ECON 252 FINAL PRACTICE EXAM QUESTIONS
True or false: one of the limitations of using money is that it does not allow for the
transfer of purchasing power in the future - answer -false
True or false: when money is used as a yardstick to describe the price of various goods
and services, it serves as a store of value - answer -false
True or false: the necessary condition required for money to function as a medium of
exchange is that it also needs to be a store of value - answer -true
True or false: the hours of labor that go into producing a product are a better unit of
account than paper money - answer -false
The quantity theory of money implies that - answer -inflation is equal to the gap
between the growth rate of money supply and the growth rate of real gdp
Assuming all else equal inflation can
A) reduce the real interest rate, and increase the real wage rate
B) increase both the real interest rate and the real wage rage
C) reduce both the real interest rate and the real wage rate
D) increase the real interest rate, and reduce the real wage rate - answer -c) reduce
both the real interest rate and the real wage rate
If the realized real interest rate in an economy is 6%, the realized inflation rate is 8%,
and the expected inflation rate is 8%, then the nominal interest rate of the economy is -
answer -14%
If there are no changes in inflation expectations, a purchase of government bonds by
the fed in the open market will cause - answer -both the general funds rate and long-
run expected real interest rate to fall
Which of the following is true when the economy is in a boom?
A) the unemployment rate is high
B) the size of government expenditure multiplier is large
C) the inflation rate is negative
D) the size of government expenditure multiplier is small - answer -d) the size of the
government expenditure multiplier is small
If the value of the government-taxation multiplier is 1.8 whats true if all other variables
remain unchanged - answer -a $1 reduction in taxation increases gross domestic
product by $1.80
If country a citizens purchase buildings worth $10 billion in country b, what is the
financial account of country a? - answer -10 billion
True or false: one of the limitations of using money is that it does not allow for the
transfer of purchasing power in the future - answer -false
True or false: when money is used as a yardstick to describe the price of various goods
and services, it serves as a store of value - answer -false
True or false: the necessary condition required for money to function as a medium of
exchange is that it also needs to be a store of value - answer -true
True or false: the hours of labor that go into producing a product are a better unit of
account than paper money - answer -false
The quantity theory of money implies that - answer -inflation is equal to the gap
between the growth rate of money supply and the growth rate of real gdp
Assuming all else equal inflation can
A) reduce the real interest rate, and increase the real wage rate
B) increase both the real interest rate and the real wage rage
C) reduce both the real interest rate and the real wage rate
D) increase the real interest rate, and reduce the real wage rate - answer -c) reduce
both the real interest rate and the real wage rate
If the realized real interest rate in an economy is 6%, the realized inflation rate is 8%,
and the expected inflation rate is 8%, then the nominal interest rate of the economy is -
answer -14%
If there are no changes in inflation expectations, a purchase of government bonds by
the fed in the open market will cause - answer -both the general funds rate and long-
run expected real interest rate to fall
Which of the following is true when the economy is in a boom?
A) the unemployment rate is high
B) the size of government expenditure multiplier is large
C) the inflation rate is negative
D) the size of government expenditure multiplier is small - answer -d) the size of the
government expenditure multiplier is small
If the value of the government-taxation multiplier is 1.8 whats true if all other variables
remain unchanged - answer -a $1 reduction in taxation increases gross domestic
product by $1.80
If country a citizens purchase buildings worth $10 billion in country b, what is the
financial account of country a? - answer -10 billion
