MACRO Econ 293 Final Exam Name ____________________

 

True / False

 

__1. Leakages in the circular flow model are caused by people saving instead of spending.

__2. As people's income rises, they wish to hold less money for transactions.

__3. Federal budget deficits are related to trade deficits.

__4. The World Bank is a multinational agency that specializes in development loans.

__5. When you purchase a new Samsung smart phone you are buying consumption goods.

__6. A barter arrangement simply means a direct exchange of goods without the use of money. 

__7. Exporters benefit from trade and importers do not.  

__8. The Board of Governors of the Federal Reserve System has 7 members serving 14 year terms.

__9. Fiscal policy is implemented by the Internal Revenue Service.

__10. The crowding-out effect is the tendency of expansionary fiscal policy to cause a decrease in planned investment or planned consumption in the private sector.

__11. In the long run, if imports increase, then exports will not change.

__12. If the government's spending exactly equals its revenues during a budget year, that government is balancing its budget.

__13. Economic freedom is the right to vote in an election for a political leader. 

__14. The Phillips curve shows the relationship between the unemployment rate and inflation rate.

__15. Consumption goods include spending on machines and buildings so that goods can be produced in the future.

 

Multiple Choice

1. At higher rates of interest

A) households save less and businesses invest more.

B) households save less and businesses invest less.

C) households save more and businesses invest less.

D) households save more and businesses invest more.

 

2. What is the most common reason people demand money?

A) Each bill and coin is a reflection of important people and events in a nation's history.

B) People desire to use money as a medium of exchange when they buy goods and services.

C) Since very few of us engage in a flow of transactions, money is our financial safety net.

D) They demand money to ensure that the nation's government will not spend too much.

 

3. Who appoints the chair of the Federal Reserve System?

A) the Senate and Congress

B) member banks of the Federal Reserve System

C) the President of the United States

D) the Federal Open Market Committee (FOMC)

 

4. The difference between "saving" and "savings" is that

A) saving is done by households and savings are done by businesses.

B) saving is undertaken as a precaution against unemployment and savings are undertaken to increase investment spending.

C) savings are an accumulation of past and current saving.

D) saving is placed in financial institutions such as banks, while savings are kept at home by people.

 

5. The International Monetary Fund (IMF) was created to achieve each of the following goals EXCEPT

A) to supervise exchange-rate practices of member countries.

B) to help finance economic development in poor countries.

C) to encourage convertibility of member countries' currencies.

D) to lend funds to countries having difficulties meeting their international payment obligations.

 

6. Selling a good abroad below the price charged in the home market, or at a price below the cost of production is called

A) dumping.

B) import substitution.

C) a quota.

D) a tariff.

 

 

7. Fiscal policy refers to the

A) manipulation of the money supply in order to increase the amount of cash that the government holds.

B) adjustment of government spending and taxes in order to achieve certain national economic goals.

C) adjustment of national income data to account for price level changes.

D) government policy that aims at raising the market prices of certain goods.

 

8. A quota is

A) a tariff imposed on goods that are dumped in the country.

B) a law that prevents ecologically damaging goods from being imported into a country.

C) a market-imposed balancing factor that keeps prices of imports and exports in equilibrium.

D) a government-imposed restriction on the quantity of a specific good that can be imported.

 

9. As a result of money in an economy

A) people are greedier than in a barter economy.

B) people can get rich more quickly with the same amount of goods and services available.

C) transaction costs are higher than would be the case in a barter economy.

D) real Gross Domestic Product (GDP) and economic growth are greater than they would be in a barter economy.

 

10. The central bank for the United States is

A) Chase Manhattan Bank.

B) the U.S. Treasury.

C) the Federal Reserve System.

D) First National Bank of America.

 

11. The idea that supply creates its own demand is known as

A) the law of diminishing returns.

B) Murphy's law

C) Keynes' law.

D) Say's law.

 

12. Which of the following is the term used to describe the expansion of a country's per capita real GDP?

A) economic growth

B) technological change

C) change in the labor force

D) change in factor incomes

 

13. Stocks change ________ whereas flows relate to ________.

A) within a given period of time; changes between points in time

B) only at the end of each year; amounts at a given point in time

C) between points in time; changes within a given time period

D) and that causes flows to change; changes that have no impact on stocks

 

14. Structural unemployment is likely to be affected by

A) an economic recession or boom.

B) the reservation wage curves of people.

C) minimum wage laws in the economy.

D) the amount of the money supply.

 

15. The ratio of the change in the equilibrium level of real GDP to the change in autonomous real expenditures is the

A) average propensity to consume.

B) marginal propensity to consume.

C) multiplier.

D) unplanned investment.

 

Matching

 

__ 1. These programs are called automatic stabilizers because payments increase during periods of high unemployment.

__ 2. This is defined as anything people generally accept in exchange for goods and services.

__ 3. This is a tax on imported goods.

__ 4. This is a group of nations that grants member special trade privileges.

__ 5. This is defined as non-consumable goods that firms use to make other goods.

__ 6. This means a high rate of inflation coupled with a high rate of unemployment.

__ 7. This is the total value of all outstanding federal government securities.

__ 8. This is the interest rate that the Fed charges banks to borrow funds from the Fed.

__ 9. When a bank buys this from the Fed its reserves initially decrease.

__ 10. He argued that capitalism did not always lead to full employment.

 

a. Capital

b. World Trade Organization

c. Money

d. Employment programs

e. Tariff

f.  Discount rate

g. Keynes

h. Stagflation

i. Bond

j. Public debt

 

Fill in the Blank

1. When Monica spends more than her disposable income, Monica is ____________.

2. The ability to produce a good or service at a lower opportunity cost than other producers is called _______ _______.

3. The _________ ______ of holding money is the interest income foregone.

4. A major function of the Federal Reserve System is the control of the ______ _______.

5. Inflation that is caused solely by an increase in aggregate demand is called _________ _____ ________.

6. According to the text, minimum-wage laws cause increases in ________ _________.

7. Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as _______ exchange rates.

8. The largest expenditure component of the federal budget is spending on _______ ________.

9. The largest portion of any nation's balance of payments current account is the importing and exporting of __________ goods.

10. When government revenues exceed government outlays in a particular year, this is called a ______ ______.

 

(Word Bank: capital, inflation, merchandise, stock, entitlement programs, barter, structural unemployment, opportunity cost, M2, dissaving, treasury, money supply, budget surplus, loan, military, demand-pull inflation, quota, flexible, debt, comparative advantage, interest rate, Federal Reserve, surplus, budget deficit, M1, consumption)