The Politics of Economic Policy - Study Guide | ECON 2105, Exams of Economics

Download The Politics of Economic Policy - Study Guide | ECON 2105 and more Exams Economics in PDF only on Docsity! ECON 2105 Pall 2010 Midterm II version 210531 Name__ On your scantron answer sheet, print your name and student number AND color in all the appropriate dots. In the SPECIAL CODE BOX pul the number 21053200 eT | and color in the corresponding dots. WITHOUT ‘LHS NUMBER YOUR TEST WILL NOT BE GRADED!!! You will turn in at the end of the period BOTH the entire test and the scantron sheet. Failure to return BOTII items will be considered cheating and you will be reported to the Office of Academic Integrity. Relax and do well!! You know this stuff! MULTIPLE CHOICE. Chonse the one alternative that best completes the statement or answers the question. 1) The aggregate expenditure curve shows plas pe A) a negative relationship between the price level and real CDP. ‘exp: B) how consumption changes in response to a change in disposable income. how planned aggregate expenditure and real GDP are related. D) Both answers B and C are currect. real Gop 2) If there are cqual rates of return between assets in two currencies, then there is AN) parity of exchange. B) purchasing power parity. interest rate parity. 1D) foreign exchange parity. 3) Ina story from www-ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy it was noted that “Ireland's story is unique: a small, English-speaking, non-industrialised country on the edge of Rurope was able to secure structural funds from the BU, cut taxes, deregulate faster than its neighbours and attract lots of foreign companies in the process.” If the natural rate of unemployment in Ireland decreased as a result of these policies, there would be a A) rightward shift in the short-run Phillips curve. iret LRPG B) rightward shift in the long-run Phillips curve. , “O) leftward shiftin the long-run Phillips curve. D) leftward shift in the short-run Phillips curve. more than one of the above is true + i x . i 4) The short-run Phillips curve shows the relationship between unemployment and inflation when the natural unemployment rate is constant and A) the expected inflation rate is falling. 9 the expected inflation rate does not change. C) the expected inflation rate is rising. D) aggregate demand is changing. 5) Which of the following changes would NOT shift the aggregate demand curve? i A) a change in monetary policy }) a change in fiscal policy this is & : €) a change in expectations about future income 3 an inerease in technology ee \ ayriter 7“: ev poly ad. 6) Demand-pull inflation is an inflation that results from an initial not cman i A) decrease in aggregate demand 3) increase in wage rates i C) increase in natural resource prices-"' - increase in aggregate demand : wood start cost push B-1 7) Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 (U.S.) on Wednesday, and on Monday the exchange rate was 5.75 (U.S.) = 1.00 British pound. Which of the following best describes what happened between Wednesday and Monday? A) The U.S. dollar appreciated against the British pound. me 50k 8 B) The British pound appreciated against the US. dollar. “S O/¢ => 1.33 2 / b C) The U.S. dollar depreciated against the British pound. @ Both answers B and C are correct. do lor ‘is deprecuating, SD pound 18 Gp agpreriating. 8) The aggregate demand curve illustrates relationship between the price level and the quantity of real CDP demanded. an inverse B) a multiplied C) a direct and proportional D) a direct but not necessarily proportional erick bel jonmmmcerenrorscmanim g 2 3 é S a x 3 3 3 & é 3 . 2 3 a g fey D < oe rOECUNI AIRC 45 degree line Teal Gr p 3 2 3 2 3S S a “6 2 —- RO Roa YN woo ; | i vertica| distance (AA) - 0 2 4 6 8 horizontal distance GAY) = 2. Real GDF frilions of 2000 dotlars Mult > AY 7 4- 2. aA samerecnetcrn Sen REED ; 9) In the above figure, the multiplier is equal to two. B) one. C) three, D) zero. 10) When the U.S. exchange rate rises, forcign'goods become and U.S, imports . home Qoods less expensive; increase * . B) more expensive; increase me. c) more expensive; decrease 7 D) less expensive; decrease * m P Lepensi ye, 11) The quantity of real GDP demanded equals $12.2 trillion when the GDP deflator is 90. If the GDP deflator rises to 95, the quantity of real GDP demanded equals less than $12.2 trillion. B) $12.2 trillion. C) more than $12.2 trillion. D) more information is needed to determine if the quantity of real CDP demanded increases, decreases, or does not change. LRAS We 4. ? SRAS . 4o frre Lijs* 12 B2 20) "Few if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater lhan expected. Those cuts have weakened the industrial sector considerably.” As a result of these changes, the U.S. government lowered its estimate of fourth-quarter growth in real GDP. www.businessweek.com 3/12/2007 The article suggests that : ft Preducers Gre cuttin a beek, A) the AE curve shifted upward in 2007. 6 v then thoy’ re Facung undepocte ly teal GDP exceeded planned expenditures in 2006. ©) planned expenditures exceeded real GDP in 2006. Wah inventors . Achiod GoP D) the AD curve shifted rightward in 2007, ? 8 must be & plan wid. 21) The SAS curve and the LAS curve “eA intersect at potential GDP, SRAS B) are parallel at potential GDP. C) are perpendicular to one another at potential GDP. D) None of the above answers is correct. Ab ‘ pot. 22) Ifa country is importing more than they are exporting, the current account willhavea______ balance and the financial account will havea _______ balance. A) negative; B) positive; © negative; D) positive; negative negative positive positive 23) The long-run aggregate supply curve is Vertical because Cur ent ¢ fy naneal : A) there is no cyclical inflation. a acets have opeas He Sequy B) the money wage rate increases faster-than the price level. 3 C) at full employment prices are stable.’ @) potential GDP is independent of the price level. 24) [fa country’s central bank does not intervene in the foreign exchange market, the country has A) a crawling peg exchange rate policy. ® a flexible exchange rate policy. C) a fixed exchange rate policy. D) no exchange rate policy. 25) Potentail GDP supplied depends on the. ; A) price level, the unemployment rate, and the quantity of government expenditures on goods and services. B) quantity of capital, bonds, and stocks. quantity of labor, the quantity of capital, and the state of technology. D) level of aggregate demand. mn 26) If the interest rate in the United States increases, then in the foreign exchange market the A) demand for U.S. dollars will remairi unchanged. et t ‘, Meye. people want to B) demand for U.S. dollars will decreabe. © supply of U.S. dollars will increase. invest a US. Sea the Oe ma nel demand for U.S, dollars will increase. & § v8 will mevense . 27) When autonomot expenditure increases, equilibrium aggregate expenditure A) increases by an equal amount. } decreases by an equal amount to offset the unplanned portion, &: increases by a greater amount due to the multiplier. A ¥ 1D} decreases by a greater amount duc to the multiplier. BS 28) A decrease in government expenditure (G) on goods and services A) increases aggregate demand. B) increases the aggregate quantity demanded. g decreases aggregate demand. D) decreases the aggregate quantity demanded. 29) The price level in India increases from 131 to 137 while its trading partners’ price levels remain constant. Asa result, people will buy Indian-made goods and there will be a movement ____ ____ along India’s aggregate demand curve. “. oy downward less; upward C) more; downward D) more; upward eods ore gating mae expensive, 30) Real ine cals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned in inventories of and real GDP will A) increase; $50 billion; decrease B) increase; $10 billion; increase C) decrease; $10 billion; decrease ®) decrease; $10 billion; increase planned > medrol —y inventories Pallenay — Tort 31) A change in results in a movement along the short-run aggregate X opty curve but no shift in the short-run aggregate supply curve. A) the money wage rate B) the quantity of capital op? © the price level D) technology . ‘eermncese er ryebe tS 5 aN oS r wo 2. iAS non g SAS oo a “420 $s z 3B 110 8 3 100 thre LRAS curve is s 2 : 8 ¢ “sD at potential GoP = 0 11.0 115 120 12.5 13.0 13.5 Real GDP (trillions of 2000 dollars} LEEPER ELIS. 32) In the above figure, when the economy is in a long-run equilibrium, real GDP will be A) $12.0 trillion. @) $12.5 trillion. C) $115 trillion. 1D) $13.0 trillion. 33) ‘Ihe idea that the value of money (buying:power) is equal across countries is known as A) interest rate parity. - purchasing power parity. C) the expected profit parity effect. D) exchange rate parity. Bo 34) For movements along the long-run aggregate supply curve, A) potential GDP is dependent on the price level. the price level and the money wage rate change by the same percentage. C) the prices of goads and services change while the prices of productive resources hold steady. D) All of the above are correct. GpP LRAS deflate B-7