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Macroeconomics Final Exam Review

Macroeconomics Final Exam Review. Macroeconomics Final Exam Review. 1. The ratio at which two nations will exchange two goods is: (comparative advantage/terms of trade/absolute advantage) 2. T he dollar appreciates if the U.S. PL (increases/decreases),

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Macroeconomics Final Exam Review

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  1. Macroeconomics Final Exam Review

  2. Macroeconomics Final Exam Review 1. The ratio at which two nations will exchange two goods is: (comparative advantage/terms of trade/absolute advantage) 2. The dollar appreciates if the U.S. PL (increases/decreases), if U.S. interest rates (increase/decrease), if U.S. growth rate (increases/decreases), and if there is a(an) (increase/decrease) in taste for U.S. products. 3. The dollar appreciates if it takes (more/fewer) pennies to buy a foreign currency. 4. If the U.S. increases tariffs on most foreign goods, prices of domestic goods will (increase/decrease) and choices will be (fewer/more numerous). 5. An increase in demand for the dollar (appreciates/depreciates) the dollar and makes our exports (cheaper/more expensive). 6. The Smoot-Hawley Tariff of 1930 greatly (increased/decreased) tariffs. 7. The Reciprocal Trade Agreement of 1934 greatly (reduced/increased) trade barriers. 8. American exports average about (5%/12%/25%/50%) of GDP. 9. If the dollar price of the peso increasesthen the dollar (appreciates/depreciates) and their exports to the U.S. would (increase/decrease). Global Trade

  3. Mexico’s PPF (tons) U.S. PPF (tons) 60 90 Product A B C D E Avocados 0 20 24 40 60 Soybeans 15 10 9 5 0 DCC: 1S costs ___A ___ S costs 1A Product A B C D E Avocados 0 30 33 60 90 Soybeans 30 20 19 10 0 DCC: 1S costs ___A ___ S costs 1A Avocados Avocados 4 3 ¼ 1/3 0 30 0 15 Terms of Trade: 1S = ___ A 3.5 Soybeans Soybeans 10. In Mexico, the opportunity cost of 1S is (1/3 or 4 or 5 ) avocados. 11. If these 2 nations specialize, Mexico will produce (avocados/soybeans) & the U.S. will produce (avocados/soybeans). 12. Mexico has an absolute disadvantage in (avocados only/soybeans only/both avocados and soybeans). 13. If both produced at combination “C” prior to specialization, what would be the gains after trade? (0/3/2/10) tons of avocados and (1/3/2/10) tons of soybeans. 14. The terms of trade would be 1 ton of soybeans for (1/3/4/3.5) tons of avocados. Djibouti Caviar 10 hours Wheat 5 hours DCC: Djibouti 1C costs ___ W ___C costs 1W Canada Caviar 18 hours Wheat 6 hours DCC: Canada 1C costs ___ W ___C costs 1W 2 3 ½ 1/3 Terms of Trade: 1C = ___ W 2.5 Going to turn inputs into outputs 15. (Djibouti/Canada) has an absolute advantage in both commodities. 16. (Djibouti/Canada) has a comparative advantage in producing wheat. 17. (Djibouti/Canada) has an absolute disadvantage in both commodities. 18. Djibouti/Canada) has a comparative advantage in caviar. 19.Trade can occur between the two when 1 caviar is exchanged for(1/2.5/3) wheat.

  4. 20. The 4 components of GDP are ____________, ____________, _______________, and _______________. 21. (Intermediate/Final) goods are components of final goods. 22. What 3 things are included in Gross investment? ____________, ___________, and change in ___________. 23. The smallest component of GDP is (C/Ig/G/Xn) and the largest component of GDP is (C/Ig/G/Xn). 24. Why do transfer payments (welfare) not count in GDP? ___________________. 25. If a new car is produced in 2005 but not sold, it is counted as (investment/consumption/disinvestment). If it is sold in 2006 to a Richland student, it is counted as (investment/consumption/disinvestment). 26. A person who quits their job to look for a better oneis classified as (cyclically/frictionally) unemployed. 27. If there is substantial unemployment [10%], (potential/actual) GDP exceeds (potential/actual) GDP. 28. Okun’s Law says that for every 1% of real unemployment[cyclical], there is a (1%/ 2%/3.5%) gap. 29. Suppose a person’s nominal income rises from $10,000 to $11,000 and the CPI rises from 100 to 103, the person’s real income will rise by (4%/7%/10%) percent. 30. If the CPI increases from 116 to 120, the economy has experienced inflation of _____. [4/116x100=?] 31. Using the “rule of 70”, how long would it take for inflation to double if the annual rate averages 8%? __ yrs. GDP, NIA, Unemployment, Inflation, & Business Cycles Consumption Ig Government Net exports tools machinery inventories No productive work 3.4% 9

  5. 32.Dissaving occurs where (income/consumption) exceeds (income/consumption). 33. The (MPC/MPS/APC/APS) indicates the percent of total income which will be consumed. 34. The greater is the MPC, the (smaller/greater) is the MPS, which results in a (larger/smaller) multiplier. The AE Model and Fiscal Policy $100 35. The APC is “one” at point [letter]: (J/H/G/A). 36. Consumption will be equal to income (GDP) at (J/H/G). 37. A shift from AE2 to AE3 would be caused by a(an) (appreciation/depreciation) of the dollar. 38. If there is a shift from “J” to “H”, the simple multiplier is: (2/ 3/ 4/ 5). 39. If the FE GDP is OL & we are at AE2 then there is: a. recessionary gap b. inflationary gap c. no gap as the economy is in FE at “E” 40. If the FE GDP is OL& we are at AE1, the (recessionary/inflationary) gap is: (AB/BC).

  6. Bonus: Suppose that autonomous consumption is $800 & that the MPC is 0.9. DI increases by $1,400, so consumption spending will increase by: (a) $1,400 (b) $2,060 (c) $1,200 (d) $1,260 (e) $800 [$800 autonomous consumption+90% of $1,400=$360; so $800+$360=$1,260] $100 41. If the FE GDP is OL & we are at AE3, the (recessionary/inflationary) gap is: (AB/BC). 42. The equilibrium level of GDP (actual GDP) at AE3 is: ($1,000/$1,600/$2,200). 43. If FE is OL & we are at AE1, bestfiscal policy would be to (incr/decr) “G” &/or (incr/decr) T. 44. If FE is OL & we are at AE3, best fiscal policy would be to (incr/decr) “G” &/or (incr/decr) T. 45. At income level OK, the volume of saving is: ($300/$700/$1,000). 46. The economy is “dissaving” at GDP level: ($200/$400/$600/$800). 47. A shift from “J” to “H” would result in a MPC of: (IP/QK or HK/OK or HI/QK). 48. A shift from “J” to “H” would result in a MPS of: (HK/OK or IP/QK or HI/QK). 49. It is assumed that Ig, Xn, & “G” (all injections): A. vary directly with GDP B. vary inversely with GDP C. are independent of the level of GDP 50. Aggregate saving will be zero where GDP is: ($200/$400/$600/$800/$1,000). 51. If the FE GDP is OL & we are at AE1, a (recess/inflat) gap, we can conclude that at the equilibrium point [actual GDP], saving (is less than/equals/exceeds) planned investment, but at the FE GDP[$1,600], saving (is less than/equals/exceeds) planned investment by (HI/GF). 52. If gross investment is AE1, the equilibrium GDP is: ($200/$700/$1,000). 53. At AE1, savings total ($200/$300/$700/$1,000) & consumption totals: ($300/$500/$700). 54. At AE1($1,000 GDP), the G decreases both “G” & “T” by $300 billion tobalance the budget. With a M of 5, the GDP (increases/decreases) to ($700/$1,000/$1,300/$1,800). 55. At AE1($1,000 GDP), the G spends $400 billion & increases taxes by $400 billion to balancethe budget.With a M of 2, the GDP (incr/decr) to ($600/$1,000/$1,400/$1,800).

  7. 56. If the economy is experiencing a recession, then appropriate fiscal policywould be to (increase/decrease) spending and/or (increase/decrease) taxes. 57. If the MPC is .8, G could eliminate an inflationary spending gap of $8 billion by increasingtaxes by ($8/$10/$12) billion, or decreasing G by ($8/$10/$12) billion. AD/AS and Classical v. Keynesian 58. The AD curve shows the amount of (nominal/real) domestic outpu t[AQD] which will be purchased at each PL. 59. The “interest rate effect” suggests an increase in the PL will (decrease/increase) I.R., (decrease/increase) “C”, Ig, and Xn, and (decrease/increase) (AQD/AD). 60. If the national incomesof Japan, Canada, and Mexico were to rise, our AD curve would shift (left/right). 61. An improvement in productivity will shift the (AD/AS) curve to the (left/right). 62. Three stabilizing forces in Classical economics are flexible _______, _______, and _________ ________. 63. Keynes (agreed/disagreed) with the Classicals about Say’s Law that “savings=Ig.” 64. The Keynesians viewed the AS curve as being basically (vertical/horizontal). 65. In Classical theory, a decline in AD will (increase/reduce/not affect) price level. 66. As regards the foreign purchase effect, an increase in U.S. price level will cause a(n) (increase/decrease) in American exports and a(n) (increase/decrease) in American imports & therefore cause a(an) (increase/decrease) in (AD/AQD). 67. A change in (price level/government spending) causes a change in AQD. A change in (price level/production) causes a change in AQS. 68. An increase in AQD would result from a(n) (increase/decrease) in price level. An increase in AQS would result from a(n) (increase/decrease) in price level. prices wages interest rates

  8. 69. The 3 functions (roles) of money are _______ of ________, unit of _______, and store of ________. 70. M1 = __________+ _________ deposits. 71. M2 = M1 + MMAs + savings deposits + ______ _____ ________ under $100,000. 72. M3 = M2 + _____ ____ ___________ over $100,000. 73. The transaction demand for money is related to money functioning as a (store of value/medium of exchange). 74. The asset demand for money is related to money functioning as a (store of value/medium of exchange). 75. In our economy the money supply is controlled by the (President/Congress/Fed). 76. Assume your economics instructor deposits $100,000 in the Duck Bank. If no ER exists at the time this deposit is made & the RR is 25%, the Duck Bank can increase the MS (its loans) by a maximum of ($65,000/$75,000/$150,000). 77. If you deposit $100 in theThunderduck Bank which has a RR of 20%, the bank will have ($60/$80/$100) of additional ER. 78. Suppose Thunderduck Bank has $100,000 DD & TR of $50,000. If the RR is 25%, the banking system can expand the MS [PMC] by a maximum amount of ($50,000/$100,000/$150,000). 79. If borrowers take a portion of their loans as currency rather than DD, the maximum amount by which the commercial banking system can increase the MS by lending will (increase/decrease). 80. The (discount rate/Federal Funds Rate/prime rate) is an overnight loan from one bank to another bank. Money & Banking, Money Creation, the Fed Monetary Policy medium exchange account value currency demand Small time deposits Large time deposits

  9. 81. Assume the Duck Bank has no ER & that the RR is 20%. If this bank sells a bond to the Fed for$1,000, it can expand its loans by a maximum of ($900/$1,000/$2,000). 82. The Fed regulates the MS mainly by (buying & selling bonds/altering the RR). 83. A decrease in the RR [say, from 20% to 10%]tends to (increase/decrease) the MS by (increasing/decreasing) the ER and (increasing/decreasing) the monetary multiplier. 84. An easy money policy cause-effect chain would go like this: (buying/selling) bonds would (decrease/increase) the MS which (raises/lowers) the interest rate, which causes a(n) (decrease/increase) in investment spending, consumption, and net Xn, which (increases/decreases) GDP. The dollar has (appreciated/depreciated). 85. A tight money policycause-effect chain would go like this: ( buying/selling) bonds would (decrease/increase) the MS which (raises/lowers) the interest rate, which causes a(n) (decrease/increase) in investment spending, consumption, and Xn, which (increases/decreases) GDP. The dollar has (appreciated/depreciated). 86. If a certain household earns and spends $30,000 per year, and on the average, holds a money balance of$10,000, then the velocity of money for this household is (3/4/5/6). 87. If a bank has DD of $100,000, TR of $15,000 & the RR is 10%, what is the possible PMC? $_________ 88. Coins in your pocket is (M1/M2/both). $50,000

  10. 89. If AD is AD3 & the Fed wants to get to FE GDP at AD2 [Yf], they should (increase/decrease) the MS from ($120/$140) to ($100/$120). 90. If the MS is MS1 and the Fed wants to get to FE GDP [Yf], they should (increase/decrease) the MS from ($100/$120) to ($120/$140). 91. (Buying/Selling) bonds would shift the MS curve from MS3 to MS1 Extending the AS Curve, Macro Disputes,the Debt and Deficits 92. The formula for the equation of exchange is (AE=GDP/MV=PQ/MP=VQ). 93. The monetarists are politically (conservative/liberal), believe in (“rules of law”/discretion of men) on controlling the MS, believe that the capitalist economy is basically (stable/unstable), that V is basically (stable/unstable), that there should be an (activist/non-activist) role for monetary policy, and they also believe the “G” is like the (“fool in the shower”/student driver) & the Fed is like the (“fool in the shower”/student driver). 94. According to Keynesians, the money demand curve is relatively (steep/flat) and the investment-demand curve is relatively (steep/flat). 95. According to the monetarists, the money demand curve is relatively (steep/flat) and the investment-demand curve is relatively (steep/flat).

  11. 96. According to Keynesians, V varies (directly/inversely) with the interestrate and (directly/inversely) with the money supply. 97. The traditional (old) PC suggests a tradeoff between unemployment & (Y/inflation). 98. According to the natural rate theorists, when the actual rate of inflation is greater than the expected rate, firms will experience (rising/less) profits & thus (increase/decrease) their employment. 99. Adaptive expectations economists believe there (is a/is no) short run tradeoff but there (is/is no) long run tradeoff between inflation and unemployment. 100. Rational Expectations economists believe there (is/is no) short run tradeoff & there also (is/is no) long run tradeoff between inflation and unemployment. 101. “Reaganomics” advocated an (increase/decrease) in government regulations, a(an) (increase/decrease) in the growth of government, and a(an) (increase/decrease) in corporate & personal income taxes. 102. The ultimate goal of Reaganomics was to shift the (AD/AS) curve to the (right/left). 103. Rational Expectations economists (recommend/do not recommend) discretionary monetary policy. 104. The notion that the federal budget should stabilize the economy and not worry about the debt best describes (cyclically balanced budget/functional finance/ annually balanced budget). 105. An annually balanced budgetamendment would (stabilize/destabilize) a recession. 106. Most of the National Debt is ownedby (foreigners/American citizens, therefore it (can/can not) also be called a public credit. 107. Because of government borrowing to finance the debt and the resultinghigher interest rates, the stock of capital [“national factory”]inherited by future generations is likely to be (smaller/larger).

  12. Practice Quiz 1

  13. Final Exam Practice Quiz 1 C B ___1. At what point would there be the most economic growth in the future if a country were producing there now? C D Capital Goods A ___2. What is given up when moving from "C" to "D"? E A a. capital goods b. consumer goods ___3. Which will NOT cause a "Change in Aggregate Demand"? a. increase in consumption b. decrease in “G” spending on the military c. change in the price level d. depreciation of the dollar ___4. A depreciation of the dollar would shift the AD curve to the? a. left b. right ___5. A depreciation of the dollar would shift the AS curve to the: a. left b. right ___6. The aggregate supply curve would shift to the right if: a. consumption increased b. businesses taxes increased c. price level increased d. productivity increased ___7. An increase in AD could be caused by: a. appreciation of the dollar. b. businesses taxes increased c. increase in incomes of our trading partners d. productivity decreased Consumer Goods C D B A D C ___8. Unemployment is18%. Nominal GDP is $300 billion. Real (cyclical) unemployment is ___%, & the GDP output gap being forgone is ____. a. 10%; $24 billion b. 24%; $48 billion c. 12%; $72 billion ___9. If our price level is increasing faster than that of Djibouti, the Djiboutian franc will (appreciate/depreciate) and their exports to the U.S. will (increase/decrease). a. appreciate/increase b. depreciate/decrease c. depreciate/increase d. appreciate/decrease C D

  14. ___10. If the dollar price of the euro increases, then thedollar (appreciates/depreciates) and European exports to the U.S. will (increase/decrease). a. appreciate/increase b. depreciate/decrease c. depreciate/increase d. appreciate/decrease ___11. Monetary policy (change the RR, DR, & buying/selling bonds) during a depression would be more effective if you? A. raise, raise, sell B. lower, lower, buy ___l2. During a recession, an easy money policy means (buy/sell) bonds, which (incr/decr) the MS, which (incr/decr) the I.R., which (incr/decr) investment, which (incr/decr) GDP. a. sell/incr/decr/incr/incr b. buy/incr/decr/incr/incr ___l3. RR is 20%; Fed buys $50 million of bonds from the Public. The MS is increased by _____? Possible money creation in the banking system is ________? a. $40 mil, $200 mil b. $50 mil, $200 mil c. $50 mil, $250 mil ___l4. Suppose the Lynch Bank has ER of $20,000 and DDof $100,000. If the RR is 40% what is the TR? a. $40,000 b. $60,000 c. $80,000 d. $120,000 Fin Ex Quiz 1 B B B B B ___l5. Assume the RR is 20% & the Lynch Bank borrows $100,000 from the Fed. As a result this one bank's ER are increased by _____? And PMC in the banking system is _____? a. $80,000, $500,000 b. $100,000, $500,000 c. $80,000, $400,000 ___l6. If nominal GDP is $100 billion & unemployment is 12%, then the GDP output gap being foregone is: a. $6 billion b. $12 billion c. $18 billion ___l7. A decrease in price level will cause: a. increase in AD b. decrease in AS c. decease in AQS D. decrease in AQD ___l8. The real money-balance effect indicates that a higher price level will (increase/decrease) the real value of assets and cause a(n) (increase/decrease) in consumption which would a(n) (increase/decrease) in AD and GDP. a. (increase/increase/increase) b. decrease/increase/increase c. decrease/decrease/decrease B B C C

  15. ___l9. Which of the following willcause an increase in AQS? a. increase in PL b. decrease in resource cost c. decrease in business taxes ___20. Which of the following willnot shift the aggregate supply curve? a. depreciation of the dollar b. increase in the PL c. increase in resource cost A Fin Ex Quiz 1 B SpainABCDDCC:SpainChinaABCDDCC: China Apples 0 20 40 60 1P = __A Apples 0 20 40 60 1P = __ A Plums 60 40 20 0 Plums 15 10 5 0 ___ P=1A 21. In China, the opportunity of cost of 1 ton of plums is (1/3/4/5) tons of apples. 22. Spain has an absolute advantage in (apples/plums). 23. If trade occurs, Spain will export (apples/plums) & China will export (apples/plums). 24. For Spain, the opportunity cost of one ton of plums is (1/3/4/2.5) tons of apples. 25. Prior to specialization and trade, China chose “C” and Spain chose “B”.Now each specializes according to comparative advantage. The resultinggains from trade will be (0/10/15/25) tons of applesand (0/20/15/25) tons of plums. 1 4 1/4 60 60 Spain’s PPF Terms of Trade 1Plum = _______Apples China’s PPF 2.5 Apples Apples 0 Plums 60 0 P 15 26. If interest rates are increasing faster in the U.S. compared to those in Bangladesh, the dollar will (appreciate/depreciate) and our exports to Bangladesh will (increase/decrease). 27. If our price level is decreasing compared to Mexico, the dollar will (appreciate/depreciate) and our imports from Mexico will (increase/decrease). 28. If Russia decides to buy 50 million Fuzzy Wuzziesfrom the U.S., the Russian ruble would (appreciate/depreciate) and our imports from Russia would (increase/decrease). 29. If the Djiboutian Franc price of the dollar increases, then the Djiboutian Franc has (appreciated/depreciated) and Djibouti’s exports to the U.S. should (increase/decrease). 30. If our growth rate (income) is increasing faster than that of Mexico, the Mexicanpeso will (appreciate/depreciate) and their exports to the U.S. will (increase/decrease).

  16. Practice Quiz 2

  17. Final Exam Practice Quiz 2 [AP] ___1. The monetarists believe the money demand curve is (more flat/more vertical), and the investment demand curve is (more flat/more vertical). a. more vertical; more vertical b. more flat; more flat c. more vertical; more flat d. more flat; more vertical ___2. A Jag produced in 2004 but not soldto youreconomicsteacheruntil 2005is counted as: a. consumption b. investment c. disinvestment ___3. “Supply creates demand” was a motto of the: a. Keynesians b. Classicals c. Democrats ___4. “Don’t do something, just stand there” is the recession advice by the: a. Keynesians b. Classicals c. Democrats ___5. “The economy has fallen and can’t get up,” might have been stated by a a. Republican b. Keynesian c. Classicals ___6. Advocates of monetary policy and particularly fiscalpolicy would be the: a. Keynesians b. Rational Expectations c. Classicals d. Monetarists ___7. According to theKeynesians, velocityvaries (directly/inversely) with the interest rate and (directly/inversely) with the money supply. a. inversely/directly b. directly/inversely ___8. A decrease in the RR (increases/decreases) the MS, (increases/decreases) the excess reserves, and (increases/decreases) the multiplier. a. decreases/decreases/decreases b. decreases/increases/increases c. increases/increases/increases [Chg in AD is caused by “C+Ig+G+Xn”; Chg in AQD is caused by a PL change (inverse)] ___9. Which of the following will cause an"Increase in AD"? a. decrease in price level b. increase in price level c. decrease in consumption d. increase in G ___10. Which of the following will cause an"Increase in AQD"? a. decrease in price level b. increase in price level c. decrease in consumption d. increase in G C C B B B A B C D A

  18. Fin Ex Quiz 2 [Change in AS is caused by “REP”; Change in AQS caused by a PL change (direct)] ___11. Which of the following will cause a"decrease in AS"? a. decrease in PL b. increase in PL c. increase in business regulations d. increase in productivity ___12. Which of the following will cause a"decrease in AQS"? a. decrease in PL b. increase in PL c. increase in business regulations d. increase in productivity 13. A bank has ER of $10,000, DD of $200,000 & RR of 50%. TR are $ _________. 14. There are no ER. Josh Howard deposits$100,000. With a RR of 25%, how much can this bank loan out $________ Potential money creation in the banking system is $ ___________. Potential TMS is $__________. 15. Assume the RR is 10% & the Lynch Bank borrows $1 from the Fed. This bank's ER are increased by _____. Possible money creation in the banking system is $_______. 16. RR is 25%. Econ Bank borrows $50,000 from the Fed. This bank's ER are increased by $ ______ Possible money creation in the banking system is $ _________. 17. RR is 10%. Fedbuys $10 million of bonds from the Public. The MS is increased by $___ million. ER are increased by $__ million. Possible money creation in the banking system is $___ million. Potential TMS is $_____ million. 18. RR is 50%. Fed buys $100 million of bonds from the Public. The MS is increased by $____ million. ER are increased by $___ million. Possible money creation in the banking system is $____ million. Potential TMS is $_____ million. 19. RR is 25%. Fedbuys $50 million of bonds from the Public. The MSis increased by $___ million. ER are increased by $______ million. Possible money creation in the banking system is $_____ million. Potential TMS is $______ million. 20. If the dollar price of the Thailand baht decreases, the dollar has (appreciated/depreciated) and Thailand's exports to the U.S. (our imports) would (increase/decrease). 21. If the U.S. price level is increasing faster than that of Mexico, the peso will (appreciate/depreciate) and Mexico’s exports to the U.S. would (increase/decrease). C A 110,000 75,000 300,000 400,000 $1 10.00 50,000 200,000 10 9 90 100 50 100 100 200 50 37.50 150 200

  19. Fin Ex Quiz 2 U.S. Japan 0 Computers 500 Computers 10 22. In the above example, (Japan/the U.S.) has a comparativeadvantagein computers and (Japan/the U.S.) has a comparative advantage in TVs. 23. In Japan, the opportunity cost of one computer is (2/3/4/5/6) TVs. 24. In the U.S., the opportunity cost of one computer is (1/2/4/7/8) TVs. 25. (Japan/The U.S.) has anabsolute advantage in both computers & TVs. U.S.’s DCC: 1C= ___ TVs Japan’s DCC: 1C = ___ TVs ____ C = 1 TV 50 1 4 1/4 40 U.S. TVs Japan TVs

  20. Looking at Inputs [Hours] Fin Ex Quiz 2 CountryFishCorn Swaziland’s DCC: 1C = __ F Swaziland 5 hours 20 hours ___ C = 1 F 4 1/4 Zaire 10 hours 80 hours Zaire’s DCC: 1C = __ F ___ C = 1 F 8 1/8 26. Swaiziland has an absolute (advantage/disadvantage) in(fish/corn/both fish & corn). 27. (Swaiziland/Zaire) has acomparative advantage in fishand(Swaiziland/Zaire) has acomparative advantage in corn. 28. In Swaiziland, the opportunity cost of one cornis (2/4/6/8) fish. 29. InZaire, theopportunity cost of one cornis (2/4/6/8) fish. 30. If nominal GDP is $200 billion & unemployment is 17%, then cyclical unemployment is___ %; the per cent gap is ___ %; and the GDP output gap being foregone is $___ billion. [11 x 2% = ___ %] 11 22 22 44 We are going toturn inputs into outputs. In 20 hours, Swazican produce anoutput of 1 corn or 4 fish. In 80 hours, Zairecan produce anoutput of 1 corn or 8 fish.

  21. Practice Quiz 3

  22. Final Exam Practice Quiz 3 [AP] 1. At income level “OD”, the volume of consumption is _____. 2. At income level “OD”, the volume of saving is _______. 3. If Ig is Ig2, then “equilibrium GDP” is __________. 4. If Ig increases from Ig1 to Ig2, then equilibrium GDP increases by ______. 5. If Ig increases from Ig1 to Ig2, the “MPC” is equal to __________. 6. As we move from income level OB to OC, the “MPS” is _________. 7. The economy is “dissaving” at income level ________. 8. Consumption will be equal to income at income level _________. S AE[C+Ig2] K AE[C+Ig1] Consumption J F I AE[C+Ig] H G E 0 A B C D DI IK OD CD HI/CD FG/BC 0A OB

  23. Fin Ex Quiz 3 9. Which of the following will cause an “increase in AD” ? a. decr in PL b. incr in PL c. decrease in consumption d. increase in G 10. Which of the following will cause an “increase in AQD”? a. decr in PL b. incr in PL c. decrease in investment d. increase in Xn 11. Which of the following will cause a “decrease in AS”? a. decr in PL b. incr in PL c. decrease in productivity d. decrease in G 12. Which of the following will cause a “decrease in AQS”? a. decr in PL b. incr in PL c. decrease in productivity d. decrease in Xn 13. Suppose a bank has ER of $13,000, DD of $500,000 & RR of 50%.TR are $______. 14. There are no ER. Elizabeth Hurley deposits$200,000. With a RR of 50%,how much can this bank loan out? $________. PMC in the banking system is $_________. TMS could be $_________. 15. Assume the RR is 20% & the Lynch Bank borrows $200 from the Fed. This bank’s ER are increased by $______. PMC and TMS could both become as much as $_______. 16. RR is 50%. Econ Bank borrows $2 million from the Fed. This bank’s ERare increased by $________. PMC in the banking system & TMS could both be as much as $__ million. 17. RR is 50%.Fedbuys $50 million of bonds from Jennifer Lopez (Public).The MS is increased by $___ million. ER are increased by $___ million. Potential money creation in the banking system is $___ million. TMS could be $______ million. 18. RR is 20%.Fedbuys $25 million of bonds from Kerri Russell (Public). The MS is increased by $____ million. ER are increased by $____ million. PMC in the banking system is $_____ million. TMS could be $_____million. 263,000 100,000 200,000 400,000 1,000 200 2 million 4 50 25 50 100 25 20 100 125

  24. Fin Ex Quiz 3 19. RR is 50%.Fed buys $16 million of bonds from Gwyneth Paltrow (Public). The MS is increased by $____ million. ER are increased by $__ million. Potential money creation in the banking system is $___ million. TMS could be $____ million. 20. If the Japanese bought 70,000 American autos in 2000 but in 2001 bought 4 million American autos [taste], the dollar would (apprec/deprec) and our imports from Japan would (incr/decr). 21. If U.S.growth rate is increasing faster than that of Canada, the Canadian dollar (loonie) will (appreciate/depreciate) and our exports to Canada should (increase/decrease). 16 8 16 32 22. (Cuba/Haiti) has an absolute advantage in corn & (Cuba/Haiti) has an absolute advantage in wheat. 23. (Cuba/Haiti) has a comparative advantage in corn & (Cuba/Haiti) has a comparative advantage in wheat. 24. The terms of trade would be 1 corn for (1/3/5/7) wheat. 25. The opportunity cost of 1 wheatin Cuba is (1 / ½ / 2 / 3 / 4) corn. Haiti’s DCC: 1C = ___ W ____ C = 1 W Cuba’s DCC: 1C = ___ W ____C = 1 W 4 2 1/4 80 1/2 60 Cuba Haiti Wheat Wheat Terms of Trade 1 C = ___ W 3 0 Corn 30 0 Corn 20

  25. Looking at Inputs [Hours] Fin Ex Quiz 3 CountryFishCorn Chad’s DCC: 1C = __ F Chad 10 hours 50 hours ___ C = 1 F 5 1/5 Gabon 5 hours 15 hours Gabon’s DCC: 1C = __ F ___ C = 1 F 3 1/3 Terms of Trade 1 C = __ F 4 26. Chad has an absolute(advantage/disadvantage) in (fish/corn/both fish & corn). 27. (Chad/Gabon) has a comparative advantage in corn and (Chad/Gabon) has a comparative advantage in fish. 28. The opportunity cost of 1 corn in Chad is (2/3/4/5/6) fish. 29. If nominal GDP is $100 billion and unemployment is 16%, then cyclical unemployment is ____%; the per cent gap is ____ %; & the GDP output gap being foregone is $____ billion. 30. If nominal GDP is $500 billion and unemployment is 8%, then cyclical unemployment is ____%; the per cent gapis ____ %, and the GDP output gap being foregone is $____ billion. 10 20 20 2 4 20 Again, we are going toturn inputs into outputs. In 50 hours, Chadcan produce anoutput of 1 corn or 5 fish. In 15 hours, Gaboncan produce anoutput of 1 corn or 3 fish.

  26. You Are Ready

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