Test1answerkey

Test1answerkey - ECON420002,004 Test1A On my honor, I have...

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ECON 420 -002, 004 Test 1A On my honor, I have neither given nor received unauthorized aid on this quiz: ______________ Name:____________________________________________ Section: _______________ 1
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SECTION I: (3 points each) 1. If an economy has a 7% growth rate of money supply, a 2% growth rate of real GDP, and a real interest rate of 3%, the nominal interest rate will be a. 2% b. 5% c. 8% d. 10% 2. The production function Y=K .0.8 + L 0.3 a. exhibits increasing marginal returns for both K and L b. exhibits diminishing marginal returns for both K and L c. exhibits diminishing marginal returns for only K. d. exhibits diminishing marginal returns for only L 3. A DECREASE in fiscal spending in the foreign country will ________________ world interest rate, ______________ domestic investment and _______________ real exchange rate in a small open economy. a. increase, increase, increase. b. decrease, increase, increase. c. decrease , increase, decrease. d. increase, decrease, decrease. 2
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4. Which of the following is TRUE about the GDP deflator and CPI? a. Both the GDP deflator and CPI are changing weight indices. b. Both the GDP deflator and CPI are fixed weight indices. c. The GDP deflator is a fixed weight index and the CPI is a changing weight index. d. The GDP deflator is a changing weight index and the CPI is a fixed weight index. 5. During the revision of GDP figures of an economy, it was noticed that consumption spending of $100 million was omitted. $75 million of these expenditures were on domestic goods and the remaining $25 million was on foreign goods. This revision will affect GDP in the following way: a. Increase C by $100 million, decrease NX by $25 million and increase
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Test1answerkey - ECON420002,004 Test1A On my honor, I have...

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