d. neither M1 or M2.
Last Bank of Cedar Bend
131．Use the balance sheet for the following question.
Assets
Reserves $25,000 Loans $125,000
Liabilities Deposits
$150,000
If the reserve requirement is 20 percent, this bank
a. has $10,000 of excess reserves
b. needs $10,000 more of reserves to meet its reserve requirements. c. needs $5,000 more of reserves to meet its reserve requirements. d. just meets its reserve requirement.
132．Arnold puts money into an account. One year later he checks and sees that he has 5
percent more dollars and that his money will buy 6 percent more goods.
a. The nominal interest rate was 11 percent and the inflation rate was 5 percent. b. The nominal interest rate was 6 percent and the inflation rate was 5 percent. c. The nominal interest rate was 5 percent and the inflation rate was -1 percent. d. None of the above is correct.
133．If your salary increased by 6 percent and prices increased by 2 percent, your real wage
rose by
a. 4 percent. b. 4.8 percent c. 5.8 percent d. 8 percent
134．Domestic saving must equal investment in
a. both closed and open economies. b. closed, but not open economies. c. open, but not closed economies. d. neither closed nor open economies.
135．If the nominal exchange rate e is foreign currency per dollar, the domestic price is P,
and the foreign price is P*, the real exchange rate is defined as
a. e(P*/P). b. e(P/P*). c. e + P/P.
d. e - P/P*.
136．Use the (hypothetical) information in the following table to answer the next question.
Country Brazil Japan Mexico Sweden Thailand Currency Real Yen Peso Krona Baht Currency per U.S. Dollar 4.00 125.00 10.00 9.00 45.00 U.S. Price Index 200 200 200 200 200 Country Price Index 800 50,000 2,000 2,000 8,000 Which currency(ies) is(are) more valuable than predicted by the doctrine of
purchasing-power parity?
a. real and peso b. yen, krona, and baht c. yen and krona d. baht
137．In the open-economy macroeconomic model, the key determinant of net capital
outflow is the
a. nominal exchange rate. b. nominal interest rate. c. real exchange rate. d. real interest rate.
138．If a government increases its budget deficit, then interest rates
a. rise and the real exchange rate appreciates. b. fall and the real exchange rate depreciates. c. rise and the real exchange rate depreciates. d. fall and the real exchange rate appreciates.
139．A trade policy is a government policy
a. directed toward the goal of improving the tradeoff between equity and efficiency. b. that directly influences the quantity of goods and services that a country imports or exports.
c. directed toward the goal of increasing domestic trade. d. toward trade unions.
140．If Kenya experienced capital flight, the supply of Kenyan schillings in the
foreign-currency exchange market would shift
a. left, which would make the real exchange rate of the Kenyan schilling appreciate. b. left, which would make the real exchange rate of the Kenyan schilling depreciate. c. right, which would make the real exchange rate of the Kenyan schilling appreciate. d. right, which would make the real exchange rate of the Kenyan schilling depreciate.
141．Ceteris paribus, as the price level rises, dollars become
a. more valuable, and interest rates rise. b. more valuable, and interest rates fall. c. less valuable, and interest rates rise. d. less valuable, and interest rates fall.
142．Which of the following shifts aggregate demand to the left?
a. The price level rises. b. The price level falls. c. The dollar depreciates. d. Stock prices fall.
143．Suppose the economy is in long-run equilibrium. If there is a sharp increase in the
minimum wage as well as an increase in pessimism about future business conditions, then we would expect that in the short run, real GDP will
a. rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
b. fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
c. rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
d. fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
144．Which of the following statements is true?
a. In the long run, output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for money; and the price level adjusts to balance the supply and demand for loanable funds.
b. In the long run, output is determined by the amount of capital, labor, and
technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money.
c. In the long run, output is determined by the amount of capital, labor, and
technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level is stuck.
d. In the long run, output responds to the aggregate demand for goods and services; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money.
145．An increase in the U.S. interest rate
a. induces firms to invest more.
b. induces households to increase consumption. c. shifts money demand to the right.
d. leads to the appreciation of the U.S. exchange rate.
146．The economy is in long-run equilibrium. Technological change shifts the long-run
aggregate supply curve $60 billion to the right. At the same time, government purchases increase by $30 billion. If the MPC equals 0.8 and the crowding-out effect is $60 billion, we would expect that in the long-run,
a. both real GDP and the price level would be higher. b. both real GDP and the price level would be lower.
c. real GDP would be higher but the price level would be lower. d. real GDP would be higher but the price level would be the same.
147．For the following question, use the diagram below:
Which of the following is true?
a. A wave of optimism could move the economy from a to b.
b. If aggregate demand moves from AD1 to AD2 the economy will stay at b in both the short and long run.
c. It is possible that either fiscal or monetary policy might have caused the shift from AD1 to AD2.
d. All of the above are correct.
148．During expansions, automatic stabilizers make government expenditures
a. and taxes fall. b. and taxes rise. c. rise, and taxes fall. d. fall and taxes rise.
149．Compared to the 1970s, the U.S. short-run Phillips curve in recent years has been
a. further right, as inflation expectations have risen. b. further right, as inflation expectations have fallen. c. further left, as inflation expectations have risen. d. further left, as inflation expectations have fallen.
150．The theory by which people optimally use all available information when forecasting
the future is known as
a. rational expectations. b. perfect expectations. c. momentum expectations. d. accommodating expectations.
151．Very low reported per capita income levels in developing economies underestimate true value added and income because:
a. of adjustments in purchasing power between countries. b. local goods are seldom competitive on international markets.
c. non-market activity such as food production within the family unit is not included in measures of per capita income levels.
d. governments are still relatively small in developing economies.
152．Poor countries are poor for all of the following reasons except
a. their technology is less than modern.
b. the labor force is too small.
c. foreign investment funds are difficult to attract. d. labor productivity is low.
153．Suppose everyone working the land in Exland knows the usefulness of investing in land
irrigation systems but those who work the land may choose not to invest in these profitable irrigations systems as long as
a. the investment is too expensive.
b. their property rights, with respect to the land, are subject to change.