宏观经济学习题练习

Exerciseandanswer

Note:ThesearebasedonPrincipleofMacroeconomics,helpingtounderstandbasicconcepts.SomecontentssuchasthoseofChap7,8,10,maynotbecoveredhere.

Foryourfinalreview,pleaseaidalsowithquestionsandproblemsoftheMacroeconomicstextbook.

MultipleChoice

Identifythechoicethatbestcompletesthestatementoranswersthequestion.

____ 1. Supposethatanapartmentcomplexconvertstoacondominiumwheretherentersarenowownersoftheirformerapartments.Supposethatanestimateofthevalueofthecondominiumowners'housingservicesisnowthesameastheirformerrent.

a.

GDPnecessarilyincreases.

b.

GDPnecessarilydecreases.

c.

GDPisunaffectedbecauseneithertherentnortheestimateofthevalueofhousingservicesisincludedinGDP.

d.

GDPisunaffectedbecausepreviouslyrentwasincludedinGDP,andnowitisreplacedbytheestimateofthevalueofhousingservices.

____ 2. GDP

a.

includesthevalueofintermediategoodssowecangetameasureofsales.

b.

excludesthevalueofintermediategoodsbecausetheyaretoodifficulttomeasure.

c.

excludesthevalueofintermediategoodsbecausetheirvalueisalreadycountedinthevalueoffinalgoods.

d.

Noneoftheabovearecorrect.

____ 3. WhichofthefollowingisincludedinU.S.GDP?

a.

goodsproducedbyforeigncitizensworkingintheUnitedStates

b.

thedifferenceinthepriceofthesaleofanexistinghomeanditsoriginalpurchaseprice

c.

knownillegalactivities

d.

Noneoftheabovearecorrect.

____ 4. Afirmproducesconsumergoodsandaddssometoinventoryinthethirdquarter.Inthefourthquarterthefirmsellsthegoodsataretailoutletwhichleavestheirinventorydiminished.Asaresultoftheseactions,whatcomponent(s)ofrealGDPchangeinthefourthquarter?

a.

onlyinvestmentanditdecreases.

b.

onlyconsumptionanditincreases.

c.

Investmentdecreasesandconsumptionincreases.

d.

Noneoftheaboveiscorrect.

____ 5. WhichofthefollowingisincludedintheinvestmentcomponentofGDP?

a.

purchasesofnewlyconstructedhomes

b.

purchasesofforeigncapitalgoodssuchasindustrialequipment

c.

changesininventory

d.

Alloftheabovearecorrect.

____ 6. WhichofthesethingswouldNOTbeincludedinthecomponentslistedafterthem?

a.

RuthbuysamotorcyclemadeinJapantorideonherweekendsoff-U.S.consumptionandU.S.import.

b.

Shirleyownsherownhomewhichhasanestimatedrentalvalue-U.S.consumption.

c.

BeverlybuysanewlyissuedstockinaU.S.corporation-U.S.investment.

d.

Samanthaproducessomeartworkbutdoesn'tsellthemallinthecurrentquarterandsoaddsthemtoherinventory-investment.

____ 7. Ifinagivenyearaneconomyhasconsumptionof$3000,investmentof$2000,governmentpurchasesof$1500,exportsof$500,importsof$600,taxesof$1200,transferpaymentsof$400,anddepreciationof$300,thenGDPwillequal

a.

$6400.

b.

$7000.

c.

$7600.

d.

$8900.

e.

$9500.

____ 8. WhichstatementrepresentsmostcorrectlytherelationshipbetweennominalGDPandrealGDP?

a.

NominalGDPmeasuresbase-yearproductionusingbase-yearprices,whilerealGDPmeasurescurrentproductionusingcurrentprices.

b.

NominalGDPmeasurescurrentproductionusingbase-yearprices,whilerealGDPmeasurescurrentproductionusingcurrentprices.

c.

NominalGDPmeasurescurrentproductionusingcurrentprices,whilerealGDPmeasurescurrentproductionusingbase-yearprices.

d.

NominalGDPmeasurescurrentproductionusingcurrentprices,whilerealGDPmeasuresbase-yearproductionusingbase-yearprices.

____ 9. TheGDPdeflatorcanbeusedtoidentifythe

a.

increaseinnominalGDPthatisduetoanincreaseinpricesratherthananincreaseinproduction.

b.

increaseinrealGDPthatisduetoanincreaseinpricesratherthananincreaseinproduction.

c.

increaseinthecostoflivingfortypicalU.S.consumers.

d.

reductioningovernmentspendingrequiredtobalancethefederalbudget.

____ 10. TheinformationbelowwasreportedbytheWorldBank.Onthebasisofthisinformation,whichlistbelowcontainsthecorrectorderingofGDPperpersonfromhighesttolowest?

Country

NominalGDP2000

Population200

Japan

$4,800,000million

127million

Switzerland

$240,000million

7.2million

UnitedStates

$9,800,000million

280million

a.

Japan,Switzerland,UnitedStates

b.

Japan,UnitedStates,Switzerland

c.

UnitedStates,Switzerland,Japan

d.

UnitedStates,Japan,Switzerland

____ 11. Supposethatoverthelasttwenty-fiveyearsacountry'snominalGDPgrewtothreetimesitsformersize.Inthemeantimepopulationgrew50percentandpricesrose100percent.WhathappenedtorealGDPperperson?

a.

Itmorethandoubled.

b.

Itrose,butlessthandoubled.

c.

Itwasunchanged.

d.

Itfell.

____ 12. Theinflationrateisdefinedasthe

a.

pricelevel.

b.

changeinthepricelevel.

c.

priceleveldividedbythepricelevelinthepreviousperiod.

d.

percentagechangeinthepricelevelfromthepreviousperiod.

____ 13. ThemarketbasketusedtocalculatetheCPIinAquiloniais4loavesofbread,6gallonsofmilk,2shirtsand2pants.In2001breadcost$1.00perloaf,milkcost$1.50pergallon,shirtscost$6.00eachandpantscost$10.00perpair.In2002breadcost$1.50perloaf,milkcost$2.00pergallon,shirtscost$7.00eachandpantscost$12.00perpair.Whatwastheinflationrate,asmeasuredbytheCPI,forAquiloniabetween2001and2002?

a.

30percent

b.

24.4percent

c.

21.6percent

d.

Itisimpossibletodeterminewithoutknowingthebaseyear.

____ 14. Thepriceindexis180inoneyearand210inthenext.Whatwastheinflationrate?

a.

16.7percent

b.

14.3percent

c.

11.1percent

d.

Noneoftheabovearecorrect.

____ 15. ByfarthelargestcategoryofgoodsandservicesintheCPIbasketis

a.

housing.

b.

recreation.

c.

transportation.

d.

foodandbeverages.

____ 16. WhichofthefollowingisnotawidelyacknowledgedproblemwiththeCPIasameasureofthecostofliving?

a.

substitutionbias

b.

introductionofnewgoods

c.

unmeasuredqualitychange

d.

unmeasuredpricechange

____ 17. WhichofthefollowingisthemostaccuratestatementabouttheeffectsofqualitychangeontheCPI?

a.

EventhoughtheBLSadjustspricesofproductsintheCPIbasketwhenthequalityoftheproductschange,changesinqualityarestillaproblem,becausequalityissohardtomeasure.

b.

BecausetheBLSadjustspricesofproductsintheCPIbasketwhenthequalityoftheproductschange,changesinqualityarenolongeraproblemfortheCPI.

c.

theBLSdoesnotadjusttheCPIforqualitychanges.

d.

MosteconomistsbelievethatchangesinthequalityofgoodsincludedintheCPIbasketdonotbiastheCPIasameasureofthecostofliving.

____ 18. SupposethatlawnmowersarepartofthemarketbasketusedtocomputetheCPI.Thensupposethatthequalityoflawnmowersimproveswhilethepriceoflawnmowersstaysthesame.IftheBureauofLaborStatisticspreciselyadjuststheCPIfortheimprovementinquality,then,otherthingsequal,

a.

theCPIwillrise.

b.

theCPIwillfall.

c.

theCPIwillstaythesame.

d.

lawnmowerswillnolongerbeincludedinthemarketbasket.

____ 19. In1931,PresidentHerbertHooverwaspaidasalaryof$75,000.Thepriceindexfor1931is15.2,andthepriceindexfor2001is177.ThePresident'ssalarytodayis$400,000.

a.

PresidentHoover'ssalaryequivalentin2001dollarsismuchsmallerthanthatofthecurrentU.S.president.

b.

PresidentHoover'ssalaryequivalentin2001dollarsisaboutthesameasthatofthecurrentU.S.president.

c.

PresidentHoover'ssalaryequivalentin2001dollarsismuchlargerthanthatofthecurrentU.S.president.

d.

Onecannotmakeameaningfulcomparisonof2001salariesand1931salaries.

Thefollowingquestionsarebasedonthefollowinginformation:

Scenario11-1

GrantSmithwasadoctorin1944andmadeabout$12,000ayear.HisdaughterLisaSmithalsoisadoctorandlastyearshemadeabout$175,000in2001.Thepriceindexin1950was17.6andthepriceindexwas177in2001.

____ 20. RefertoScenario11-1.WhatisLisa'sincomein1945dollars?

a.

$15,667

b.

$17,401

c.

$19,322

d.

Noneoftheabovearecorrect.

____ 21. Ingridtakesauniversityteachingjobasanassistantprofessorin1974atasalaryof$10,000.By2003,shehasbeenpromotedtofullprofessor,withasalaryof$50,000.Ifthepriceindexin1974is50,andthepriceindexin2003is180,whatisIngrid's2003salaryin1974dollars?

a.

$13,889

b.

$18,000

c.

$26,000

d.

$36,000

____ 22. Whichisthemostaccuratestatementabouttherelationshipbetweeninflationandinterestrates?

a.

Thereisnorelationshipbetweeninflationandinterestrates.

b.

Theinterestrateisdeterminedbytherateofinflation.

c.

Inordertofullyunderstandinflation,weneedtoknowhowtocorrectfortheeffectsofinterestrates.

d.

Inordertofullyunderstandinterestrates,weneedtoknowhowtocorrectfortheeffectsofinflation.

____ 23. IntheUnitedStates,asmeasuredbyrealGDPperperson,averageincomeisabouthowmanytimesashighasaverageincomeacenturyago?

a.

2

b.

4

c.

6

d.

8

____ 24. Whichofthefollowingistrue?

a.

AlthoughlevelsofrealGDPperpersonvarysubstantiallyfromcountrytocountry,thegrowthrateofrealGDPperpersonissimilaracrosscountries.

b.

Productivityisnotcloselylinkedtogovernmentpolicies.

c.

ThelevelofrealGDPperpersonisagoodgaugeofeconomicprosperity,andthegrowthrateofrealGDPperpersonisagoodgaugeofeconomicprogress.

d.

ProductivitymaybemeasuredbythegrowthrateofrealGDPperperson.

____ 25. WhichofthefollowingdoesthelevelofrealGDPmeasure?

a.

totalrealincome

b.

productivity

c.

thestandardofliving

d.

Alloftheabovearecorrect.

____ 26. In2002realGDPperpersoninOlympuswas4,500.In2001itwas4,250.WhatwasthegrowthrateofrealGDPperperson?

a.

5.6percent

b.

5.9percent

c.

6.5percent

d.

Noneoftheabovearecorrecttothenearesttenth.

____ 27. In2002realGDPinOceaniawas561.0billionandthepopulationwas2.2million.In2001realGDPwas500.0billionandthepopulationwas2.0million.WhatwastheapproximategrowthrateofrealGDPperperson?

a.

12percent

b.

10percent

c.

4percent

d.

2percent

____ 28. WhichofthefollowingisNOTcorrect?

a.

Countriesthathavehadhigheroutputgrowthperpersonhavetypicallynotdonesowithhigherproductivitygrowth.

b.

Acountry'sstandardoflivinganditsproductivityarecloselyrelated.

c.

Productivityreferstooutputproducedperhourofwork.

d.

Increasesinproductivitycanbeusedtoincreaseoutputorleisure.

____ 29. Humancapitalisthe

a.

knowledgeandskillsthatworkersacquirethrougheducation,training,andexperience.

b.

stockofequipmentandstructuresthatisusedtoproducegoodsandservices.

c.

totalnumberofhoursworkedinaneconomy.

d.

samethingastechnologicalknowledge.

____ 30. Yourcompanydiscoversabetterwaytoproducemousetraps,butyourbettermethodsarenotapparentfromthemousetrapsthemselves.Yourknowledgeofhowtomoreefficientlyproducemousetrapsis

a.

commontechnologicalknowledge.

b.

common,butnottechnological,knowledge.

c.

proprietarytechnologicalknowledge.

d.

proprietary,butnottechnological,knowledge.

____ 31. Ifyourfirmhasconstantreturnstoscale,thenifyoudoubledallyourinputsyourfirm'soutputwould

a.

notchange.

b.

increase,butbylessthandouble.

c.

double.

d.

morethandouble.

____ 32. Otherthingsequal,relativelypoorcountriestendtogrow

a.

slowerthanrelativelyrichcountries;thisiscalledthepovertytrap.

b.

slowerthanrelativelyrichcountries;thisiscalledtheMalthuseffect.

c.

fasterthanrelativelyrichcountries;thisiscalledthecatch-upeffect.

d.

fasterthanrelativelyrichcountries;thisiscalledtheconstant-returns-to-scaleeffect.

____ 33. Thelogicbehindthecatch-upeffectisthat

a.

workersincountrieswithlowincomeswillworkmorehoursthanworkersincountrieswithhighincomes.

b.

thecapitalstockinrichcountriesdeterioratesatahigherratebecauseitalreadyhasalotofcapital.

c.

newcapitaladdsmoretoproductioninacountrythatdoesn'thavemuchcapitalthaninacountrythatalreadyhasmuchcapital.

d.

Noneoftheabovearecorrect.

____ 34. Anorganizationthattriestoencouragetheflowofinvestmenttopoorcountriesisthe

a.

WorldBank.

b.

OrganizationofLessDevelopedCountries.

c.

AllianceofDevelopingCountries.

d.

InternationalDevelopmentAlliance.

____ 35. Whichofthefollowingisgenerallyanopportunitycostofinvestmentinhumancapital?

a.

futurejobsecurity

b.

forgonewagesatpresent

c.

increasedearningpotential

d.

Alloftheabovearecorrect.

____ 36. GaryBeckerhasproposedprogramslikeMexico'sProgressatoreducechildlaborandincreaseeducationallevels.

a.

Ifsuccessful,theseprogramswillraiseproductivitybyincreasinghumancapital.

b.

InMexicotheseprogramshavedecreaseddifferencesinthelevelofeducationobtainedbygirlsandboys.

c.

Suchprogramsmightbefundedbyreducingmoneyspentonuniversitiesandeducationoftheelite.

d.

Alloftheabovearecorrect.

____ 37. WhichofthefollowingstatementsisFALSE?

a.

Thecatch-upeffectisbasedontheassumptionofdiminishingreturnstocapital.

b.

Investmentinpoorcountriesfromrichcountriesisonewaypoorcountriescanlearnnewtechnologies.

c.

Malthusarguedthatcharityandgovernmentaidwasaneffectivewaytoreducepoverty.

d.

AdamSmitharguedthatpeace,lighttaxesandatolerableadministrationofjusticearethekeystogrowth.

____ 38. WhichofthefollowingisanobservationmadebyKremer?

a.

Worldgrowthratesincreasedasthepopulationincreased.

b.

Technologicalprogressallowsforincreasingpopulationbecauseofadvancesinagriculture.

c.

Worldpopulationisgrowingsorapidlythatsoonitwilloutstripnaturalresourcesandourstandardoflivingwilldecline.

d.

Alloftheabovearecorrect.

____ 39. Typically,countriesinAfrica

a.

havehightaxrates.

b.

havelawsandgeographythatencouragetrade.

c.

hadlowbutpositivegrowthofrealGDPperpersonbetween1978and1994.

d.

Alloftheabovearecorrect.

____ 40. Ifthegovernment'sexpendituresexceededitsreceipts,itwouldlikely

a.

lendmoneytoabankorotherfinancialintermediary.

b.

borrowmoneyfromabankorotherfinancialintermediary.

c.

directlybuybondsfromthepublic.

d.

directlysellbondstothepublic.

____ 41. Comparedtolong-termbonds,otherthingsthesame,short-termbondsgenerallyhave

a.

moreriskandsopayhigherinterest.

b.

lessriskandsopaylowerinterest.

c.

lessriskandsopayhigherinterest.

d.

aboutthesameriskandsopayaboutthesameinterest.

____ 42. PapaMario'sPizzaCompanysellscommonstock.

a.

Theyareusingequityfinancingandthereturnshareholdersearnisfixed.

b.

Theyareusingequityfinancingandthereturnshareholdersearndependsonhowprofitablethecompanyis.

c.

Theyareusingdebtfinancingandthereturnshareholdersearnisfixed.

d.

Theyareusingdebtfinancingandthereturnshareholdersearndependsonhowprofitablethecompanyis.

____ 43. Comparedtobonds,stocksoffertheholder

a.

lowerrisk.

b.

partialownership.

c.

thelikelihoodofalowerreturn.

d.

Alloftheabovearecorrect.

____ 44. WhichofthefollowingisnotanimportantstockexchangeintheUnitedStates?

a.

NewYorkStockExchange

b.

AmericanStockExchange

c.

ChicagoMercantileExchange

d.

NASDAQ

____ 45. Stockindexesare

a.

theaverageofagroupofstockprices.

b.

theaverageofagroupofstockyields.

c.

reportsinthenewspaperthatreportonthepriceofthestockandearningsofthecorporation.

d.

measuresoftheriskrelativetotheprofitabilityofcorporations.

____ 46. TheDowJonesIndustrialAverageisnowbasedonthepricesofthestocksof

a.

30majorU.S.corporations.

b.

100majorU.S.corporations.

c.

500representativeU.S.corporations.

d.

1000representativeU.S.corporations.

____ 47. StockinSynergyisticCorporationissellingat$25pershare.Ithadearningsof$5ashareandadividendyieldof5percent.Whatisthedividendandtheprice-earningsratio?

a.

$.25,5

b.

$.25,6.7

c.

$1.25,5

d.

$1.25,6.7

____ 48. Amutualfund

a.

isafinancialmarketwheresmallfirmsmutuallyagreetosellstocksandbondstoraisefunds.

b.

isfundssetasidebylocalgovernmentstolendtosmallfirmswhowanttoinvestinprojectsthataremutuallybeneficialtothefirmandcommunity.

c.

sellsstocksandbondsonbehalfofsmallandlessknownfirmswhowouldotherwisehavetopayhighinteresttoobtaincredit.

d.

isaninstitutionthatsellssharestothepublicandusestheproceedstobuyaselectionofvarioustypesofstocks,bonds,orbothstocksandbonds.

____ 49. WhichofthefollowingequationswillalwaysrepresentGDPinanopeneconomy?

a.

S=I-G

b.

I=Y-C+G

c.

Y=C+I+G

d.

Y=C+I+G+NX

____ 50. Ifthenominalinterestrateis10percentandtheinflationrateis4percent,thentherealinterestrateis

a.

14percent.

b.

6percent.

c.

2.5percent.

d.

4/10percent.

____ 51. IfCongressreducedthetaxrateoninterestincome,investment

a.

wouldincreaseandsavingwoulddecrease.

b.

woulddecreaseandsavingwouldincrease.

c.

andsavingwouldincrease.

d.

andsavingwoulddecrease.

____ 52. SupposetheU.S.governmentallowedtaxpayerstoearntheirfirst$5,000ofinterestincometaxfree.Thiswouldshiftthe

a.

supplyforloanablefundsrightmakinginterestratesfall.

b.

supplyofloanablefundsleftmakinginterestratesrise.

c.

demandforloanablefundsrightmakingtheinterestraterise.

d.

demandforloanablefundsleftmakingtheinterestratefall.

____ 53. Interestratesfallandinvestmentfalls.Whichofthefollowingcouldexplainthesechanges?

a.

thegovernmentgoesfromasurplustoadeficit

b.

thegovernmentrepealsaninvestmenttaxcredit

c.

thegovernmentreplacesaconsumptiontaxwithanincometax

d.

Noneoftheabovearecorrect.

____ 54. From2000to2002theU.S.nationaldebthasbeenabout

a.

10percentofGDP.

b.

35percentofGDP.

c.

50percentofGDP.

d.

75percentofGDP.

____ 55. Afewyearsago,basedonconceptssimilartothoseusedtoestimateU.S.employmentfigures,theCanadianadultnon-institutionalizedpopulationwas24million,thelaborforcewas16million,andthenumberofpeopleemployedwas14million.Accordingtothesenumbers,theCanadianlabor-forceparticipationrateandunemploymentratewereabout

a.

67percentand8.3percent.

b.

67percentand12.5percent.

c.

58percentand8.3percent.

d.

58percentand12.5percent.

____ 56. Anincreaseintheminimumwagewould

a.

increaseboththequantitydemandedandthequantitysuppliedoflabor.

b.

decreaseboththequantitydemandedandthequantitysuppliedoflabor.

c.

increasethequantityoflabordemandedwhiledecreasingthequantitysupplied.

d.

decreasethequantityoflabordemandedwhileincreasingthequantitysupplied.

____ 57. Iftheminimumwagewascurrentlyabovetheequilibriumwage,thanadecreaseintheminimumwagewould

a.

increaseboththequantitydemandedandthequantitysuppliedoflabor.

b.

decreaseboththequantitydemandedandthequantitysuppliedoflabor.

c.

increasethequantityoflabordemandedanddecreasethequantitysupplied.

d.

decreasethequantityoflabordemandedandincreasethequantitysupplied.

____ 58. Samantha,theCEOofacorporationoperatinginUganda,decidestoraisethewagesofherworkerseventhoughshefacesanexcesssupplyoflabor.Herdecision

a.

mightincreaseprofitsifitmeansthatthewageishighenoughforherworkerstoeatanutritiousdietthatmakesthemmoreproductive.

b.

willhelpeliminatetheexcesssupplyoflaborifsheraisesitsufficiently.

c.

willcauseunemploymenttofall.

d.

Alloftheabovearecorrect.

____ 59. WhentheFederalReserveconductsopenmarkettransactions,it

a.

issuesFederalReservenotes.

b.

buysorsellsgovernmentbondsfromthepublic.

c.

lowersthediscountrate.

d.

increasesitslendingtomemberbanks.

____ 60. Supposeabankhas$10,000indepositsand$8,000inloans.Ithasareserveratioof

a.

2percent.

b.

12.5percent.

c.

20percent.

d.

80percent.

____ 61. Ifyoudeposit$3,000intoFirstHawkeyeBank,the

a.

bank'srequiredreservesincreasebythereserveratiotimes$3,000.

b.

bankwillbeabletolendout$3,000timesthereserveratio.

c.

bankinitiallyseesreservesincreaseby$0.

d.

Alloftheabovearecorrect.

____ 62. Ifabankuses$100ofreservestomakeanewloanwhenthereserveratiois20percent,thisactionbyitselfinitiallymakesthemoneysupply

a.

andwealthincreaseby$100.

b.

andwealthdecreaseby$100.

c.

increaseby$100whilewealthdoesnotchange.

d.

decreaseby$100whilewealthdecreasesby$100.

____ 63. Ifthereserveratiois10percent,themoneymultiplieris

a.

100.

b.

10.

c.

9/10.

d.

1/10.

____ 64. Ifthereserveratiois15percent,anadditional$1,000ofreserveswillincreasethemoneysupply,tothenearestdollar,by

a.

$1176.

b.

$1275.

c.

$5667.

d.

$6667.

____ 65. Whichlistcontainsonlyactionsthatdecreasethemoneysupply?

a.

raisethediscountrate,makeopenmarketpurchases

b.

raisethediscountrate,makeopenmarketsales

c.

lowerthediscountrate,makeopenmarketpurchases

d.

lowerthediscountrate,makeopenmarketsales

____ 66. Whichlistcontainsonlyactionsthatdecreasethemoneysupply?

a.

makeopenmarketpurchases,raisethereserverequirementratio

b.

makeopenmarketpurchases,lowerthereserverequirementratio

c.

makeopenmarketsales,raisethereserverequirementratio

d.

makeopenmarketsales,lowerthereserverequirementratio

____ 67. Ifreserverequirementsaredecreased,thereserveratio

a.

decreases,themoneymultiplierincreases,andthemoneysupplydecreases.

b.

increases,themoneymultiplierincreases,andthemoneysupplyincreases.

c.

decreases,themoneymultiplierincreases,andthemoneysupplyincreases.

d.

increases,themoneymultiplierincreases,andthemoneysupplydecreases.

____ 68. WhichofthefollowingstatementsaboutU.S.inflationisfalse?

a.

LowinflationwasviewedasatriumphofPresidentCarter'seconomicpolicy.

b.

Therewerelongperiodsinthenineteenthcenturyduringwhichpricesfell.

c.

TheU.S.publichasviewedinflationofeven7percentasamajoreconomicproblem.

d.

TheU.S.inflationratehasvariedovertime,butinternationaldatashowsevenmorevariation.

____ 69. Whenthevalueofmoneyrises,thenumberofdollarsneededtobuyarepresentativebasketofgoods

a.

increases,andsothepricelevelrises.

b.

increases,andsothepricelevelfalls.

c.

decreases,andsothepricelevelrises.

d.

decreases,andsothepricelevelfalls.

____ 70. Whenthemoneymarketisdrawnwiththevalueofmoneyontheverticalaxis,anincreaseinthepricelevelcausesa

a.

shifttotherightofthemoneydemandcurve.

b.

shifttotheleftofthemoneydemandcurve.

c.

movementtotheleftalongthemoneydemandcurve.

d.

movementtotherightalongthemoneydemandcurve.

____ 71. Whenthemoneymarketisdrawnwiththevalueofmoneyontheverticalaxis,anincreaseinthemoneysupplyshiftsthemoneysupplycurvetothe

a.

right,loweringthepricelevel.

b.

right,raisingthepricelevel.

c.

left,raisingthepricelevel.

d.

left,loweringthepricelevel.

____ 72. Thepricelevelisa

a.

relativevariable.

b.

actualvariable.

c.

realvariable.

d.

nominalvariable.

____ 73. Whichofthefollowingisnotimpliedbythequantityequation?

a.

Ifvelocityisstable,anincreaseinthemoneysupplycreatesaproportionalincreaseinnominaloutput.

b.

Ifvelocityisstableandmoneyisneutral,anincreaseinthemoneysupplycreatesaproportionalincreaseinthepricelevel.

c.

Withconstantmoneysupplyandoutput,anincreaseinvelocitycreatesanincreaseinthepricelevel.

d.

Withconstantmoneysupplyandvelocity,anincreaseinoutputcreatesaproportionalincreaseinthepricelevel.

____ 74. Supposethatvelocityandoutputareconstant,andthatthequantitytheoryandFishereffectarebothcorrect.Ifnominalinterestratesare6percentandinflationis2.5percent,itfollowsthatthe

a.

moneysupplygrowthrateis2.5percent.

b.

realinterestrateis8.5percent.

c.

realinterestrateis2.5percent.

d.

moneysupplygrowthrateis6percent.

____ 75. Highandunexpectedinflationhasagreatercost

a.

forthosewhoborrowthanthosewhosave.

b.

forthosewhoholdalittlemoneythanforthosewhoholdalotofmoney.

c.

forthosewhosewagesincreasebyasmuchasinflation,thanthosewhoarepaidafixednominalwage.

d.

forsaversinhighincometaxbracketsthanforsaversinlowincometaxbrackets.

____ 76. WhichofthefollowingwouldbeU.S.foreigndirectinvestment?

a.

YourU.S.basedmutualfundbuysstockinEasternEuropeancompanies.

b.

AU.S.citizenopensaguitarstoreinHongKong.

c.

ASwissbankbuysaU.S.governmentbond.

d.

AGermantractorfactoryopensaplantinPeoria.

____ 77. TheU.S.sellsmachinerytoaSouthAfricancountrythatpaysthemwithSouthAfricancurrency(therand).

a.

ThisincreasesU.S.netcapitaloutflowbecausetheU.S.acquiresforeignassets.

b.

ThisdecreasesU.S.netcapitaloutflowbecausetheU.S.acquiresforeignassets.

c.

ThisincreasesU.S.netcapitaloutflowbecausetheU.S.sellscapitalgoods.

d.

ThisdecreasesU.S.netcapitaloutflowbecausetheU.S.sellscapitalgoods.

____ 78. Supposetherealexchangerateis4/5poundsofChileanbeefperpoundofU.S.beef,apoundofU.S.beefcosts$2andthenominalexchangerateis600Chileanpesosperdollar.ItfollowsthatChileanbeefcosts

a.

960pesosperpound.

b.

1,200pesosperpound.

c.

1,500pesosperpound.

d.

Noneoftheaboveiscorrect.

____ 79. Ifthenominalexchangerateeisforeigncurrencyperdollar,thedomesticpriceisP,andtheforeignpriceisP*,therealexchangerateisdefinedas

a.

e(P*/P).

b.

e(P/P*).

c.

e+P/P.

d.

e-P/P*.

____ 80. Theintroductionoftheeurohas

a.

eliminatedthepossibilityofarbitragewithinEurope.

b.

eliminatedthepossibilityofarbitragebasedonexchange-ratediffere