Exam 3 - Spring 2008

Exam 3 - Spring 2008 - ECON 101-008 Exam#3 Spring 2008...

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ECON 101 - 008 Exam #3, Spring 2008 Bubble your answers on your scantron sheet by using your #2 pencil. Each question is worth 1.66 points. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1. An increase in the demand for loanable funds will occur if there is A) an increase in expected profits from firm investment projects. B) an increase in the nominal interest rate accompanied by an equal increase in inflation. C) a decrease in the real interest rate. D) an increase in the real interest rate. 2. Stagflation occurs when A) inflation rises and GDP rises. B) inflation rises and GDP falls. C) inflation falls and GDP rises. D) inflation falls and GDP falls. 3. Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase? A) A decrease in consumer income. B) A drought that sharply reduces barley output. C) An increase in consumer income. D) Unusually good weather that results in a bumper crop of barley. 4. Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen. One can conclude that A) the number of personal trainers has increased. B) personal trainers are deliberately charging high prices because they provide services for wealthy clients. C) the demand for personal trainers has increased. D) the law of demand has been violated. 5. If the Fed buys U.S. Treasury securities, then this A) decreases reserves, causes banks to reduce their loans, and increases the money supply. B) increases reserves, causes banks to reduce their loans, and increases the money supply. C) increases reserves, encourages banks to make more loans, and increases the money supply. D) decreases reserves, causes banks to reduce their loans, and decreases the money supply. 6. If production displays diseconomies of scale, the long run average cost curve is A) upward sloping. B) above the short run average toal cost curve. C) downward - sloping. D) above the long run marginal cost curve. 1
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Figure 14 - 8 Refer to Figure 14 - 8. In the figure above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve? A) A decrease in the required reserve ratio B) An open market purchase of Treasury bills C) An increase in income taxes D) An open market sell of Treasury bills Table 14 - 2 Price per dose Quantity Demanded (Dose) Total Cost of Production (Dollars) $80 0 $80 72 1 82 64 2 88 56 3 100 48 4 124 40 5 164 32 6 208 24 7 268 16 8 340 Shakti Inc. has been granted a patent for its arnica toothache balm. Table 14 - 2 shows the demand and the total cost schedule for the firm. 8.
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Exam 3 - Spring 2008 - ECON 101-008 Exam#3 Spring 2008...

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