Final exam

1. (TCO 5) An increase in expected future income will (Points : 4)

increase aggregate demand and aggregate supply.

decrease aggregate demand and aggregate supply.

increase aggregate supply.

increase aggregate demand.

2. (TCO 5) The long-run aggregate supply curve is (Points : 4)

upward-sloping and becomes steeper at output levels above the full-employment output.

upward-sloping and becomes flatter at output levels above the full-employment output.

horizontal.

vertical.

3. (TCO 5) Which would most likely increase aggregate supply? (Points : 4)

An increase in the prices of imported products

An increase in productivity

A decrease in business subsidies

A decrease in personal taxes

4. (TCO 5) Disinflation refers to a situation where (Points : 4)

price level falls, but the rate of inflation does not.

Price level rises, but the rate of inflation does not.

the rate of inflation falls, but the price level does not.

the rate of inflation rises, but the price level does not.

5. (TCO 6) With an MPS of .3, the MPC will be (Points : 4)

1 – .3.

.3 – 1.

1/.3.

.3.

6. (TCO 7) The M1 money supply is composed of (Points : 4)

all coins and paper money held by the general public and the banks.

bank deposits of households and business firms.

bank deposits and mutual funds.

checkable deposits and currency in circulation.

7. (TCO 7) The basic requirement of money is that it be (Points : 4)

backed by precious metals–gold or silver.

authorized as legal tender by the central government.

generally accepted as a medium of exchange.

some form of debt or credit.

8. (TCO 7) How many members can serve on the Board of Governors of the Federal Reserve System? (Points : 4)

Seven

Nine

12

14

9. (TCO 7) Which of the following is the most important function of the Federal Reserve System? (Points : 4)

Setting reserve requirements

Controlling the money supply

Lending money to banks and thrifts

Acting as fiscal agent for the U.S. government

10. (TCO 7) The Federal funds rate is the rate that banks pay for loans from (Points : 4)

the Fed.

the U.S. Treasury.

other banks.

large corporations.

11. (TCO 7) During the financial crisis of 2007-2008, the FDIC increased deposit insurance coverage from (Points : 4)

$50,000 to $100,000 per account.

$100,000 to $250,000 per account.

$200,000 to $500,000 per account.

$500,000 to $1,000,000 per account.

12. (TCO 7) Which one of the following is a tool of monetary policy for altering the reserves of commercial banks? (Points : 4)

Issuing currency

Check collection

Open-market operations

Acting as the fiscal agent for the federal government

13. (TCO 7) The most frequently used monetary device for achieving price stability is: (Points : 4)

open market operations.

the discount rate.

the reserve ratio.

the prime interest rate.

14. (TCO 8) Which of the following products is a leading import of the United States? (Points : 4)

Grains

Aircraft

Petroleum

Generating equipment

15. (TCO 8) In a two-nation world, comparative advantage means that one nation can produce (Points : 4)

a product with fewer inputs than the other nation.

a product at lower average cost than the other nation.

a product at a lower domestic opportunity cost than the other nation.

more of a product than the other nation.

16. (TCO 8) If a nation imposes a tariff on an imported product, then the nation will experience a(n) (Points : 4)

decrease in total supply and an increase in the price of the product.

decrease in demand and a decrease in the price of the product.

decrease in supply of, and an increase in demand for, the product.

increase in supply of, and a decrease in demand for, the product.

17. (TCO 8) Tariffs and quotas are costly to consumers because (Points : 4)

the price of the imported good falls.

the supply of the imported good increases.

import competition increases for domestic goods.

consumers shift purchases to higher-priced domestic goods.

18. (TCO 8) When tariffs on imported products are removed by a nation, it will result in (Points : 4)

higher prices and lower quantities consumed.

higher prices and quantities consumed.

lower prices and quantities consumed.

lower prices and higher quantities consumed.

19. (TCO 8) A major goal of the World Trade Organization is to (Points : 4)

increase the protection of producers against foreign trade competition.

encourage bilateral trade agreements between nations.

liberalize international trade among nations.

maximize tariff revenue for governments.

20. (TCO 9) French and German farmers wanting to buy equipment from an American manufacturer based in the U.S. will be (Points : 4)

supplying dollars and also supplying euros in the foreign exchange market.

demanding dollars and also demanding euros in the foreign exchange market.

supplying dollars and demanding euros in the foreign exchange market.

supplying euros and demanding dollars in the foreign exchange market.

1. (TCO 9) Remittances of Mexican workers in the U.S. to their families in Mexico are included in the U.S. balance of payments as a debit in the section on (Points : 4)

trade in services.

net international transfers.

financial accounts.

capital accounts.

2. (TCO 9) Comparing everything that the United States owes to other nations, and what they owe to the United States, the United States is currently a(n) (Points : 4)

net creditor.

net debtor.

international banking asset.

international banking liability.

3. (TCO 9) Foreign exchange rates refer to the (Points : 4)

price at which purchases and sales of foreign goods take place.

movement of goods and services from one nation to another.

price of one nation’s currency in terms of another nation’s currency.

difference between exports and imports in a particular nation.

4. (TCO 9) When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has (Points : 4)

depreciated.

appreciated.

inflated.

deflated.

5. (TCO 9) The monetary system for conducting international trade is usually described as a system of (Points : 4)

fixed exchange rates.

freely floating exchange rates.

a managed gold standard.

managed floating exchange rates.

6. (TCO 8) a) Define the four basic types of trade barriers.  b) Who gains and who loses from a protective tariff?  Explain. (Points : 40)

7.

(TCO 6) a) Identify the four major tools of monetary policy.  b) Describe how changes in the Fed’s major policy tools leads to [1] expansionary and [2] restrictive or contractionay monetary policies.

(Points : 40)