one of the following statements is the most accurate?
Because dollar and DM interest rates are measured in comparable terms, they can move quite differently over time.
Because dollar and DM interest rates are not measured in comparable terms, they can move quite differently over time.
Because dollar and DM interest rates are measured in comparable terms, they move quite the same over time.
Because dollar and DM interest rates are measured in comparable terms, they still move quite differently over time.
None of the above.
Which one of the following statements is the most accurate?
The dollar rate of return on euro deposits is the euro interest rate plus the rate of depreciation of the dollar against the euro.
The dollar rate of return on euro deposits is approximately the euro interest rate minus the rate of depreciation of the dollar against the euro.
The dollar rate of return on euro deposits is the euro interest rate minus the rate of depreciation of the dollar against the euro.
The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of appreciation of the dollar against the euro.
The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of depreciation of the dollar against the euro.
If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
it is impossible to tell given the information.
All of the above.
If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is zero percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
It is impossible to tell given the information.
All of the above.
If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 4 percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
It is impossible to tell given the information.
All of the above.
If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 8 percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
It is impossible to tell given the information.
All of the above.
If the euro is 8 percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
It is impossible to tell given the information.
All of the above.
If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, and the expected return on dollar depreciation against the euro is negative 4 percent, then
an investor should invest only in dollars.
an investor should invest only in euros.
an investor should be indifferent between dollars and euros.
It is impossible to tell given the information.
All of the above.
Which of the following statements is the most accurate?
A rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
A rise in the interest rate offered by dollar deposits causes the dollar to depreciate.
A rise in the interest rate offered by dollar deposits does not affect the U.S. dollar.
For a given euro interest rate and constant expected exchange rate, a rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
None of the above.
Which of the following statements is the most accurate?
Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euros it is 4 percent. Under these assumptions,
covered interest parity does hold.
covered interest parity does not hold.
It is hard to tell whether covered interest parity does or does not hold.
Not enough information is given to answer the question.
None of the above.
The exchange rate between currencies depends on
the interest rate that can be earned on deposits of those currencies.
the expected future exchange rate.
the interest rate that can be earned on deposits of those currencies and the expected future exchange rate.
national output.
None of the above.
Money serves as
a medium of exchange.
a unit of account.
a store of value.
All of the above.
Only A and B
Money includes
currency.
bank deposits on which check may be written.
both A and B.
travelers’ checks.
A, B and D.
Individuals base their demand for an asset on
the expected return the asset offers compared with the returns offered by other assets.
the riskiness of the asset’s expected return.
the asset’s liquidity.
All of the above.
Only A and B.
The family summer house on Cape Code pays a return in the form of
interest rate.
capital gains.
the pleasure of vacations at the beach.
A, B and C.
B and C only.
In a world with money and bonds only,
it is risky to hold money.
it is not risky to hold money.
risk does affect the demand for money.
there is no relationship between risk and holding money.
None of the above.
Which one of the following statements is the most accurate?
A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall.
A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
A rise in the average value of transactions carried out by a household or a firm causes its demand for nominal money to rise.
A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.
The aggregate money demand depends on
the interest rate.
the price level.
real national income.
All of the above.
Only A and C.
The aggregate real money demand schedule L(R,Y)
ward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.
slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy.
has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy.
slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.
None of the above.
For a given level of
nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule.
real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule.
real GNP, changes in interest rates cause an increase of the L(R,Y) schedule.
nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule.
real GNP, changes in interest rates cause movements along the L(R,Y) schedule.
A rise in
real GNP decreases aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
real GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the left.
real GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
nominal GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
real GNP raises aggregate nominal money demand for a given interest rate, moving the L(R,Y) schedule to the right.
The money supply schedule is
horizontal because MS is set by the central bank while P is taken as given.
vertical because MS is set by the central bank.
vertical because MS is set by the households and firms while P is taken as given.
vertical because MS and P are set by the central bank.
vertical because MS is set by the central bank while P is taken as given.
If there is initially
excess demand for money, the interest rate falls, and if there is initially an excess supply, it rises.
excess supply of money, the interest rate falls, and if there is initially an excess demand, it rises.
excess supply of money, the interest rate increases, and if there is initially an excess demand, it falls.
excess supply of money, the interest rate falls, and if there is initially an excess demand, it further falls.
None of the above.
Which one of the following statements is the most accurate?
A decrease in the money supply lowers the interest rate, while an increase in the money supply raises the interest rate, given the price level and output.
An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the price level.
An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the output level.
An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the price level and output.
None of the above.
An increase in
nominal output raises the interest rate, while a fall in real output lowers the interest rate, given the price level and the money supply.
real output decreases the interest rate, while a fall in real output increases the interest rate, given the price level.
real output raises the interest rate, while a fall in real output lowers the interest rate, given the money supply.
nominal output raises the interest rate, while a fall in real output lowers the interest rate, given the price level.
real output raises the interest rate, while a fall in real output lowers the interest rate, given the price level and the money supply.
An increase in a country’s money supply causes
its currency to appreciate in the foreign exchange market, while a reduction in the money supply causes its currency to depreciate.
its currency to depreciate in the foreign exchange market, while a reduction in the money supply causes its currency to appreciate.
no effect on the values of its currency in international markets.
its currency to depreciate in the foreign exchange market, while a reduction in the money supply causes its currency to further depreciate.
None of the above.
Which one of the following statements is the most accurate?
Given PUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.
Given YUS, when the money supply rises, the dollar interest rate declines and
