EC 202 assignment#4, EC 202 assignment#3, economics chapter 7, EC 202 assignment#2, Quiz 1, EC
202 assignment #1 Questions and Answers Solved Correctly
Suppose you have $200 to invest at a nominal interest rate of 8%. If the inflation rate is 3%, then the real
return on your investment is: - Answers$10
If Table 11.3 represents all the investments available to the economy, the nominal interest rate is 10%,
and there is no inflation, what will be the level of investment in the economy? (Note that the Cost
represents the level of investment for each investment project.) - Answers$100
The present value of a given payment in the future _______ when interest rates rise. -
Answersdecreases
Which of the following is not included in M1? - Answerssavings accounts
Assume the following information about the DUCK BANK: Bank deposits are $30,000; Loans are $20,000;
Reserves are $5,000; and the reserve requirement is 10%. The DUCK BANK is holding _______ in excess
reserves. - Answers$2,000
If the banking system has a required reserve ratio of 5 percent, then the money multiplier is: -
Answers20
If the FED sells $7.5 million of US bonds and the reserve requirement is 25%, M1 will eventually: -
Answersdecrease by $30 million
If the quantity of money demanded exceeds the quantity of money supplied, then the: - Answersinterest
rate will increase
If the FED has a major policy objective to decrease unemployment, it should: - Answersdecrease the
reserve requirement and/or conduct an open market purchase.
Refer to Fig. 13.1. Assume the initial equilibrium point is the intersection of the solid money demand and
supply lines. Which point is a likely equilibrium outcome if the FED conducts an open market sale and
real income decreases? - AnswersE
When money is used to express the value of goods and services, it is functioning as a: - Answersunit of
account
An open market purchase by the Fed: - AnswersIncreases both investment and output
Suppose consumer tastes and preferences shift from a desire to go skiing to an interest in
snowboarding. If skis and snowboards are produced by different firms, then firms that produce
snowboards will experience: - Answersa rise in prices, which will induce them to increase production
and increase the number of workers.
Assuming a long-run Classical aggregate supply curve, a decrease in the money supply results in _______
in output and _______ in prices. (Note there is a typo in the ANS9 answer to question 20 in QUES9, as
, the answer should state that the long-run Classical supply is perfectly INELASTIC, not perfectly ELASTIC.)
- Answersno change; a decrease
Assuming a short-run Keynesian aggregate supply curve, a decrease in taxes results in _______ in output
and _______ in prices. - Answersa substantial increase; a slight or no increase
Consider Fig. 9.2. A simultaneous increase in the labor force due to an increase in immigration and an
increase in government spending would cause a movement from ________ . - AnswersB to C
If the government wants to reduce unemployment, government spending should be ________ and/or
taxes should be _________. - Answersincreased; decreased
In a situation where the government is operating on a budget surplus, it can reduce its overall debt by
________ . - Answersbuying back bonds it has sold to the public.
If firms experience an unplanned increase in inventories, they are likely to: - Answersdecrease
production.
If the consumption function is C = 50 + 0.75 y, where C is consumption and y is output, then the marginal
propensity to consume is _______ and the Keynesian multipler is _____. - Answers0.75; 4
Let C = 100 + 0.6 y, and I = 150, where I is investment. Assume no government or foreign sectors. Then
the equlibrium level of output y* equals: - Answers625
Refer to Fig. 10.4. Which diagram illustrates the effect of an increase in the income tax rate? - AnswersA
Although running a budget deficit during a recession should not be a source of concern, running a deficit
when there is no recession is a bad policy due to: - AnswersCrowding out.
If the demand for goods and services is less than output, then there should be: - Answersan increase in
inventories
In national income accounts, value added refers to: - Answersthe difference in the market value and the
cost of inputs purchased from other firms
Goods and services that are purchased for resale or for further processing or manufacturing are called
______ goods. - Answersintermediate
A final good is - AnswersCounted as part of GDP; A good directly consumed by individuals or businesses.
The term that covers all expenditures by households is ______ ______ expenditures - AnswersPersonal
consumption
Which of the following is not included in investment spending in the national income accounts? -
AnswersThe purchase of stocks and bonds
202 assignment #1 Questions and Answers Solved Correctly
Suppose you have $200 to invest at a nominal interest rate of 8%. If the inflation rate is 3%, then the real
return on your investment is: - Answers$10
If Table 11.3 represents all the investments available to the economy, the nominal interest rate is 10%,
and there is no inflation, what will be the level of investment in the economy? (Note that the Cost
represents the level of investment for each investment project.) - Answers$100
The present value of a given payment in the future _______ when interest rates rise. -
Answersdecreases
Which of the following is not included in M1? - Answerssavings accounts
Assume the following information about the DUCK BANK: Bank deposits are $30,000; Loans are $20,000;
Reserves are $5,000; and the reserve requirement is 10%. The DUCK BANK is holding _______ in excess
reserves. - Answers$2,000
If the banking system has a required reserve ratio of 5 percent, then the money multiplier is: -
Answers20
If the FED sells $7.5 million of US bonds and the reserve requirement is 25%, M1 will eventually: -
Answersdecrease by $30 million
If the quantity of money demanded exceeds the quantity of money supplied, then the: - Answersinterest
rate will increase
If the FED has a major policy objective to decrease unemployment, it should: - Answersdecrease the
reserve requirement and/or conduct an open market purchase.
Refer to Fig. 13.1. Assume the initial equilibrium point is the intersection of the solid money demand and
supply lines. Which point is a likely equilibrium outcome if the FED conducts an open market sale and
real income decreases? - AnswersE
When money is used to express the value of goods and services, it is functioning as a: - Answersunit of
account
An open market purchase by the Fed: - AnswersIncreases both investment and output
Suppose consumer tastes and preferences shift from a desire to go skiing to an interest in
snowboarding. If skis and snowboards are produced by different firms, then firms that produce
snowboards will experience: - Answersa rise in prices, which will induce them to increase production
and increase the number of workers.
Assuming a long-run Classical aggregate supply curve, a decrease in the money supply results in _______
in output and _______ in prices. (Note there is a typo in the ANS9 answer to question 20 in QUES9, as
, the answer should state that the long-run Classical supply is perfectly INELASTIC, not perfectly ELASTIC.)
- Answersno change; a decrease
Assuming a short-run Keynesian aggregate supply curve, a decrease in taxes results in _______ in output
and _______ in prices. - Answersa substantial increase; a slight or no increase
Consider Fig. 9.2. A simultaneous increase in the labor force due to an increase in immigration and an
increase in government spending would cause a movement from ________ . - AnswersB to C
If the government wants to reduce unemployment, government spending should be ________ and/or
taxes should be _________. - Answersincreased; decreased
In a situation where the government is operating on a budget surplus, it can reduce its overall debt by
________ . - Answersbuying back bonds it has sold to the public.
If firms experience an unplanned increase in inventories, they are likely to: - Answersdecrease
production.
If the consumption function is C = 50 + 0.75 y, where C is consumption and y is output, then the marginal
propensity to consume is _______ and the Keynesian multipler is _____. - Answers0.75; 4
Let C = 100 + 0.6 y, and I = 150, where I is investment. Assume no government or foreign sectors. Then
the equlibrium level of output y* equals: - Answers625
Refer to Fig. 10.4. Which diagram illustrates the effect of an increase in the income tax rate? - AnswersA
Although running a budget deficit during a recession should not be a source of concern, running a deficit
when there is no recession is a bad policy due to: - AnswersCrowding out.
If the demand for goods and services is less than output, then there should be: - Answersan increase in
inventories
In national income accounts, value added refers to: - Answersthe difference in the market value and the
cost of inputs purchased from other firms
Goods and services that are purchased for resale or for further processing or manufacturing are called
______ goods. - Answersintermediate
A final good is - AnswersCounted as part of GDP; A good directly consumed by individuals or businesses.
The term that covers all expenditures by households is ______ ______ expenditures - AnswersPersonal
consumption
Which of the following is not included in investment spending in the national income accounts? -
AnswersThe purchase of stocks and bonds
