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Unformatted text preview: Place your answers to the multiple choice in the spaces provided 6”” MID 1-me SP'Q/Né I998
on page 1! PART A 1) When the US dollar appreciates, A) American goods are more appealing to foreign buyers and exports rise. B) American ﬁrms that compete with foreign goods suffer and consumers benefit. C) American citizens traveling in Europe are worse off and goods they purchase at home rise‘in
price. D) the ratio of dollars to foreign currency increases and imports become more expensive. 2) When actual real GDP is equal to the, natural real GDP, the unemployment rate is A) zero. B) accelerating.
C) at its "natural” rate. D) decelerating. 3) Which of the following is not a leakage?
A) export of a Cadillac B) personal saving
C) import of a Toyota D) indirect business taxes 4) Economic magnitudes measured at the prices actually paid are referred to as magnitudes.
A) "nominal" B) "actual" C) "real" D) "gross" E) "unadjusted" 5) Assume that the marginal propensity to consume equals 0.8, the income tax rate equals 0.3, and the marginal propensity to import equals 0.2. The marginal leakage rate is and the size of
the multiplier is A) 0.60; 2.5 B) 0.50; 2.0 C) 0.64; 1.56 D) 0.70; 3.33 6) If Ep is 3500 and Y is 3000 then A) unplanned inventory accumulation is 500. B) planned inventory accumulation is 500.
C) planned inventory depletion is 500. D) unplanned inventory depletion is 500. 7) If the MP5 is .1 and the income tax rate is .33, and the fraction of income spent on imports is .25,
then the multiplier is A) 1.47. B) 1.55. C) 1.51.’ D) 2.5. 8) If Y = $200 billion, c = 0.75, autonomous consumption = $10 billion, and T = $20 billion, induced
consumption expenditure is A) $135 billion. B) $150 billion C) $180 billion D) $200 billion
9) Higher real GDP growth usually causes A) a drop in the trade deﬁcit. B) a rise in net exports. C) a drop in net exports. D) a and c. 10) If there is unplanned inventory accumulation there is excess
A) supply of commodities. B) demand for bonds.
C) supply of bonds. D) demand for commodities. Page 4 of 6 11) "Crowding-out" occurs in the IS-LM model as rising government spending requires a in the y interest rate in order to the demand for money at the new equilibrium, thus planned
private investment. A) rise, keep constant, lowering B) fall, raise, lowering C) rise, raise, lowering D) fall, keep constant, raising E) rise, lower, raising 12) Monetary policy will have a large income effect provided the 13) 14) 15) 16) 17) A) sensitivity of output changes to interest rates is small. B) sensitivity of autonomous spending to interest rates is low.
C) sensitivity of autonomous spending to interest rates is high.
D) None of the above. Suppose we are modeling a "closed" economy. The only way its government can obtain more goods
and services than it can claim with net tax revenues is for A) investment to exceed saving. B) imports to exceed exports. C) exports to exceed imports. D) saving to exceed investment. If the US. imports another good in exchange for assets transferred from an American bank to a foreign bank, in the US. balance of payments table A) the current and capital account deficits both rise and so the balance of payments is unaffected. B) the current account deﬁcit rises by as much as the capital account surplus rises and the balance
of payments is unaffected. C) the current and capital account deﬁcits both rise and so the balance of payments deﬁcit rises. D) the current account deﬁcit rises and so the balance of payments deficit rises. E) the current and capital account deficits both fall and so the balance of payments deficit falls. In a ﬂexible exchange rate system with perfect capital mobility, a small open economy has an initial
IS-LM equilibrium point on its BP line, with income Y A and interest rate rA. From there, a monetary expansion affects the interest rate, causing of the domestic currency, which
net exports, further changing the IS-LM equilibrium until it occurs where A) appreciation, lowers, r<rA and Y = YA. appreciation, raises, r rA and Y>YA.
depreciation, lowers, r = rA and Y = YA.
D) depreciation, raises, r = rA and Y>YA. E) depreciation, raises, r<rA and Y<YA. Suppose that you are the representative of IBM selling computers manufactured in the US. to
German companies. If the dollar appreciates, your prices in German marks A) stay the same. B) rise. C) fall. D) None of the above since contracts are in fixed dollar terms. For a fixed money supply, to maintain equilibrium in the money market interest rates will when income
A) fall; stays the same 8) rise; rise C) fall; rise D) rise; fall Page 5 of 6 _ 18) A marginal propenSiW to save of 020 m an economy with no taxes or foreign sector results in a
nuiltiplierof , , ' , ' 'y, ' » ‘L
A)5 " ,', B) 2. _ _ <38 ~, villi _ Ell- 19) If the mterest rate were to rise We impact that L
A) the supply of money will fall ' i r» i
B) the amount of money people want to, hold will rise. C) the amount of money people want to hqld will fall.
D) autonomous expenditures will rise. ' ' 20) A ﬁscal expansion (:3, tax cut) accompanist! by moiietaxy accommodation named in:
A) 1954 i , B) 1964. c) 1974. D) 1984. . 13) None of the ’abové. Page» 6 off 6_ ...
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