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Unformatted text preview: e long run real output will A. increase the price level in the economy. B. decrease the price level in the economy. *** C. increase the nominal GDP in the economy. D. decrease the nominal GDP in the economy. 43. Alex borrows $500 from Samantha, and Alex promises to pay her back in one year. An unexpected increase in the inflation rate will A. arbitrarily redistribute wealth from Alex to Samantha. B. arbitrarily redistribute wealth from Samantha to Alex. *** C. increase the real cost of borrowing in the long run. D. increase the real returns to saving in the long run. 44. The Federal Reserve wants to increase the money supply. It can do so by A. increasing the federal funds rate and increasing the reserve requirement. B. increasing the federal funds rate and decreasing the reserve requirement. C. decreasing the federal funds rate and increasing the reserve requirement. D. decreasing both the federal funds rate and the reserve requirement. *** 45. Which of the following statements is correct? A. Fiat money has intrinsic value. B. Fiat money is an imperfect store of value. *** C. Gold is an example of Fiat money. D. [All of the above] E. [None of the above] 46. Which of the following statements is an example of moral hazard? A. John buys medical insurance and then stops taking his blood pressure medication regularly. *** B. Martha loves extreme sports and buys life insurance but doesn’t disclose her love for risky outdoor activities to the insurance agent. C. Jeremy is prone to a certain genetic disorder, and he doesn’t tell this to his insurance agent while purchasing health insurance. D. [All of the above] E. [None of the above] 47. The Federal Reserve conducted an open market purchase of treasury bonds worth $5 million, which increased the money supply in this economy by $25 million. So the reserves to deposit ratio in this economy is A. 1/5 *** B. 5 C. 5/4 D. 4/5...
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This test prep was uploaded on 03/03/2014 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue.
- Spring '08