ROUND II: MACROECONOMICS

  1. In the long run, the most important determinant of a nation’s standard of living is:
    1. its rate of productivity growth.
    2. its ability to export cheap labor.
    3. it’s ability to control the nation’s money supply.
    4. its endowment of natural resources.
    5. its gold reserves.
  2. The real economic cost of high unemployment is:
    1. the unemployment insurance funds depleted.
    2. the food consumed by those who are not producing.
    3. goods and services that go unproduced for failure to fully utilize labor available.
    4. negligible since many workers become re-employed within a few weeks.
    5. All of the above are correct.
  3. Which of the following is the most accurate statement about the relationship between the nominal interest rate and the real interest rate?
    1. The real interest rate is the nominal interest rate times the rate of inflation.
    2. The real interest rate is the nominal interest rate plus the rate of inflation.
    3. The real interest rate is the nominal interest rate minus the rate of inflation.
    4. The real interest rate is the nominal interest rate divided by the rate of inflation.
    5. None of the above are accurate statements.
  4. A reduction in personal income taxes will leave consumers with:
    1. more government goods and services.
    2. lower disposable income.
    3. fewer government goods and services.
    4. more income to spend.
    5. lower aggregate demand.
  5. In Keynesian Theory, assume that the MPC is .8, and investment rises by $25 billion. How much will real GDP change?
    1. $5 billion
    2. $20 billion
    3. $25 billion
    4. $100 billion
    5. $125 billion
  6. The government’s fiscal policy is its plan to regulate aggregate demand by manipulating:
    1. the money supply.
    2. taxation and spending.
    3. defense contracts.
    4. welfare programs.
    5. none of the above.
  7. The primary feature of money is that it serves as:
    1. barter value.
    2. inherent value.
    3. medium of exchange.
    4. trade account.
    5. all of the above.
  8. Which of the following is included in M1?
    1. savings accounts
    2. money market deposit accounts
    3. money market mutual funds
    4. checking Accounts
    5. all of the above
  9. When bankers accept a deposit of $100,000 in cash, they will put (say) $20,000 in the vault as required reserves and lend the remaining $80,000 to some new customer. To this point, this set of transactions:
    1. increases the money supply by the $80,000.
    2. decreases the money supply by $20,000.
    3. increases the money supply by $100,000.
    4. has no net effect on the money supply.
    5. increases the money supply by $500,000.
  10. The most common method the Federal Reserve uses to increase the money supply is:
    1. to print more cash.
    2. to order Congress and the President to raise taxes.
    3. to sell bonds to banks.
    4. to buy bonds form banks.
    5. to change the required reserve requirements for banks.
  11. In a recession, real GDP falls and:
    1. investment spending rises.
    2. personal income falls.
    3. unemployment falls.
    4. home and auto sales rise.
    5. retail sales are unaffected.
  12. If the tax revenue of the federal government exceeds spending, then:
    1. the government runs a budget deficit.
    2. the government runs a budget surplus.
    3. the government runs a national debt.
    4. the government will decrease taxes.
    5. the government will increase taxes.
  13. Crowding out can best be defined as:
    1. government deficits increase interest rates and decrease investment.
    2. private investment increases growth rates and decreases deficits.
    3. consumption spending increases interest rates and decreases investment.
    4. restrictive monetary policy raises interest rates and decreases investment.
    5. tax increases decrease private spending (consumption and investment).
  14. If wages are growing at 9% a year and expected inflation equals 3% a year:
    1. real wages are growing at 27% a year.
    2. real wages are growing at 3% a year.
    3. real wages are growing at 12% a year.
    4. real wages are growing at 9% a year.
    5. real wages are growing at 6% a year.
  15. During an inflationary period, stabilization policy should seek to:
    1. expand aggregate demand.
    2. contract aggregate demand.
    3. neutralize aggregate demand.
    4. find new sources of aggregate demand.
    5. none of the above.

Answer Key