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MAcro Econ 832 > Macroecon 832 > Flashcards

Macroecon 832 Flashcards

1
Q

Suppose our domestic economy consists of two firms. One produces an intermediate good that it sells to the second firm for $300. The second firm then transforms this product and sells it to a foreign country for $500. What is the domestic country’s GDP?

a. 300
b. 500
c. 800
d. not enough information to answer

A

The answer is B

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2
Q

Suppose our domestic economy consists of two firms. One produces an intermediate good that it sells to the second firm for $300. The second firm then transforms this product and sells it to a foreign country for $500. What is the domestic country’s GDP?

Same as above except that the second firm sells its good to domestic consumers. What is the domestic country’s GDP?

a. 300
b. 500
c. 800
d. not enough information to answer

A

the answer is B

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3
Q

Imagine a country produces a single good. In 2006 it produced 200 units of this good, pricing it at $5. In 2011 it produced 500 units of this good pricing it at 8 dollars. What is the country’s nominal GDP in 2006?

A

$1000 - why is this? 200*5=1000 - see notes for explanation.

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4
Q

In a different economy, suppose a country produces 5 units in 2001 and produced 12 units in 2015. True or False: In this economy real GDP has gone up between 2001 and 2011:

a. True
b. False
c. Not enough information to answer

A

C

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5
Q

What is GDP (Y) equal to?

a. Y = C + I + G + NX
b. Y = C – T + I + G
c. Y - T = C
d. Y=mpc(Y-T)
e. T = G

A

A

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6
Q

Which of the following might make sense in terms of an investment function:

a. I = 1000r + 50 Y
b. I = 1000r - 50 Y
c. I = 50Y – 1000r
d. I = -50Y – 1000r

A

C is correct. Notice the positive year and the negative rate. prof. said something about the positive year and the negative rate.

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7
Q

Suppose a country produces 5 units in 2001 and produced 12 units in 2015. In this economy nominal GDP has gone up between 2001 and 2015:

a. True
b. False
c. Not enough information to answer

A

C. Not enough information

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8
Q

Which of the following is true in a closed economy:

a. Y=C+I+G
b. T=G
c. Money Supply = Money Demand
d. None of the above

A

A and B

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9
Q

In a closed economy, which is more likely to have the highest impact on GDP?

a. A reduction in taxes of 100
b. An increase in government spending of 100
c. A reduction of taxes of 50 and an increase in government spending of 50
d. Neither has any impact on GDP.

A

B

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10
Q

In an open economy, which of the following is true:

a. Y=C+I+G
b. Y=C+I+G-NX
c. Y=C-T
d. Y=C
e. None of the above

A

E

Don’t let answer B fool you. there is no plus sign there

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11
Q

Government Savings are equal to:

a. T+G
b. Y-T-C
c. C+I+G+NX
d. T-G
e. G-T
f. None of the above

A

D

Taxes minus government spending

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12
Q

In a closed economy, which may be true:

a. S>I
b. S = I
c. S<i></i>

A

b - Savings = Investment

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13
Q

Which of these will cause a drop in GDP:

a. An increase in the money supply
b. An increase in the marginal propensity to consume
c. An increase in government revenue
d. none of the above

A

C - an increase in government revenue

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14
Q

Public Savings are equal to:

a. S-I
b. Y-T-C
c. C+I+G+NX
d. G-T
e. None of the above

A

E.

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15
Q

Which of the following will affect the IS curve:

a. A change in taxes
b. An increase in government spending
c. A change in the money supply.
d. None of the above

A

a. A change in taxes

b. An increase in government spending

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16
Q

Which of the following will shift the LM curve to the left:

a. A decrease in the money supply
b. An increase in the money supply
c. An increase in government spending
d. A decrease in government spending
e. None of the above

A

A - A decrease in the money supply

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17
Q

True or False: If the Fed increases the money supply and the government increases spending, then the interest rate will go down.

A

False

18
Q

Suppose the Fed decides to increase the money supply. Which of the following Fed actions would achieve that goal:

a. Buying bonds
b. Selling bonds
c. Increasing the reserve ratio
d. Decreasing the reserve ratio
e. Increasing the overnight interest rate
f. Decreasing the overnight interest rate
g. None of the above

A

The following answers are correct!

a. Buying bonds
d. Decreasing the reserve ratio
f. Decreasing the overnight interest rate

19
Q

part 1
Suppose the Fed decides to conduct an open market purchase of bonds. Which would happen:
a. Money supply goes down and the interest rate rises.
b. Money supply goes up and the interest rate rises.
c. Money supply goes down and the interest rate falls.
d. Money supply goes up and the interest rate falls.

part 2
In the context of the above question, what happens to r in this economy?
a.	It goes up
b.	It goes down
c.	It stays the same
d.	Not enough information to answer.
e.	None of the above
A

part 1
d. The money supply goes up and the interest rate falls.

part 2
d. Not enough information to answer.

20
Q

If inflation is positive, the value of your money:

a. Increases
b. Decreases
c. Stays the same
d. Not enough information to answer.

A

b. Decreases

21
Q

Draw a “standard” IS-LM graph. Label both axes and curves.

A

Y axis contains r - interest rates
X axis contains income or GDP
LM curve is from origin upwards
IS curve comes downwards

22
Q

In equilibrium in a open economy, we must have:

a. Y= C+I+G
b. Y=C+I+G+NX
c. S=I-NX
d. S=I
e. S=I+NX
c. None of the above

A

The following answers are correct

d. S=I
e. S=I+NX

23
Q

In an open economy, what happens to domestic GDP if foreign income goes down?

a. It goes up
b. It goes down
c. It stays the same
d. None of the above

A

b. It goes down

24
Q

The real exchange rate is (where Pf is the foreign price):

a. eP/Pf
b. ePPf
c. ePf/P
d. Pf/eP
e. None of the above.

A

a. eP/Pf

25
Q

Assume the real exchange rate decreases, and all else remains equal. Then:

a. Money supply will increase.
b. Money supply will decrease.
c. Net exports will increase.
d. Net exports will decrease.
e. None of the above.

A

c. Net exports will increase.

26
Q

Assume a closed economy suddenly opens up. Which of the following can happen:

a. The IS curve shifts left.
b. The IS curve shifts right.
c. The IS curve does not move.
d. none of the above.

A

The following answers are correct

a. The IS curve shifts left.
b. The IS curve shifts right.
c. The IS curve does not move.

27
Q

If the nominal interest rate is negative then:

a. the real interest rate must be positive.
b. the real interest rate must be negative.
c. None of the above

A

c. None of the above

28
Q

In an open economy, if there is a trade deficit then:

a. the government must be saving (positively)
b. individuals must be saving (positively)
c. only one of the above must be true
d. none of the above.

A

d. none of the above.

29
Q

True or False: An increase in the money supply will shift the LM curve right and lead to an increase in the interest rate.

A

False

30
Q

In the IS-LM context, suppose the economy is such that the central bank is worried that inflation in the future will be too high. Which of the following policies should it pursue:

a. Conduct an open market purchase of bonds
b. Conduct an open market sale of bonds
c. Lower the overnight interest rate
d. Increase the overnight interest rate
e. None of the above.

A

b. Conduct an open market sale of bonds

d. Increase the overnight interest rate

31
Q
  1. True or False: the Fed sets the interest rate.
A

False. The Fed sets only the overnight interest rate.

32
Q

Which of the following occurs if government increases its deficit?

a. Output will change causing a change in the money demand and a shift of the LM curve.
b. The IS curve shifts and the economy moves along the LM curve.
c. Both the IS and LM curve shift.
d. Neither the IS or the LM curve shifts.
e. The LM curve shifts and the economy moves along the IS curve.
f. none of the above

A

b. The IS curve shifts and the economy moves along the LM curve.

33
Q

Which of the following will cause the IS curve to shift right?

a. an increase in taxes.
b. a decrease in taxes.
c. a decrease in the interest rate.
d. none of the above

A

b. a decrease in taxes.

34
Q

Which of the following will cause a shift in the LM curve?

a. an open market purchase of bonds
b. an increase in Y
c. an increase in government spending
d. none of the above

A

a. an open market purchase of bonds

35
Q

Which of the following occurs if the central bank conducts an open market
sale of bonds:
a. The LM curve shifts to the left and the interest rate increases.
b. The LM curve shifts to the left as the interest rate falls.
c. The IS curve shifts to the right and the interest rate increases.
d. The IS curve shifts to the right as the interest rate falls.
e. None of the above.

A

a. The LM curve shifts to the left and the interest rate increases.

36
Q

Imagine a country produces a single good. In 2006 it produced 200 units of this good, pricing it at $8. In 2011 it produced 500 units of this good at $5.

What is this country’s real GDP in 2006 (using 2011 as a base year)?

a. 4000
b. 1000
c. 1600
d. 2500
e. none of the above

A

b. 1000

37
Q

In a closed economy, if total savings goes down then:

a. r must go up.
b. r must go down.
c. we don’t know what happens to r.
d. r stays the same.
e. none of the above

A

a. r must go up.

38
Q

Which of these relationships is true (where P is the price level):

a. Real Money Supply = (Nominal Money Supply)/P
b. Real Money Supply = (Nominal Money Supply)*P
c. Nominal Money Supply - Real Money Supply = P
d. Nominal Money Supply = Real Money Supply
e. none of the above.

A

a. Real Money Supply = (Nominal Money Supply)/P

39
Q

Which of these is/are correct:

a. Y=C+I+G
b. S=I
c. S=C+I+G
d. none of the above

A

d. none of the above

40
Q

The government is worried about its deficit and has decided to lower it by decreasing G. After this, the central bankers meet and decide to target
output instead of inflation and wants to keep output as it was before the government changed its policy. The central bank should:
a. increase the money supply
b. decrease the money supply

A

a. increase the money supply

MAcro Econ 832 (1 decks)

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