ECO 561 Final Exam Guide (New, 2018) (Score 29\/30)\t\u00a0\t\u00a0\t1 Which of the following have substantially equivalent effects on a nation’s volume of exports and imports?”\ufffd\t\u00a0\t“\ufffdExchange rate appreciation and domestic deflation\t“\ufffdExchange rate depreciation and domestic inflation\t“\ufffdExchange rate appreciation and a decrease in the domestic supply of money\t“\ufffdExchange rate depreciation and domestic deflation \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t2 Which of the following statements best describes the 12 Federal Reserve Banks?”\ufffd\t\u00a0\t“\ufffdThey are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.\t“\ufffdThey are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities.\t“\ufffdThey are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry.\t“\ufffdThey are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare\t\u00a0\t\u00a0\t3 “\ufffdBuyers will opt out of markets in which:\t“\ufffdthere are only foreign sellers\t“\ufffdthere is inadequate information about sellers and their products\t“\ufffdthere are significant negative externalities\t“\ufffdstandardized products are being produced \ufffd \ufffd \ufffd\t\u00a0\t4 “\ufffdPure monopolists may obtain economic profits in the long run because:\t\u00a0\t“\ufffdof advertising\t“\ufffdmarginal revenue is constant as sales increase\u00a0\t“\ufffdof rising average fixed costs\t“\ufffdof barriers to entry \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0\t5 All else equal, a large decline in the real interest rate will shift the:”\ufffd\t\u00a0\t“\ufffdinvestment demand curve rightward\t“\ufffdinvestment demand curve leftward\t“\ufffdinvestment schedule upward\t“\ufffdinvestment schedule downward \ufffd \ufffd \ufffd \ufffd\t\u00a0\t6 In order for mutually beneficial trade to occur between two otherwise isolated nations:”\ufffd\t\u00a0\t“\ufffdeach nation must be able to produce at least one good relatively cheaper than the other\t“\ufffdeach nation must face constant costs in the production of the good it exports\t“\ufffdone nation’s production must be labor-intensive while the other nation’s production is capital-intensive\t“\ufffdeach nation must be able to produce at least one good absolutely cheaper than the other\u00a0\u00a0\u00a0\u00a0\t\u00a0\t7 “\ufffdIf the Federal Reserve System buys government securities from commercial banks and the public:\t\u00a0\t“\ufffdthe money supply will contract\t“\ufffdcommercial bank reserves will decline\t“\ufffdit will be easier to obtain loans at commercial banks\t“\ufffdcommercial bank reserves will be unaffected \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t8 Normal profit is:”\ufffd\t\u00a0\t“\ufffdthe average profitability of an industry over the preceding 10 years\t“\ufffddetermined by subtracting explicit costs from total revenue\t“\ufffdthe return to the entrepreneur when economic profits are zero\t“\ufffddetermined by subtracting implicit costs from total revenue \ufffd \ufffd\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\t9 The term “recession” describes a situation where:”\ufffd\t\u00a0\t“\ufffdan economy’s ability to produce is destroyed\t“\ufffdoutput and living standards decline\t“\ufffdinflation rates exceed normal levels\t“\ufffdGovernment takes a less active role in economic matters\t\u00a0\t10 If an unintended increase in business inventories occurs at some level of GDP, then GDP:”\ufffd\t\u00a0\t“\ufffdis too low for equilibrium\t“\ufffdentails a rate of aggregate expenditures in excess of the rate of aggregate production\t“\ufffdis too high for equilibrium\t“\ufffdmay be either above or below the equilibrium output\t\u00a0\t\u00a0\t11 “\ufffdThe fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that:\t\u00a0\t“\ufffda nation’s production possibilities and trading possibilities lines coincide\t“\ufffdthe production possibilities curves of any two nations are identical\t“\ufffda nation’s trading possibilities line lies to the right of its production possibilities line\t“\ufffda nation’s production possibilities line lies to the right of its trading possibilities line\t \ufffd \ufffd\u00a0\t\u00a0\t\u00a0\t12 In the theory of comparative advantage, a good should be produced in that nation where:”\ufffd\t\u00a0\t“\ufffdits cost is least in terms of alternative goods that might otherwise be produced\t“\ufffdits absolute cost in terms of real resources used is least\t“\ufffdits absolute money cost of production is least\t“\ufffdthe production possibilities line lies further to the right than the trading possibilities line\t\u00a0\t\u00a0\t\u00a0\t13 “\ufffdWhy are economists concerned about inflation?\t\u00a0\t“\ufffdInflation lowers the standard of living for people whose income does not increase as fast as the price level\t“\ufffdReal GDP is necessarily falling when there is inflation\t“\ufffdInflation generally causes unemployment rates to rise\t“\ufffdInflation increases the value of peoples’ saving and encourages overspending on goods and services\t\u00a0\t14 “\ufffdTwo major virtues of the market system are that it:\t\u00a0\t“\ufffdresults in an equitable personal distribution of income and always maintains full employment\t“\ufffdresults in price level stability and a fair personal distribution of income\t“\ufffdallocates resources efficiently and allows economic freedom\t“\ufffdeliminates discrimination and minimizes environmental pollution\t\u00a0\t\u00a0\t15 “\ufffdSuppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that:\t\u00a0\t“\ufffdthe income and substitution effects associated with each are equal\t“\ufffdtheir marginal and total utilities are proportionate\t“\ufffdtheir total utilities are the same\t“\ufffdtheir marginal utilities are the same\t\u00a0\t\u00a0\t16 “\ufffdMacroeconomics approaches the study of economics from the viewpoint of:\t\u00a0\t“\ufffdgovernmental units\t“\ufffdthe entire economy\t“\ufffdindividual firms\t“\ufffdthe operation of specific product and resource markets\t\u00a0\t\u00a0\t17 “\ufffdMrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:\t\u00a0\t“\ufffdMrs. Arnold should spend more on soda and less on pretzels\t“\ufffdMrs. Arnold is buying soda and pretzels in the utility-maximizing amounts\t“\ufffdthe two commodities are substitute goods\t“\ufffdMrs. Arnold should spend more on pretzels and less on soda\t\u00a0\t\u00a0\t\u00a0\t18 “\ufffdThe simple circular flow model shows that:\t\u00a0\t“\ufffdhouseholds are on the selling side of the resource market and on the buying side of the product market.\t“\ufffdbusinesses are on the selling side of both product and resource markets.\t“\ufffdhouseholds are on the buying side of both product and resource markets.\t“\ufffdbusinesses are on the buying side of the product market and on the selling side of the resource market.\t\u00a0\t\u00a0\t19 Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of U.S. securities from the public, which deposits this amount into checking accounts. As a result of these transactions, the supply of money is:”\ufffd\t“\ufffddirectly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $16 million.\t“\ufffdnot directly affected, but the money-creating potential of the commercial banking system is increased by $12 million.\t“\ufffddirectly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million.\t“\ufffddirectly reduced by $4 million and the money-creating potential of the commercial banking system is decreased by an additional $12 million.\t\u00a0\t\u00a0\t20 As output increases, total variable cost:”\ufffd\t\u00a0\t“\ufffdincreases at a constant rate\t“\ufffdincreases at a decreasing rate and then at an increasing rate\t“\ufffdincreases continuously at a decreasing rate\t“\ufffdincreases more rapidly than does total cost\t\u00a0\t\u00a0\t\u00a0\t21 “\ufffdThe two basic markets shown by the simple circular flow model are:\t\u00a0\t“\ufffdproduct and resource\t“\ufffdfree and controlled\t“\ufffdhousehold and business\t“\ufffdcapital goods and consumer goods\t\u00a0\t\u00a0\t22 Countercyclical discretionary fiscal policy calls for:”\ufffd\t“\ufffdsurpluses during both recessions and periods of demand-pull inflation\t“\ufffddeficits during both recessions and periods of demand-pull inflation\t“\ufffdsurpluses during recessions and deficits during periods of demand-pull inflation\t“\ufffddeficits during recessions and surpluses during periods of demand-pull inflation\t\u00a0\t\u00a0\t23 “\ufffdBecause the federal government typically provides disaster relief to farmers, many farmers do not buy crop insurance even through it is federally subsidized. This illustrates:\t\u00a0\t“\ufffdthe moral hazard problem\t“\ufffdthe special interest effect\t“\ufffdthe adverse selection problem\t“\ufffdlogrolling\t\u00a0\t24 “\ufffdA monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:\t\u00a0\t“\ufffdthe likelihood of collusion\t“\ufffdmutual interdependence\t“\ufffdproduct differentiation\t“\ufffdhigh entry barriers\t\u00a0\t\u00a0\t25 Research for industrially advanced countries indicates that:”\ufffd\t\u00a0\t“\ufffdthe more independent the central bank, the higher the average annual rate of unemployment.\t“\ufffdthe more independent the central bank, the higher the average annual rate of inflation\t“\ufffdthe more independent the central bank, the lower the average annual rate of inflation\t“\ufffdthere is no relationship between the degree of independence of a country’s central bank and its inflation rate.\t\u00a0\t\u00a0\t26 “\ufffdThe business cycle depicts:\t\u00a0\t“\ufffdshort-run fluctuations in output and employment\t“\ufffdthe phases a business goes through from when it first opens to when it finally closes\t“\ufffdfluctuations in the general price level\t“\ufffdthe evolution of technology over time\t\u00a0\t\u00a0\t27 “\ufffdThe primary gain from international trade is:\t\u00a0\t“\ufffdincreased employment in the domestic export sector\t“\ufffdincreased employment in the domestic import sector\t“\ufffdmore goods than would be attainable through domestic production alone\t“\ufffdtariff revenue\t\u00a0\t\u00a0\t28 Contractionary fiscal policy is so named because it:”\ufffd\t\u00a0\t“\ufffdnecessarily reduces the size of government\t“\ufffdis aimed at reducing aggregate demand and thus achieving price stability\t“\ufffdinvolves a contraction of the nation’s money supply\t“\ufffdis expressly designed to expand real GDP\t\u00a0\t\u00a0\t29 If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?”\ufffd\t\u00a0\t“\ufffdReal GDP would rise, but nominal GDP would be unchanged\t“\ufffdNominal and real GDP would both be unchanged\t“\ufffdNominal GDP would rise, but real GDP would be unchanged\t“\ufffdNominal and real GDP would both rise\t\u00a0\t\u00a0\t\u00a0\t30 Which of the following will generate a demand for country X’s currency in the foreign exchange market?”\ufffd\t\u00a0\t“\ufffdCharitable contributions by country X’s citizens to citizens of developing nations\t“\ufffdThe imports of country X\t“\ufffdThe desire of foreigners to buy stocks and bonds of firms in country X\t“\ufffdTravel by citizens of country X in other countries<\/p>\n","protected":false},"excerpt":{"rendered":"
ECO 561 Final Exam Guide (New, 2018) (Score 29\/30) \u00a0 \u00a0 1 Which of the following have substantially equivalent effects on a nation’s volume of exports and imports?”\ufffd \u00a0 “\ufffdExchange rate appreciation and domestic deflation “\ufffdExchange rate depreciation and domestic 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-210816","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210816","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=210816"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210816\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=210816"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=210816"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=210816"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}