on 2080 4 ‘Rerum ths fest and the answer sheet provided to your instructor af the final exam. FIG | 8 used for several questions and is printed on the last page. 1. (15) A reduction in the Reserve Ratio is an example of A). expansionary fiscal policy 3) imternational trade intervention ¢ expansionary monetary policy B) higher domestic rate of interest D). None of the others. 3. (18-3) Removal of trade barriers is expected 10 |A) decrease international trade B) increase gains from trade C) shorten recessions D) None of the others. ‘Use the following to answer question 4:‘Use the following to answer question 14: “ 12). Am inseave it aggregate supply with bo change tt exnand is expected to Q) decree pie fret) ete pre leet” C) RRs eal oeatpad 1) NO f ok (18) An nerease ti intert rates by expected to lead to A) mors inyestinenisB) wiore foreign capital inflow —C) more Gonsummption D) Note ofthe others. § (15) A decrease in the Reserve Ratio for the conmimereial banks is ekpected 10 lead to ‘ A) _inerease of mawiey supply inthe eeondmy, ©) inflation BD _desrease in the money supply At the econamy 1B) Nome of the others x {SD Most world trade is governed by unde agreemeots in which both Countries agree to engage in less trade protection of the other sounuy’s expats A) Tre 8) False 10, (7) Which equation sppropcately captures the national income identity for an open. AVVSCeSeT B)Y=C#IeG+X-IM C)¥=C+14G Dy ¥aieGeT 11. (9) A decline i output por worker is expected to lead 10 A) Taflation 8) recession ©) long term économie growth) No of the bers: 12; (9) As the amour of physical capital increases, the marginal product of physical capital is expected to AA) Increase B) decrease C) remain the same D) None of the others 13, (183) In FAG 1 where domestic demand is given by AAD and domestic supply is given by FS, Ifthe country now opens up to rade the gains from international trade equals the trianagle A) ABH B) GDH C) BEH D) None of the others. Quantity of Loanable Quantity of Loanable Ss $100we ee ee ierecamestic demand ie given hy AD and domestic supply in gives fy FS, exam quit domestic economy under autarky is given by. br A) 2B) C ©) 1D) None of the others. yi as ‘that engage in trade will tend to specialize in goods in which they have a(s) ees A). comparative advantage; import ©) comparative advanage: expect 'B) absolute advantage; export D) economic prot: per ‘Sim invests ina new machine that costs $5,000 a yeat bus whichis expected to prodace an increase in ttl oveaue of ‘$5,200 8 year. The current real rate of interest is 7 peroent. The firm should: 4) undertake the investment because the expected rate of retum of 10 percent is greater than the seal mate f interest 'B) “undertake the investment because the expected rate of retuma of 8 percent is greater than the ral uae of imerase ©). notundertake the investment because the expected rate of retura of 6 percent is less than tne eal ste of esr. ‘D)_notundertake the investment because the expected rate of reurn of 4 percents les than the al rate of interest {Ef the convergence hypothesis is true in the long run A)» Richer countries will become: a. 23. (15) A decrease in money supply is expected to lead to . A) deflation B) decrease in aggregate demand C) decrease in employment D) ail ofthe above, (S-3) When an economy moves from autarky to free international trade, in the export sector A) consumer and prochicer surplus both rise and the economy as a whole exins B) consumer surplus rises, producer surplus falls, and the economy as a whole gains i C) consumer surplus falls, producer surplus rises, and the economy 23 a whole gains. 1D) the decrease im either consumer surplus ot producer surplus i sufficiently laze t cate net lost forthe ecomomy. "25. (6-2) Japan's comparative advantage in sutomobiles can be attributed to: 5 on B) factor endowments. C) technology, 1D) all of the above. _ 26. (4) A price floor imposed at @ level lower than the equilibrium price is expects to esi io “AY excess demand (©) no change in the equibtriam price znd quantity ‘D) Nome of the others iv 24.Price level $ ‘a0 ‘a0 Real domestic output “Real comestic output 28. Which of the above dingrams best portrays the cffocts of 2 substantial reduction in government spending? AA BB OC DD ‘Use the following to answer questioe 29:30, 33 38. 36. 18-4) Over the last decade, Chinese reserve of foreign correncies bas ‘A) considerably decreased B) considerably increased C) remained unchanged D) Noné of the others (12) A doctine im aggregate supply with no change in aggregate demand is expected 10 A) decrease prive levels B) increase price levels C) keep price levels unchanged D) None of the others. (10) Portfolio diversification is expected to lead to. ‘A) _ increase in the overall risk of the investinents: ©). no change in the overall risk of the investments 'B) decline in the overall risk of the investments. D)- Nowe of the others. ‘Which ofthe following is an expansionary fiscal policy? |A) an increase i the money supply which decreases interest rates B) an increase in taxes which reduces tbe budget deficit and decreases consumption (C) a decrease in government spending on the space program D) as increase in unemployment benefits . (18) With an expansionary monetary palicy we may observe ‘A) higher rate of interest and higher unemployment ©) lower rate of interestand lower unemployment B)_ lower rate of interest and higher unemployment D) Nove of the others. (9) Investments and rate of interest are believed to be A) positively related 'B) negatively related C) no relationship at all 'D) None of the others. Financial markets: 'A) reduce transactions costs. B) reduce financial risk. C) provide liquidity. _D) dovall of the above. Use the following to answer question 37: Figure: Loamable Fundsea ee 39, $a he amet oer be dea fo mons $100 ion il i app a ty 6900 ii AL oe © remnin unchanged.) be in equilibeium. Use the following to answer question 40; Figure: Demand and Supply of Gasoline 0100 200. “300 400 500 Bo ‘Quantity of gasoline (per month) 40. (Figure: Demand and Supply of Gasoline) What might cause the supply carve o shift hom Ss back the tl spy Ae The Orizaton of Petoleun nee (OPEC) restricts the produgtion of ene oil. » ‘The Organization > eee ocean Couniries (OPEC) increases the production of crude oi, | D) Technology in See; Use the flloing to. saswer tie 9: Table: Market for Fried inkles (ble: Mart or Frid Twinkie) The goverment decides ox Hd een fo rooes See ee ‘ tae Pee Scare ieicaeglec ofa aoe B) indirect tax) taciehacesitnal eee x ‘The reserve requirement is 20%, and Leroy deposits his $1,000 check received as a graduation gift in his checking account. The bank ‘does NOT wantto hold excess reserves. 4 : is ‘$3. (Scenario: Money Creation) What is the maximum expansion in the money supply possible? ‘A) $1,000 B) $1,800 C) $4,000 D) $5,000 - $4, Diminishing returns to physical capital implies that, when buman capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to: A) a simller increase in productivity. (©) addecrease in productivity. B) a larger increase in productivity. D) negative productivity. ‘Use the following to answer question $5: Figure: Loanable FundsUDG ntn Si ed Res ger use the following to answer question $6; Figure: Money Market It & OO, Quantity of money 36. (Figure: Money Market It) Ifthe rate of interest is below the equilibrium rate, there will be an money and the ‘interest rate will ; 'A) excess demand forrFise B) excess supply of fall C) excess demand for; fall D) excess supply of, rise 57. (181) WTO usually stands for . A) World Teacher's Organization ©), World Trade Organization ' B) World Tariff Operatives D) None ofthe others. ‘Use the following o answer question 58: ‘Figure: International Capital Flows aus. wuK‘Changes in taxes and government transfers shift the aggregate demand curve ___equalsized changes in government purchases. A) bymore than B) by exactly as much as ©) by ess than, D) in inverse proportion to 62. (10). An increase in capital gains tax rates is expected to ‘A) encourage savings B) reduce private investments C) encourage exports D) None of the others. 68. To close an inflationary gap using monetary poliey, the Ped should ‘the money supply to {investment ‘and consumer spending, and shift the aggregate demand curve tothe ‘A) inorease; increase; left ©) bereases increase right B) decrease; decrease; left D) decrease; decrease; right (4. (12) A decrease in investments in infrastructure is expected to lead to A). reduction in employment ©) decrease in unemployment 1B) increase in money supply BD) None ofthe others. 65. In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005, Based ‘on tis information and considering 2003 as the base year, the price index in 2005 was: A) 100, B) 107.69. C) 123.07. D) 130. 166. (5-3) When a domestic market begins to export goods to and import goods from a foreign market: ‘A)_ producers in the exporting industry may be better off. pete ee Report pot ny to wer C) consumers of the exparted good may be better off 1D) producers in the importing industry are better off. Use the following to answer question 67: ‘Scenario: Closed Economy S= I as ‘Ina closed economy suppose that GDP is $12 trillion. Consumption is $8 trillion and government spending is $2 tilion. Taxes are ‘$0.5 trillion. 67. (Scenario: $= D) How much is private saving? A) Hillion 8) $25 uillim C) $3.5 wilion D) “$0.5 wilion7m ©) sbi ct an $90 ion re never Seing So ort aR scare ppp To soe Sakamoto core are rte get ee . :) hom beuniercatameaereee B) increase X and decrease ihe a )_ inerease the quantity supplied and decrease the quanty demanded of. D) ae egy pad td noe go eam Ifpmducs AaB ae complemen wd ro of 2 acres A) demand curves for both A and B wil sit to the Je. B) sou of B pais wil incase, butte demand cane fo wa ae (©) demand for A will increase and the amount of B demanded williaremse. 1) demand fr wil decline sod the demand for B wil incre A business vel ya a eng a invesmment project when the te of vanes on that peor AA) less than the interest rate, C) greater than the exchange ce 1B) greater than the imerest rate, 1D) equal the snfieion me ‘Wick soe poy molds i mot pint 2 A) 240 billion increase in goverament spending i 'B) 4520 billion tx cut and $20 billion increase in govecament spending ‘D) a$40 billion tax cut ‘output (exactly), government should: eon ee ea caaien [SSeS (ou “Perronal income x coleciens msceocly Sandmar nd cs Linco soa a eo{Use the following to answer question 78° ‘Scenario: Real GDP e Real GDP pode 100 golf th el for 3 exch a 75 pz hw sl for each Th est YO Srrempredoes 110 gor balls that sell for $3.25 etch mn #0 plzzm tha sel for $2 each ‘48. (Scenario: Real GDP) Using Year 1 as the base yeas, real GDP 8 Year 2's ‘A) $900. B) $970. C) $1,000, DB) $1,077.50. 79, Hfthe rate of inflation is 12 percent pes yea, the price Jevel will double in about: ‘A) dears. B) 6 years. C) 10years D) 12yeers: 130; Ifthe Consume Price index rises from 300 to 333 in a particular yar, the rate of inflation In that yea 6 ‘A) Hipereeat.B) 33 percent. C) 91 percent, D) 10perceat. ‘Use the flowing to answer question 83: a ‘Assume an thas provacing oly one pro and price data fora thre: follows. conn at ong aly ne ts nts fa ieee pea et “Answer the next