MCQs ECON B Flashcards
1
Q
- If nominal GDP in 2018 is greater than nominal GDP in 2017, but real GDP in 2017 is equal to real GDP in 2018 then prices:a. must have fallen.
b. must have risen.
c. must have stayed the same.
d. may have risen, fallen, or stayed the same
because there is not enough information to
determine what happened to real output
A
b
2
Q
- Which of the following is an example of a “perverse good” that is captured in GDP?
a. New building projects that result from destruction in a war.
b. Record shops closing down due to competition with itunes
c. Pollution from cars in traffic jams
d. All of the above
A
a
3
Q
- In the exogenous growth model studied in class, long run growth in living standards must come from:
a. Responsible monetary policy
b. Constant increases in the capital stock
c. Advances in productivity due to technological innovation
d. Transfer of resources from poor to rich countries
A
c
4
Q
- According to the production function studied in class, why might two countries have the same level of capital, but different output per person.
a. The “richer” country has a lower savings rate than the poorer one.
b. The richer country has a different, and more productive, production technology than the poorer one.
c. The richer country had a better starting level of capital than the poorer one.
d. Any of these may explain this.
A
b
5
Q
- Which of the following would be a Keynesian prospective on business cycles.
a. Business cycles are a fact of life. Because they are unpredictable the government cannot do anything about them.
b. The economy is inherently stable and the government should get out of the way of business.
c. The economy is inherently stable, bad monetary policy is at fault, and should be fixed to address the problem.
d. The economy is inherently unstable, we need government to intervene with taxes and spending to stabilise it
A
d
6
Q
- When and where did living standards start to rise permanently above subsistence levels?
a. In the Middle East, around 9000BC, when the first cities were founded
b. England, the mid 1600s AD during the industrial revolution and colonization
c. Rome, circa 100BC, as the Roman Empire started expanding
d. China, roughly 1000AD, when paper money was invented
e. England, about 1800AD, during the industrial revolution
A
e
7
Q
- In what way is the Malthusian economy “self correcting”?
a. Increased output leads to population increases, eroding per person living standards.
b. Increased output encourages decreased population, eroding per person living standards.
c. Irrational exuberance, coming from rapid growth forms bubbles that eventually burst.
d. None of the above
A
a
8
Q
- If the European Central Bank purchases €1 Million in assets on the open market we would expect that the money supply will:
a. Increase, by exactly €1 Million
b. Decrease, by exactly €1 Million
c. Increase, by more than €1 Million
d. Decrease, by more than €1 Million
A
c
9
Q
- What policy did Paul Volcker pursue in the early 1980s United States to fight inflation:
a. Small increases in interest rates
b. Small decreases in interest rates
c. Large increases in interest rates
d. Large decreases in interest rates
A
c
10
Q
- Which of the following best describes a nominal anchor:
a. Central banks hold nominal variables fixed to gain credibility.
b. Central banks target a nominal variable in the long run consistently over time.
c. Tight money supply weighs the economy down, slowing growth
d. Central banks tighten money supply consistently to hold back inflation.
A
b
11
Q
- Which of the following is not a cause of bubbles we discussed in class:
a. Rapid improvements in production technology leading to an overheating of the economy.
b. Herding behaviour by investors.
c. Over-confidence about ability to beat the market
d. Financial innovations that are poorly regulated
A
a
12
Q
- What do we mean when we say “real” money balances relative to nominal money balances
a. “Real” money refers to the actual currency rather than money that is created through fractional reserve banking.
b. “Real” money is money backed by a physical commodity, like gold, rather than operating based on faith alone.
c. “Real” refers to the actual spending power of money in goods and services.
d. “Real” money refers to only liquid assets like demand deposits and currency and excludes other financial assets that take time to be converted to cash.
e. None of the above
A
c
13
Q
- In the money market discussed in class, what is the “price” of money?
a. The current exchange rate
b. The level of the consumer price index
c. The real interest rate
d. Unemployment caused by increasing the money supply
A
c
14
Q
- Which of the following variables typically move together in a positive manner?
a. A rise in consumption /A rise in GDP
b. A rise in employment/A rise in GDP
c. A rise in exports/A rise in GDP
d. A rise in investment/A rise in GDP
e. All of the above
A
e
15
Q
- Define in algebraic terms private savings:
a. Private Savings = C + I + G
b. Private Savings = Y – C – I
c. Private Savings = Y – C - G
d. Private Savings = C + I + G + NX
e. Private Savings = T – G
A
c