1.\tMartha lends $200 to a friend who promises to return it after a year. Instead of lending it to her friend, Martha could have put the money in a bank where she could have earned an interest rate of 2 percent per annum. Martha’s opportunity cost of lending the money is _____.\t\u00a0\t2\tThe exhibit given below shows the short-run aggregate demand and supply curves in an economy, AD1 and AS1, and the long-run aggregate supply curve, LRAS. The economy was initially in equilibrium when there was a decrease in aggregate demand, causing a shift of the aggregate demand curve from\t\u00a0AD1 to AD2. Which of the following is true in this case?\t\u00a0\tThe economy will move from point B to point A in the short run and then to point C in the long run. \ufffd\u00a0\u00a0\t\u00a0\tThe economy will move from point C to point B in the short run and then eventually to point A.\u00a0\u00a0\t\u00a0\tThe economy will move from point D to point A in the short run and then to point C in the long run. \ufffd\u00a0\u00a0\t\u00a0\tThe economy will move from point D to point C in the long run.\t\u00a0\t3\tSuppose an economy is in long-run equilibrium. An increase in consumption expenditure will:\t\u00a0\t\u00a0\ta) \ufffd\u00a0\u00a0\u00a0 shift the short-run aggregate supply curve rightward and increase both the price level and real output in the long run.\t\u00a0\tb) \ufffd\u00a0\u00a0\u00a0 decrease both the price level and real gross domestic product in the long run.\t\u00a0\tc) \ufffd\u00a0\u00a0\u00a0 increase the price level in the long run but have no effect on real gross domestic product.\t\u00a0\td) \ufffd\u00a0\u00a0\u00a0 shift the aggregate demand curve rightward and increase the real output in the long run.\t\u00a0\t\u00a0\t4\tIn the long run, a higher saving rate:\t\u00a0\talways leads to a higher level of productivity because of increasing returns to scale.\t\u00a0\tdoes not lead to a higher level of income because of deterioration in labor productivity.\t\u00a0\talways leads to a higher growth rate of output because of improvement in the stock of human capital.\t\u00a0\tdoes not always lead to a higher growth rate of output because of diminishing returns to capital.\t\u00a0\t5.\tSuppose the net foreign investment in Italy is positive. This implies that:\u00a0\u00a0\u00a0\u00a0\t\u00a0\tItalians are buying more foreign assets than foreigners are buying Italian assets. \ufffd\t\u00a0\tforeigners are buying relatively more Italian assets.\u00a0\u00a0\t\u00a0\tItaly is experiencing a net capital inflow. \ufffd \u00a0\t\u00a0\tforeign direct investment in Italy is higher than foreign portfolio investment in the country.\t\u00a0\t5)\tSuppose the net foreign investment in Italy is positive. This implies that:\t\u00a0\tItalians are buying more foreign assets than foreigners are buying Italian assets.\t\u00a0\tforeigners are buying relatively more Italian assets.\t\u00a0\tItaly is experiencing a net capital inflow.\t\u00a0\tforeign direct investment in Italy is higher than foreign portfolio investment in the country.\t\u00a0\t\u00a0\t6)\tThe circular-flow diagram shows that: \ufffd \ufffd\t\u00a0\tfirms receive wages and profits from households in the products market.\u00a0\u00a0\u00a0\t\u00a0\thouseholds sell the factors of production to firms in the inputs market. \ufffd\u00a0\u00a0\t\u00a0\thouseholds supply resources to firms in the products market. \ufffd \ufffd\t\u00a0\tfirms supply labor and other resources to the government in the factor market.\t\u00a0\t\u00a0\t\u00a0\t7)\tThe table given below shows the total amount of spending in the country of Mesodonia. Mesodonia’s\t\u00a0\tgross domestic product is:\u00a0\t\u00a0\t\u00a0\t\u00a0\t8\t\u00a0\tThe country of Merilya exported goods and services worth $1.2 million and imported goods and services worth $2.7 million. The net exports of the country was _____.\t\u00a0\t\u00a0\t\u00a0\t9\tSuppose the Fed purchases government bonds through open-market operations. All other things remaining equal, this is likely to: \ufffd\u00a0\t\u00a0\tdecrease the price level and increase the real wealth of consumers. \u00a0 \u00a0\t\u00a0\tdecrease the price level and make domestic goods less expensive relative to foreign goods. \ufffd \ufffd \u00a0\t\u00a0\tincrease the price level and eventually decrease the interest rate and investment spending.\t\u00a0\tincrease the price level and eventually decrease the demand for money as well as goods and services.\t\u00a0\t\u00a0\t10\tA rise in the price of bacon from $14 per pound to $16 per pound will reduce the purchasing power of the dollar by: \ufffd \ufffd\u00a0\t\u00a0\t0.55 pounds of bacons. \ufffd \ufffd\t\u00a0\t0.06 pounds of bacon. \ufffd \ufffd\u00a0\t\u00a0\t5 pounds of bacon. \u00a0\u00a0\u00a0 \u00a0\t\u00a0\t2 pounds of bacon.\t\u00a0\t\u00a0\t11.\tA difference between commodity money and fiat money is that:\u00a0\u00a0\u00a0\u00a0\t\u00a0\tfiat money cannot be used as a unit of account. \ufffd\u00a0\u00a0\u00a0\t\u00a0\tcommodity money is used in a barter economy. \ufffd\u00a0\u00a0 \u00a0\t\u00a0\tfiat money does not have any intrinsic value.\t\u00a0\tcommodity money cannot be used as a unit of account.\t\u00a0\t\u00a0\t12\tSuppose the net capital outflow from Zenovia is negative. This implies that: \ufffd \ufffd\t\u00a0\tthe real interest rate in Zenovia is high. \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\tthe real interest rate in foreign countries is higher than in Zenovia.\u00a0\u00a0\t\u00a0\tforeigners are not interested in buying assets in Zenovia. \u00a0\u00a0\u00a0\u00a0 \u00a0\t\u00a0\tthe citizens of Zenovia are investing more in foreign assets than foreigners are investing in assets in Zenovia.\t\u00a0\t\u00a0\t\u00a0\t13\tThere is an increase in human capital when _____.\u00a0\u00a0\u00a0\t\u00a0\tShiroh persuades the management of her company to offer more perks to employees \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\tSue rents a laser printer to teach her employees how to fix it \ufffd \ufffd\u00a0\t\u00a0\tSamantha receives training in quality management after joining a new firm\t\u00a0\tSusie puts in more than 8 hours of work at her workplace every day\t\u00a0\t\u00a0\t14\tAfter retirement, Molly deposits $500,000 in a local bank in Merrina. At an interest rate of 4 percent, she will receive approximately _____ after 3 years.\t\u00a0\t\u00a0\t15\tRuth wants to calculate the present value of a sum of money that she will receive after the demise of her grandparents. To calculate the present value, she should use the:\t \ufffd \ufffd\u00a0 \u00a0\t\u00a0\texpenditure method.\u00a0\u00a0\t\u00a0\tdiscounting method. \u00a0 \u00a0\t\u00a0\tvalue-added method.\u00a0\t\u00a0\tcompounding method.\t\u00a0\t\u00a0\t16\tThe buyers and sellers in the country of Perylia use corn as a medium of exchange. This means that: \ufffd\u00a0\u00a0\u00a0\t\u00a0\tPerylia uses commodity money. \ufffd\u00a0\u00a0 \u00a0\t\u00a0\tcorn cannot be used as a store of value or as a unit of account in Perylia.\u00a0\u00a0\u00a0\u00a0\t\u00a0\tPerylia uses fiat money. \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\tcorn can be used as a store of value but not as a unit of account in Perylia.\t\u00a0\t17\tScarcity occurs because of:\u00a0\u00a0\u00a0\u00a0\t\u00a0\tthe excess of quantity supplied over quantity demanded.\u00a0\u00a0\u00a0\u00a0\t\u00a0\toverutilization of labor. \ufffd \ufffd\t\u00a0\tlimited human needs and wants. \ufffd\u00a0\u00a0\t\u00a0\tthe limited supply of resources.\t\u00a0\t\u00a0\t18\tThe Phillips curve shows:\t \ufffd \ufffd\u00a0 \u00a0\t\u00a0\tthe negative relationship between inflation and unemployment.\t\u00a0\tthe positive relationship between the interest rate and the supply of money. \ufffd \ufffd\u00a0\t\u00a0\tthe positive relationship between the price level and aggregate supply. \ufffd\u00a0 \u00a0\t\u00a0\tthe negative relationship between the interest rate and the demand for money.\t\u00a0\t\u00a0\t19\tEphlon Inc., an Italian bike manufacturer, opens a factory in the United States. This is an example of:\t \ufffd \ufffd\u00a0 \u00a0\t\u00a0\tthe accumulation of human capital.\u00a0\u00a0\u00a0\t\u00a0\tthe catch-up effect.\u00a0\u00a0\u00a0\u00a0\t\u00a0\ta foreign direct investment. \u00a0\u00a0 \u00a0\t\u00a0\ta foreign portfolio investment.\t\u00a0\t\u00a0\t20\tJack is an out-of-work sculptor. He has been looking for a job for the last two years. Unable to find any, he has given up his job search. Which of the following is true in this case?\t \ufffd \ufffd\u00a0 \u00a0\t\u00a0\tThis is an example of frictional unemployment. \ufffd\u00a0\u00a0 \u00a0\t\u00a0\tThis is an example of structural unemployment. \ufffd\u00a0\u00a0\u00a0\t\u00a0\tHe is a part of the unemployed labor force.\u00a0\u00a0\t\u00a0\tHe is a discouraged worker and will not be included in the calculation of the unemployment rate.\t\u00a0\t21\tSuppose the central bank of a country undertakes an expansionary monetary policy. Which of the following is most likely to be the effect of such a policy, all other things remaining unchanged? \ufffd\u00a0\u00a0\u00a0\t\u00a0\tAn increase in the price level that reduces the real value of households’ money holdings and stimulates consumer spending \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\tAn increase in the price level that stimulates spending on net exports and increases the demand for money \ufffd \ufffd\t\u00a0\tA decrease in the price level that reduces the amount of money that people want to hold and decreases the interest rate. \u00a0\u00a0\u00a0 \u00a0\t\u00a0\tA decrease in the price level that reduces the interest rate and lowers the real value of the domestic currency foreign-exchange market.\t\u00a0\t22\tFollowing the unexpected good performance of Leathex, all its employees were given a one-time bonus. This consequently led to a rightward shift of the demand curve for shoes manufactured by the company and a leftward shift of the demand curve for socks. This shows that shoes are:\t \ufffd \ufffd\u00a0 \u00a0\t\u00a0\tinferior goods.\t\u00a0\tsubstitutes. \ufffd\t\u00a0\tnormal goods.\t\u00a0\tcomplementary goods.\t\u00a0\t23\t23\tA higher interest rate in a country:\u2022\u00a0\u00a0\u00a0\t\u00a0\tencourages citizens to buy foreign assets. \ufffd\t\u00a0\tmakes domestic bonds less attractive to foreigners.\t\u00a0\tlowers saving in the country and decreases the quantity of loanable funds supplied.\u2022 \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\tdiscourages investment and decreases the quantity of loanable funds demanded.\t\u00a0\t\u00a0\t24\tIf the price level in an economy is 120 and the equilibrium price level is 100, _____.\u2022 \ufffd\u00a0\u00a0\u00a0\t\u00a0\tpeople will want to hold more money than is supplied by the central bank\u2022\t\u00a0\tthe demand for money curve will shift to the left \ufffd\t\u00a0\tthe purchasing power of money will increase\t\u00a0\tthe supply of money is likely to exceed the demand for money\t\u00a0\t\u00a0\t25\t25\tA recent survey showed the health benefits of cranberry juice for treating heart and other respiratory disorders. The exhibit below shows that the initial demand curve for cranberry juice is D1. Which of the following is likely to be a consequence of the publication of the survey?\t\u00a0\t\u00a0\t\u00a0\tThe demand curve will shift from D1 to D3.\t\u00a0\tThere will be a movement from point A to point C on D1. \u00a0\u00a0 \u00a0\t\u00a0\tThe demand curve will shift from D1 to D2.\t\u00a0\tThere will be a movement from point A to point B on D1.\t\u00a0\t\u00a0\t26\tKeynesian economists believe that when an economy is in a recession, the government should:\u2022\u00a0\u00a0\u00a0\t\u00a0\tdecrease tax rates rather than increase government spending because households always view such tax cuts as permanent and increase their current consumption. \u00a0\u00a0 \u00a0\t\u00a0\tincrease its purchases rather than decrease taxes because households save a part of the increase in their income as a result of tax cuts. \ufffd\u00a0\u00a0\t\u00a0\tincrease the money supply in the economy so that interest rates decline, reducing the cost of borrowing to finance new investment projects.\t\u2022 \ufffd \ufffd\tincrease the money supply in the economy so that an excess supply of money can induce households to increase their consumption expenditure.\t\u00a0\t\u00a0\t27\tThe Marions purchased a Persian rug worth $5,000 from an Iranian textile mill. Everything else remaining unchanged, this will:\u00a0\u00a0\t\u00a0\tdecrease the consumption expenditure in the domestic country by $5,000.\u00a0\t\u00a0\tdecrease the net imports of the domestic country by $5,000. \ufffd \ufffd\u00a0\t\u00a0\treduce the net exports of the domestic country by $5,000.\u00a0\u00a0\t\u00a0\tincrease the gross domestic product of the domestic country by $5,000.\t\u00a0\t\u00a0\t\u00a0\t28\tAs more capital is used in the production process, the amount of other inputs being fixed, the production function becomes:\t\u2022 \ufffd \ufffd\t\u00a0\tflat because the extra output produced from an additional unit of capital decreases. \ufffd \ufffd\t\u00a0\tsteep because the extra output produced from an additional unit of capital decreases.\t\u00a0\tsteep because the extra output produced from an additional unit of capital increases.\t\u00a0\tflat because the extra output produced from an additional unit of capital increases.\t\u00a0\t\u00a0\t29\tThe natural rate of unemployment in a country is 4 percent. This implies that:\u2022 \ufffd\u00a0\u00a0\t\u00a0\tthe country has an unemployment rate of 4 percent in the short run.\u2022 \ufffd \ufffd\t\u00a0\tthe country has a 4 percent unemployment rate when the labor market is in equilibrium. \u2022\u00a0\u00a0\t\u00a0\t4 percent of the labor force is unemployed at any given point of time. \ufffd\u00a0\u00a0 \u00a0\t\u00a0\tthe unemployment rate is constant at 4 percent over time.\t\u00a0\t\u00a0\t\u00a0\t30\t\u00a0\t\u00a0\tWhich of the following is true according to the circular-flow diagram?\t\u2022 \ufffd \ufffd\t\u00a0\tFirms receive wages, rent, and profit from the government.\t\u00a0\tFirms receive income from households. \ufffd\u00a0\u00a0\u00a0 \u00a0\t\u00a0\tHouseholds receive revenue from the government.\u00a0\u00a0\u00a0\t\u00a0\tHouseholds receive wages, rent, and profit from firms.<\/p>\n","protected":false},"excerpt":{"rendered":"
1. Martha lends $200 to a friend who promises to return it after a year. Instead of lending it to her friend, Martha could have put the money in a bank where she could have earned an interest rate of Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-210710","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=210710"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210710\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=210710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=210710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=210710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}