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5 Steps To A 5 Ap Macroeconomics 2022 Elite 1st Edition Eric Dodge - Solutions
Higher levels of government deficit spending would likely have which of the following changes in the market for loanable funds?
Which of the following represents a combination of contractionary fiscal and expansionary monetary policy?
Households demand more money as a financial asset when(A) nominal GDP falls.(B) the nominal interest rate falls.(C) bond prices fall.(D) the supply of money falls.(E) nominal GDP increases.
Which of the following tends to increase the spending multiplier?(A) An increase in the marginal propensity to consume(B) A decreased velocity of money(C) An increase in the marginal propensity to save(D) An increase in the real interest rate(E) An increase in the price level
When nominal GDP is rising, we would expect money demand to(A) increase as consumers demand more money as a financial asset, increasing the interest rate.(B) increase as consumers demand more money for transactions, increasing the interest rate.(C) decrease as the purchasing power of the dollar is
When both short-run aggregate supply and aggregate demand increase, which of the following can be said for certain?(A) The price level rises, but real GDP falls.(B) Both the price level and real GDP rise.(C) The price level rises, but the change in real GDP is uncertain.(D) The price level falls,
Which of the following most likely increases aggregate demand in the United States?(A) An American entrepreneur founds and locates a software company in London.(B) The U.S. military closes a military base in California.(C) The Chinese government makes it increasingly difficult for American firms to
Which of the following is true of the complete circular flow model of an open economy?(A) All goods and services flow through the government in exchange for resource payments.(B) There is no role for the foreign sector.(C) Households supply resources to producers in exchange for goods and
What does the presence of discouraged workers do to the measurement of the unemployment rate?(A) Discouraged workers are counted as “out of the labor force”; thus, the unemployment rate is understated, making the economy look stronger than it is.(B) Discouraged workers are counted as “out of
In the long run, aggregate supply is(A) upward sloping at full employment.(B) horizontal below full employment.(C) vertical at full employment.(D) vertical below full employment.(E) vertical above full employment.
The economy is currently operating at full employment. Assuming flexible wages and prices, how would a decline in aggregate demand affect GDP and the price level in the short run, and GDP and the price level in the long run?
A likely cause of falling Treasury bond prices might be(A) expansionary monetary policy.(B) contractionary monetary policy.(C) a depreciating dollar.(D) fiscal policy designed to reduce the budget deficit.(E) a decrease in the money demand.
Which of the following policies best describes supply-side fiscal policy?(A) An increase in the money supply(B) Increased government spending(C) Lower taxes on research and development of new technology(D) Higher taxes on household income(E) More extensive government social welfare programs
Some economists believe that when aggregate demand declines, prices are inflexible or “sticky” in the downward direction. This implies that the short-run aggregate supply curve is(A) upward sloping at full employment.(B) horizontal below full employment.(C) vertical at full employment.(D)
A nation’s economic growth can be seen as a(n)(A) increase in the SRAS curve.(B) increase in the AD curve.(C) increase in the LRAS curve.(D) decrease in the production possibility curve.(E) increase in the short-run Phillips curve.
Suppose that the unemployment rate falls from 6 percent to 5 percent and the inflation rate falls from 3 percent to 2 percent. Which of the following best explains these trends?(A) An increase in aggregate demand.(B) A decrease in both aggregate demand and aggregate supply.(C) An increase in both
Which of the following lessens the impact of expansionary fiscal policy?(A) An increase in the marginal propensity to consume.(B) Lower interest rates that cause a decrease in net exports.(C) Higher interest rates that cause an increase in net exports.(D) Higher interest rates that decrease private
Which of the following best measures changes in the price level of national product?(A) The consumer price index(B) The real interest rate(C) The unemployment rate(D) The producer price index(E) The GDP deflator
If your nominal income rises 4 percent and your real income falls 1 percent, by how much did the price level change?(A) 5 percent decrease(B) ¼ percent increase(C) 3 percent increase(D) 3 percent decrease(E) 5 percent increase
Which of the following statements is true?(A) The velocity of money is equal to real GDP divided by the money supply(B) Dollars earned today have more purchasing power than dollars earned a year from today.(C) The supply of loanable funds consists of investors.(D) The demand for loanable funds
Which of the following are harmed by unexpectedly high rates of inflation?(A) Borrowers repaying a long-term loan at a fixed interest rate.(B) Savers who have put their money in long-term assets that pay a fixed interest rate.(C) Workers who have negotiated cost-of-living raises into their
The government has just lowered personal income taxes. Which of the following best describes the effects that this policy has on the economy?(A) Higher disposable income, higher consumption, higher real GDP, lower unemployment(B) Higher disposable income, lower consumption, higher real GDP, lower
Which of the following is characteristic of a centrally planned economic system?(A) Resources are allocated based on relative prices.(B) The circular flow of goods and services minimizes the role of the federal government.(C) Private ownership of resources is fundamental to economic growth.(D)
An increase in the consumer price index is commonly referred to as(A) economic growth.(B) inflation.(C) unemployment.(D) discouraged workers.(E) deflation.
Corn is exchanged in a competitive market. Which of the following definitely increases the equilibrium price of corn?(A) Both supply and demand shift rightward.(B) Both supply and demand shift leftward.(C) Supply shifts to the right; demand shifts to the left.(D) Supply shifts to the left; demand
How would fiscal and monetary policymakers combine spending, tax, and monetary policy to fight a recessionary gap, while avoiding large budget deficits?
A nation is producing at a point inside of its production possibility curve. Which of the following is a possible explanation for this outcome?(A) This nation has experienced a permanent decrease in its production capacity.(B) This nation has experienced slower than usual technological progress.(C)
Which of the following statements is true of production possibility curves and trade between nations?(A) Nations specialize and trade based on absolute advantage in production.(B) Free trade allows each nation to consume beyond the production possibility curve.(C) The flow of goods and services is
When the United States places an import quota on imported sugar, we expect which of the following effects?(A) Consumers seek substitutes for sugar and products that use sugar.(B) Consumers consume more sugar and products that use sugar.(C) The supply of sugar increases.(D) Net exports in the United
If the Japanese economy suffers a deep, prolonged recession, in what ways would U.S. net exports and the values of the dollar and yen change?
Which of the following is a consequence of a protective tariff on imported steel?(A) Net exports fall.(B) Income is transferred from domestic steel consumers to domestic steel producers.(C) Allocative efficiency is improved.(D) Income is transferred from domestic steel to foreign steel
You hear that the United States has a negative balance in the current account. With this information we conclude that(A) there is a trade deficit.(B) there is a capital account deficit.(C) there is a capital account surplus.(D) more U.S. dollars are being sent abroad than foreign currencies are
If the U.S. dollar and Chinese yuan are traded in flexible currency markets, which of the following causes an appreciation of the dollar relative to the Chinese yuan?(A) Lower interest rates in the United States relative to China(B) Lower price levels in China relative to the United States(C)
The United States produces rice in a competitive market. With free trade, the world price is lower than the domestic price. What must be true?(A) The United States begins to import rice to make up for a domestic shortage.(B) The United States begins to export rice to make up for a domestic
Which of the following is a likely result of expansionary monetary policy in a recession?(A) Aggregate demand decreases so that the price level falls.(B) Aggregate demand increases, which increases real GDP and increases employment.(C) Increases unemployment, but low prices negate this effect.(D)
To move the economy closer to full employment, the central bank decides that the federal funds rate must be increased. The appropriate open market operation is to ______, which ______ the money supply, ______ aggregate demand, and fights ______.
If the money supply increases, what happens in the money market(assuming money demand is downward sloping)?(A) The nominal interest rates rises.(B) The nominal interest rates falls.(C) The nominal interest rate does not change.(D) Transaction demand for money falls.(E) Transaction demand for money
Which of the following is a way that the Fed can increase the money supply?(A) An increase in the discount rate(B) An open market operation that increases the fed funds rate.(C) An increase in the reserve ratio(D) A decrease in tax rates(E) Buying Treasury securities from commercial banks
If a bank has $500 in checking deposits and the bank is required to reserve $50, what is the reserve ratio? How much does the bank have in excess reserves?(A) 10 percent, $450 in excess reserves(B) 90 percent, $50 in excess reserves(C) 90 percent, $450 in excess reserves(D) 10 percent, $50 in
Which function of money best defines $1.25 as the price of a 20-ounce bottle of pop?(A) Medium of exchange(B) Unit of account(C) Store of value(D) Transfer of ownership(E) Fiat money
The U.S. economy currently suffers a recessionary gap, and a budget deficit exists. If the government wishes to fix the recession, which of the following choices best describes the appropriate fiscal policy, the impact on the market for loanable funds, the interest rate, and the market for the U.S.
Which of the following would likely slow a nation’s long-term economic growth?(A) Guaranteed low-interest loans for college students(B) Removal of a tax on income earned on saving(C) Removal of the investment tax credit(D) More research grants given to medical schools(E) Conservation policies to
Which of the following fiscal policies is likely to be most effective when the economy is experiencing an inflationary gap?(A) The government decreases taxes and keeps spending unchanged.(B) The government increases spending and keeps taxes unchanged.(C) The government increases spending matched
The crowding-out effect from government borrowing is best described as(A) the rightward shift in AD in response to the decreasing interest rates from contractionary fiscal policy.(B) the leftward shift in AD in response to the rising interest rates from expansionary fiscal policy.(C) the effect of
In a long period of economic expansion the tax revenue collected ____ and the amount spent on welfare programs ____ , creating a budget ____ .(A) increases, decreases, surplus(B) increases, decreases, deficit(C) decreases, decreases, surplus(D) decreases, increases, deficit(E) increases, increases,
Which of the following would not be an example of contractionary fiscal policy?(A) Decreasing money spent on social programs(B) Increasing income taxes(C) Canceling the annual cost of living adjustments to the salaries of government employees(D) Increasing money spent to pay for government
The effect of the spending multiplier is lessened if(A) the price level is constant with an increase in aggregate demand.(B) the price level falls with an increase in aggregate supply.(C) the price level is constant with an increase in long-run aggregate supply.(D) the price level falls with an
What is the difference between the short-run Phillips curve (SRPC) and the long-run Phillips curve (LRPC)?(A) The SRPC is downward sloping and the LRPC is horizontal.(B) The SRPC is upward sloping and the LRPC is downward sloping.(C) The SRPC is vertical and the LRPC is horizontal.(D) The SRPC is
Equilibrium real GDP is far below full employment, and the government lowers household taxes. Which is the likely result?(A) Unemployment falls with little inflation.(B) Unemployment rises with little inflation.(C) Unemployment falls with rampant inflation.(D) Unemployment rises with rampant
Stagflation most likely results from(A) increasing AD with constant SRAS.(B) decreasing SRAS with constant AD.(C) decreasing AD with constant SRAS.(D) a decrease in both AD and SRAS.(E) an increase in both AD and SRAS
Which is the best way to describe the AS curve in the long run?(A) Always vertical in the long run.(B) Always upward sloping because it follows the Law of Supply.(C) Always horizontal.(D) Always downward sloping.(E) Without more information we cannot predict how it looks in the long run.
Using the model of AD and AS, what happens in the short run to real GDP, the price level, and unemployment with more consumption spending (C )?
Which of the following is the source of the supply of loanable funds?(A) The stock market(B) Investors(C) Net exports(D) Banks and mutual funds(E) Savers
The tax multiplier increases in magnitude when(A) the MPS increases.(B) the spending multiplier falls.(C) the MPC increases.(D) government spending increases.(E) taxes increase.
Which of the following choices is most likely to create the greatest decrease in real GDP?(A) The government decreases spending, matched with a decrease in taxes.(B) The government increases spending with no increase in taxes.(C) The government decreases spending with no change in taxes.(D) The
Which of the following events most likely increases real GDP?(A) An increase in the real rate of interest(B) An increase in taxes(C) A decrease in net exports(D) An increase in government spending(E) A lower value of consumer wealth
Which of the following is true about the consumption function?(A) The slope is equal to the MPC.(B) The slope is equal to the MPS.(C) The slope is equal to MPC + MPS.(D) It shifts upward when consumers are more pessimistic about the future.(E) It shifts downward when consumer wealth increases in
When disposable income increases by $X,(A) consumption increases by more than $X.(B) saving increases by less than $X.(C) saving increases by exactly $X.(D) saving remains constant.(E) saving decreases by more than $X.
You are working at a supermarket bagging groceries, but you are unhappy about your wage, so you quit and begin looking for a new job at a competing grocery store. What type of unemployment is this?(A) Cyclical(B) Structural(C) Seasonal(D) Frictional(E) Discouraged
What is the official unemployment rate?(A) 5 percent(B) 2.5 percent(C) 5.5 percent(D) 7 percent(E) Unknown, as we do not know the number of discouraged workers
What is the size of the labor force, and what is the labor force participation rate?(A) 2,000; 100 percent(B) 950; 47.5 percent(C) 900; 45 percent(D) 1,000; 50 percent(E) 1,000; 5 percent
If Real GDP = $200 billion and the price index = 200, Nominal GDP is(A) $4 billion.(B) $400 billion.(C) $200 billion.(D) $2 billion.(E) impossible to determine since the base year is not given.
GDP is $10 million, consumer spending is $6 million, government spending is $3 million, exports are $2 million, and imports are $3 million. How much is spent for investments?(A) $0 million(B) $1 million(C) $2 million(D) $3 million(E) $4 million
Which of the following transactions would be counted in GDP if we were using the spending approach?(A) The cash you receive from babysitting your neighbor’s kids(B) The sale of illegal drugs(C) The sale of cucumbers to a pickle manufacturer(D) The sale of a pound of tomatoes at a supermarket(E)
The apple market is in equilibrium. Suppose we observe that apple growers are using more pesticides to increase apple production. At the same time, we hear that the price of pears, a substitute for apples, is rising. Which of the following is a reasonable prediction for the new price and quantity
The market for denim jeans is in equilibrium, and the price of polyester pants, a substitute good, rises. In the jean market(A) supply falls, increasing the price and decreasing the quantity.(B) supply falls, increasing the price and increasing the quantity.(C) demand falls, increasing the price
Suppose that aluminum is a key production input in the production of bicycles. If the price of aluminum falls, and all other variables are held constant, we expect(A) the demand for aluminum to rise.(B) the supply of bicycles to rise.(C) the supply of bicycles to fall.(D) the demand for bicycles to
If average household income rises and we observe that the demand for pork chops increases, pork chops must be(A) an inferior good.(B) a normal good.(C) a surplus good.(D) a public good.(E) a shortage good.
When the price of pears increases, we expect the following:(A) Quantity demanded of pears rises.(B) Quantity supplied of pears falls.(C) Quantity demanded of pears falls.(D) Demand for pears falls.(E) Supply of pears rises.
Ray and Dorothy can both cook and can both pull weeds in the garden on a Saturday afternoon. For every hour of cooking, Ray can pull 50 weeds and Dorothy can pull 100 weeds. Based on this information,(A) Ray pulls weeds, since he has absolute advantage in cooking.(B) Dorothy pulls weeds, since she
The shape of this PPF tells us that(A) economic resources are perfectly substitutable from production of tea to production of crumpets.(B) citizens prefer that an equal amount of tea and crumpets be produced.(C) the opportunity cost of producing crumpets rises as more crumpets are produced.(D) the
Economic growth is best represented by a movement from(A) A to B.(B) B to C.(C) C to D.(D) D to E.(E) E to A.
A student decides that, having already spent three hours studying for an exam, she should spend one more hour studying for the same exam.Which of the following is most likely true?(A) The marginal benefit of the fourth hour is certainly less than the marginal cost of the fourth hour.(B) The
Economics is best described as(A) the study of how scarce material wants are allocated between unlimited resources.(B) the study of how scarce labor can be replaced by unlimited capital.(C) the study of how decision makers choose the best way to satisfy their unlimited material wants with a scarce
Suppose real interest rates in the United States are higher than real interest rates in the European Union (EU). How will this difference in real interest rates affect currency markets and the value of the U.S.dollar relative to the European euro?(A) Demand for the euro rises, increasing the
Which of the following transactions would appear as a monetary inflow into the U.S. current account?(A) An American buys a car produced in Sweden.(B) An American bank buys stock in a Swedish firm that produces cars.(C) A European investor buys a factory in Wisconsin.(D) A Brazilian family sends
When the Mexican economy is strong and real GDP is rising, what happens to the supply of the Mexican peso, the demand for the American dollar, and the value of the peso relative to the dollar?
If the Central Bank of Hanoveria has been lowering interest rates relative to interest rates in other nations, how would this affect the balance of payments and value of Hanoveria’s currency?(A) Money would flow into the capital account, depreciating the currency.(B) Money would flow out of the
Which of the following is a likely effect of a higher tariff imposed by the United States on imported automobiles?(A) Net exports will fall and the dollar will appreciate in value.(B) Net exports will fall and the dollar will depreciate in value.(C) The price of automobiles in the United States
Suppose the Japanese economy is suffering a prolonged recession.Lower Japanese household incomes will affect U.S. exports to Japan, demand for the dollar, and the value of the dollar relative to the yen in which of the following ways?
If the world price of copper exceeds the domestic (U.S.) price of copper, we would expect(A) the United States to be a net exporter of copper.(B) the United States to impose a tariff on imported copper to protect domestic producers.(C) the demand for U.S. copper to fall.(D) a growing trade deficit
All else equal, economic growth should result in(A) higher real output per worker.(B) a decrease in demand for capital goods.(C) a lower standard of living.(D) a decrease in demand for labor.(E) no change in real output per worker.
Long-term economic growth is most likely under which scenario?(A) Deficit spending to increase aggregate demand(B) Government investment in high-tech research and development(C) Higher resource prices(D) Tax cuts on consumption spending(E) Weak environmental protection and high levels of pollution
Economic output is currently below full employment. If no action is taken, how will this economy adjust in the long run?(A) The SRAS will decrease, increasing the size of the recessionary gap.(B) The LRAS will decrease, bringing the economy back to full employment.(C) The AD will increase, bringing
Dodgetopia’s economy is currently operating at full employment output Yf with the price level of PLf. Assume the government of Dodgetopia engages in expansionary fiscal policy. What level of output and price level will the economy experience in the long run?
When a nation experiences economic growth, we shift the _____ curve _____.(A) LRAS; rightward(B) AD; rightward(C) SRAS; leftward(D) SRAS; rightward(E) AD; leftward
If a nation’s capacity to produce more output with the same resources has improved, we call it(A) a recession.(B) economic growth.(C) a depression.(D) a peak in the business cycle.(E) a trough in the business cycle.
This nation’s economy is currently in long-run equilibrium at point C.What would occur to cause the economy to move to point D?(A) A decrease in aggregate demand(B) A decrease in long-run aggregate supply(C) An increase in aggregate demand(D) A decrease in short-run aggregate supply(E) An
This nation’s economy is currently in long-run equilibrium at point C.What would occur to cause the economy to move to point E?(A) A decrease in aggregate demand(B) A decrease in long-run aggregate supply(C) An increase in aggregate demand(D) A decrease in short-run aggregate supply(E) An
If the velocity of money is constant, an increase in the money supply will create _____ in the long run.(A) unemployment(B) economic growth(C) inflation(D) an increase in real GDP(E) higher interest rates Use Figure D.1 for Questions 46 and 47.
When a government engages in deficit spending, how does this affect the market for loanable funds, the real interest rate, and private investment spending?
Suppose the reserve ratio is 10 percent and the Fed buys $1 million in Treasury securities from commercial banks. If money demand is perfectly elastic, which of the following is likely to occur?(A) Money supply increases by $10 million, lowering the interest rate and increasing AD.(B) Money supply
If a bank has $1,000 in checking deposits and the bank is required to reserve $250, what is the reserve ratio? How much does the bank have in excess reserves? What is the size of the money multiplier?(A) 25%, $750, M = 1⁄4(B) 75%, $250, M = 4(C) 25%, $750, M = 4(D) 75%, $750, M = 1⁄4(E) 25%,
Excess reserves in the banking system will increase if(A) the reserve ratio is increased.(B) the checking deposits increase.(C) the discount rate is increased.(D) the Fed sells Treasury securities to commercial banks.(E) income tax rates increase.
Which of the following is an accurate statement of the money supply in the United States?(A) The money supply is backed by gold reserves.(B) The money supply is controlled by elected members of Congress.(C) M1 is larger than M2.(D) Paper money can be exchanged at commercial banks for an equal
Which of the following monetary policies would lessen the effectiveness of expansionary fiscal policy?(A) Decreasing the value of the domestic currency.(B) Lowering the income tax rate.(C) Selling Treasury securities to commercial banks.(D) Lowering the discount rate.(E) Lowering the reserve ratio.
When a firm wants to raise money without relinquishing ownership of the firm, they will most likely issue ____ to the public.(A) a share of stock(B) a Treasury bill(C) mutual funds(D) an insurance policy(E) a corporate bond
A financial asset that gives the holder a small percentage of ownership in a corporation is called(A) a share of stock.(B) a Treasury bill.(C) fiat money.(D) an insurance policy.(E) a corporate bond.
Which of the following is a tool used by the Fed to increase the money supply?(A) A lower discount rate(B) Selling Treasury securities to commercial banks(C) A higher reserve ratio(D) A lower personal income tax rate(E) A lower investment income tax rate
A contractionary monetary policy will cause the nominal interest rate, aggregate demand, output, and the price level to change in which of the following ways?
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