Practice Exam (ECON E-202; Introduction to Macroeconomics; Wenyi Shen)

Practice Exam(ECON - Exam Name ‘iLTlPLE C H DICE Choose the one alternative that best completes the statement or answers the question 1 The

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Unformatted text preview: Exam Name ‘iLTlPLE C H DICE. Choose the one alternative that best completes the statement or answers the question. 1) The short-run and long- run aggregate supply curves remain stable, and a decrease in aggregate 1) demand occurs. I-.r't.-‘hat is the result in the short run? A) An increase in the price level and real GDP will occur. B) A period of expansion and a rise in the unemployment rate could occur. {3) The price level will fall but real GDP will remain the same. D) A period of recession and a rise in the unemployment rate could occur. 2) lithe MPC = 0.8 and planned autonomous investment increases by $30 billion+ then equilibrium 2) real G DP will increase by A)s400 billion. B)3320 billion. (3)864 billion. D)SBU billion. 3) In the short run, real GDP can be expanded past a level consistent with the long-run growth path 3) A) if the price level decreases accordingly. 8) it we measure in nominal terms instead of real terms. C) by using existing capital and labor more intensely. D) if there is an increase in marginal tax rates. 4) To reduce an inflationary gap. the government could 4) A) increase spending on goods and services. B) increase taxes. (3) decrease taxes. D) increase military spending. 5) Consider a nation in which most workers are unionized. Ifall the nation's unions band together 5) and succeed in boosting wages established by long—term labor contracts, then A) there is a rightward shift in lustSRAS. B) there is a rightvvard movement along the SRAS curve. C) there is a leftward shift in both LRAS and SHAS. D) there is a leftward shift in just LBAS. 6) In Country 2, the government simultaneously increases its expenditures by $25 billion and 6) increases taxes by 525 billion. It the MP8 is equal to 0.2, the government’s action real G DP by . A) has no sheet on: SD B) increases; 5 100 billion C) increases; $125 billion D} increases; :25 billion 7) Which ofthe tollowing could explain why there is an increase in potential GDP butthe equilibrium 7) level of G DP does not rise? A) SRAS shifted to the right by morethan LHAS. B) SEAS and AD do not shitt. C) AD shifted to the right by more than SEAS. D) AD shifted to the right by lessthan SRAS. 8) The following would cause an upward shift in the C + | + G + X CUI‘VB EXCEPT 8) A) an increase in household wealth. B) an increase in disposable income. C) a decrease in importsoending D) an increase in export spending. Real Disposable Real Planned Income Consumption 80 $20 $50 850 375 380 S100 3100 $125 $120 $150 $140 9) Use the above table. Which ofthe following is true it real disposable income is$15{}? 9) A) APC is less than MPG. B) APE = 0.8. C) APS is less than MPS. D] APS = 0.2. 10) Equationsfor C, i. G, and Xare given below, assume there is no tax. If the equilibrium level oi GDP 10) is821,500, what is the marginal propensity to consume? c =1.500+(MP0)*oi i: 1.000 G = 2,000 X: -200 A) 0.57 a} 0.75 C). 0.8 o) 0.9 Price 52 f1 CI Liz ii, Loanable funds (billions of dollars per year) 11) Refer to the above figure. Which ofthefollowing is consistent with the graph depicted? 11) A) an increase in the proportion of income after not taxes used for consumption B) an increase In transfer payments to households C) an increase in tax revenues collected by the government D) an increase in household income 12] According to the Ricardian equivalence theorem. a tax cut that increase the government budget 12) deficit will have A) a positive effect on aggregate demand since people look at changes in taxes or government spending in the present. B) an effect on aggregate demand. The magnitude the effect will have depends upon whether the increase is caused by a reduction in taxes or an increase in governmentspending. C) no effect on aggregate demand because people only look at changes in taxes or government spending in the present. D) no effect on aggregate demand because people will realize thatthere will be a future tax liability and reduce consumption expenditures. 1'2 13 Heal GDP per Year {5 Inllwnsi 13) In the abovefigure, if the relevant aggregate demand curve is A132, and if the government wants to 13) use fiscal policy to close the gap. it could A) increase the money supply. B) increase government spending. C) increase taxes. D) decrease taxes. 14) The response of investment spending to an increase in the government budget deficit is called 14) A) private dissaving. B) BXpansionary investment. C) income minus net taxes. D) crowding out. 15) 1v'iihich of the following is N OT an event that causes BOTH the short—run aggregate supply (ERAS) 15) curve and the long—run aggregate supva (LRAS) curve to shift? A) Technological changes 8) A temporary change in the price of a key input C) A change in an economy‘s endowments of the factors of production D) A change in an economy's laborsupply Total Expenditures 20 '16 ' C+I+X+G 12 0 2 4 6 8 10121416 18 20 RealGDPerar (Tritiions of dollars) 16) According to the above figure, the equilibrium level of real Gross Domestic Product (GDP) is 15) A) 37 trillion. B_)1312 trillion. C) 36 trillion. D) $20 trillion. 1?) When government revenues exceed government outlays in a particular year, this is called 1?} A) a budget deficit. B) the national debt. C) a budgetsurplus. D) fiscal policy. 18) When real Gross Domestic Product {GDP)falls, which ofthe following will automatically occur? 18} A) A decrease in all tax rates B) An increase in income tax revenues C) A decrease in unemployment compensation expenditures D) A decrease in income tax revenues 19) in the short run. an increase in the price level induces firms to expand production because 19) fit) each firm must keep its production level up to the level of its rivals, and some firms will expand production as the price level increases. B) prices of inputs are held constant, so the higher prices for firms' products imply that it is profitable to expand production. C) higher prices allow firms to hire more inputs by offering higher prices for inputs, which increases productivity and profits. D) they can increase profits by increasing maintenance costs. 20) Because a decrease in real autonomous spending results in a in the price level. the 20) ultimate effect on real [3 DP is that predicted by the multiplier. A) fall; larger 3) rise; smaller 0) fall; smaller D) rise, smaller 21) A recession begins in July but government policy makers do not reach a consensusthat a recession 21) had in fact begun until October. This is an example of a(n) A) recognition time lag. B) quick time leg. 8) effect time lag. D) action time lag. 22) One difference between stocks and bonds is that A) stocks are financiat securities. while bonds are labor market securities. B) stocks are usually issued in electronic form. while bonds are usually issued in paper form. C) stocks do not involve a promise to repay a purchaser of the stock. while bonds represent a promise to repay the purchase price of the bond. D) stocks represent ownership in companies. while bonds represent ownership in banks. 23) Money illusion is A) could not exist if the economy did not have competitive markets. B) a basic condition that all classical economists assume people have. C) when people are motivated by selt-interest. D) when people think they are better off when their income increases even though prices have increased by the same amount. 24) All 01 the following will cause an outward shift otthe investment function EXCEPT A) business people becoming optimistic about the future. B) a decrease in the interest rate. C) a reduction in business taxes. D) innovation that improves production efficiency at every level of output. 25) The demand for loanable funds is downward sloping because the the interest rate, the the number of profitable investment projects a firm can undertake. and the the quantity demanded of loanable funds. A) lower; smaller; greater C) greater; greater; greater B) lower: greater; greater D} greater: smaller; greater 26) Which of the fotlowing is notan assumption made by the dynamic model of aggregate demand and aggregate supply? A) The short- run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages. B) Aggregate demand and potential real GDP decrease continuously. C) The aggregate demand curve shifts to the right during most periods. D) Potential real GDP increases continuously. 22) 23) 24) 25) 2e) Consumption per year 0 v1 Ya Ya Real Disposable Income per Year 27) According to the above figure, the average propensity to save (APS) is zero at point A) D. B) .l. _C) F. D) I. Consider the following data for a closed economy: Y_=$12tril|ion G: SBtrillion l: 34 trillion TH=82trillion T: SStrillion 28) Based on the information above, what isthe level of public saving? A) $0 B)s1 trillion C) 82 trillion D) negativell trillion (a deficit ofsl trillion) 29) Given the assumptions of the classical model, A) the economy will often experience recessions and expansions. B) .the market is a self-correcting mechanism. C) the macroeconomy is erratic. and problems will often be increased overtime. D) expansion will be the normal condition, but recessions will often be severe and require government intervention. 30) The Keynesian short-run aggregate supply curve is horizontal because A) it reflects wage and price inflexibility. B) it represents the full employment level of real G DP. C) it represents Say‘s law. D) it reflects the absence of money illusion. 27} 28) 29) 30) ...
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This note was uploaded on 12/21/2011 for the course BUS 100 taught by Professor Intro during the Fall '11 term at UCSB.

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Practice Exam(ECON - Exam Name ‘iLTlPLE C H DICE Choose the one alternative that best completes the statement or answers the question 1 The

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