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ECO3202U04 Practice Test #3

# ECO3202U04 Practice Test #3 - ECO 3202.U04 Applied...

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Page 1 ECO 3202.U04 Applied Macroeconomics - Practice Test #3 1. In the Solow model with technological progress, the steady-state growth rate of total output is: A) 0. B) g . C) n . D) n + g . 2. If Fed A cares only about keeping the price level stable and Fed B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money: A) both Fed A and Fed B should increase the quantity of money. B) Fed A should increase the quantity of money whereas Fed B should keep it stable. C) Fed A should keep the quantity of money stable whereas Fed B should increase it. D) both Fed A and Fed B should keep the quantity of money stable. 3. Assume that the economy begins in long-run equilibrium. Then the Fed reduces the money supply. In the short run ______, whereas in the long run prices ______ and output returns to its original level. A) output decreases and prices are unchanged; rise B) output decreases and prices are unchanged; fall C) output and prices both decrease; rise D) output and prices both decrease; fall 4. The long run refers to a period: A) of decades. B) during which capital and labor are sometimes not fully employed. C) during which prices are flexible. D) during which capital, labor, and technology can change. 5. According to the quantity equation, if the velocity of money and the supply of money are fixed, and the price level increases, then the quantity of goods and services purchased: A) increases. B) decreases. C) does not change. D) may either increase or decrease.

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Page 2 6. If the Fed reduces the money supply by 5 percent and the quantity theory of money is true, then output will fall 5 percent in the short run and: A) prices will remain unchanged in the long run. B) output will fall 5 percent in the long run. C) prices will fall 5 percent in the long run. D) output will remain unchanged in the long run. 7. The relationship between the quantity of goods and services supplied and the price level is called: A) aggregate demand. B) aggregate supply. C) aggregate investment. D) aggregate production. 8. Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in advance of the overall economy. D) standardized statistics compiled by the National Bureau of Economic Research. 9. In the Solow growth model, capital exhibits ______ returns. In a basic endogenous growth model, capital exhibits ______ returns. A) constant; diminishing B) constant; constant C) diminishing; constant D) diminishing; diminishing 10. In a steady state with population growth and technological progress: A) the real rental price of capital is constant and the real wage grows at the rate of technological progress. B) the real rental price of capital grows at the rate of technological progress and the real wage is constant.
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ECO3202U04 Practice Test #3 - ECO 3202.U04 Applied...

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