Part 2 Mock Final

Question 1

If the euro rises in price, it becomes:

Answer 1

More expensive for Americans to buy European products but cheaper for Europeans to buy American products

Question 2

When a U.S. company purchases a foreign company, the transaction is recorded in the balance of payments as part of:

Answer 2

The financial account

Question 3

An import quota does which of the following?

Answer 3

Increases the price of the domestic good for the consumer

Question 4

Early 2000s US half off sale for Europeans. What led to this?

Answer 4

A rise in the dollar price of the Euro

Question 5

M2 is $8 trillion and nominal GDP is about 14.2 trillion. What is the velocity of money?

Answer 5

1.8

Question 6

What two numbers do you need to compute the unemployment rate?

Answer 6

The number of employed persons and the number of unemployed persons

Question 7

What effect do discouraged workers have on the unemployment rate?

Answer 7

Raise it because there are always discouraged workers

Question 8

During an economic expansion, automatic stabilizers?

Answer 8

Reduce a budget deficit or increase a surplus

Question 9

The theoretical proposition that government deficits do not affect the level of output because individuals realize that they have to pay the deficits in the future and therefore increase their savings is called:

Answer 9

The recardian equivalence theorem

Question 10

So classical economists believe in the principle of sound finance?

Answer 10

Yes

Question 11

The recardian equivalence theorem states that:

Answer 11

It dosnt matter wether govt spending is financed by taxes or deficits neither would affect the economy

Question 12

Does the recardian equivalence theorem lead to a policy of sound finance?

Answer 12

No. It says the method of financing a deficit does not matter

Sound finance says it does and deficits should not be run

Question 13

Pre 1930 economists believed that govt should maintain a balanced budget even if recession

Answer 13

True