AGEC Final Exam Questions and Answers Graded A+
Structural unemployment occurs when - Answers the skills of unemployed people do not match
the skills required for available jobs, or the unemployed people are not located where the job
openings are
In 1974 the CPI averaged near 50, and in 2006 the CPI hit 200. This means that - Answers prices
were four times higher in 2006 than they were in 1974
Suppose a 10% increase in the price of gasoline causes a 3% decrease in gasoline sales. The
elasticity of demand for gasoline is - Answers -0.3
Suppose in a market, demand decreases and the quantity supplied decreases. Which of the
following could be true? - Answers The price of a substitute decreased, so equilibrium price and
quantity decreased.
Suppose recesson decreases the incomes of consumers. Which of the above diagrams
describes what will happen in the market for concert tickets, which are normal goods? -
Answers Decrease in aggregate demand
Suppose property taxes are one of the costs of providing rental housing. Which of the above
diagrams describes what will happen in the market for rental housing, if the property tax
decreases? - Answers Increase in money supply
Suppose an increase in the minimum wage raises the wages paid to fast food workers. Which
of the above diagrams describes what will happen in the market for fast food hamburgers? -
Answers Decrease in money supply
A beloved football star's Mom endorses chicken soup. Which of the above diagrams describes
what will happen in the market for chicken soup? - Answers Increase in aggregate demand
Suppose a new drilling technology allows old natural gas wells to be reopened. Which of the
above diagrams shows what is likely to happen in the market for natural gas? - Answers
Increase in money supply
The article says that the cauliflower market has "the makings of a major shortage." This means
that - Answers the price of cauliflower will be below the equilibrium price
Here are some excerpts from an October 4, 2016 Washington Post article, "As Demand for Cars
Falters, Auto Prices are Poised to Fall." The article implies that new cars and used cars are -
Answers substitute goods
Among the reasons that housing prices increased so much between 1998 and 2006 were -
Answers Home buyers came to expect the future price of houses to rise, so they increased their
demand for houses
,Here are some excerpts from an October 4, 2016 Washington Post article, "As Demand for Cars
Falters, Auto Prices are Poised to Fall." The article says "While the U.S. inched its way out of the
Great Recession, consumers went car shopping in droves." It also says that "Auto prices have
risen every year since the Great Recession." This implies that cars are - Answers normal goods.
In the macroeconomic model, if the supply of the dollar in the exchange market decreases, -
Answers the exchange value of the dollar rises and aggregate demand in the goods market
decreases.
In the macroeconomic model, if the real interest rate in the money market increases, - Answers
the demand for the dollar increases in the exchange market, and the value of the dollar rises
Which of the following is a counter-cyclical monetary policy? - Answers Increasing the discount
rate during a time of rising inflation
Use the above Federal budget scatter diagram and trendline to answer this question. The
diagram uses data from 1987 through 2013.
The Federal budget scatter points and the trendline imply that during the 1987-2013 period, -
Answers Fiscal policy was usually counter-cyclical
The above scatter diagram from the work of Alesina and Summers implies that - Answers there
is a negative correlation between central bank independence and inflation
In the midst of the Great Depression of 1931, the Federal Reserve increased the discount rate.
They did this because - Answers international investors were selling their U.S. assets, and higher
interest rates would make holding U.S. assets more attractive.
Here's an excerpt from the article "Central Banks Act With a New Boldness to Revitalize
Economies," New York Times, May 28, 2013.
Which of the following statements explains the economic conditions and policies described in
this article? - Answers The Bank of England is using open market operations, buying bonds for
money, to try to stimulate aggregate demand. However, banks are holding a large amount of the
new money as reserves, decreasing the money multiplier and limiting the growth of the money
supply.
Here are some excerpts from the article "Low Inflation Seen Amid Solid Growth In Economy,"
New York Times, August 29, 1997. Read these excerpts and answer the question.
Which money market diagram best represents the Federal Reserve policy that economists were
, expecting in 1997? - Answers decrease in money supply
Here's an excerpt from the article "Central Banks Act With a New Boldness to Revitalize
Economies," New York Times, May 28, 2013.
Which of the following best explains the economic conditiions and policies described in this
article? - Answers The Japanese government is pursuing an expansionary fiscal policy in an
attempt to stimulate aggregate demand. The Bank of Japan is buying government bonds,
holding down interest rates. The low interest rates are helping to reduce the exchange value of
the Japanese yen, which should help encourage Japanese exports.
Here is the introduction to an economic forecast for the United States, prepared by the
Research Seminar on Quantitative Economics (RSQE) at the University of Michigan in November
2013. Read this excerpt and answer the question. - Answers The Fed announced that it would
soon reduce its open market purchases of assets, and financial markets responded with
reduced lending. The resulting higher interest rates slowed investment spending growth.
Here is an excerpt from the Federal Reserve's policy statement from March 19, 2014.
Which of the following best represents the Federal Reserve's monetary policy as of March 19,
2014? - Answers The Fed is buying bonds to increase the money supply, but improvements in
the economy are allowing the Fed to "taper" the amount of bonds it buys. The Fed will hold
interest rates near record lows as long as inflation remains low.
Tariffs on imported goods affect the goods market by - Answers raising the prices of imports,
which reduces import spending; causing retaliation by other countries, which reduces export
spending; and raising the cost of imported inputs, which decreases aggregate supply
Which series of graphs best describes what happens when a tariff is imposed on imported
goods? - Answers First increase in aggregate demand, then decrease in aggregate demand,
then decrease in money supply, bringing it back to equilibrium
Here are some excerpts from the article, "Ammunition for a Trade War Between U.S. and
Mexico," New York Times, September 27, 2012.
If the agreement expires, Mexico fears that the U.S. will impose tariffs on Mexican tomatoes. If
tariffs are imposed, - Answers American tomato growers will increase production, Mexico may
retaliate by imposing tariffs on other U.S. products, reducing the production of these U.S.
products, and U.S. consumers may pay higher prices for tomatoes.
Structural unemployment occurs when - Answers the skills of unemployed people do not match
the skills required for available jobs, or the unemployed people are not located where the job
openings are
In 1974 the CPI averaged near 50, and in 2006 the CPI hit 200. This means that - Answers prices
were four times higher in 2006 than they were in 1974
Suppose a 10% increase in the price of gasoline causes a 3% decrease in gasoline sales. The
elasticity of demand for gasoline is - Answers -0.3
Suppose in a market, demand decreases and the quantity supplied decreases. Which of the
following could be true? - Answers The price of a substitute decreased, so equilibrium price and
quantity decreased.
Suppose recesson decreases the incomes of consumers. Which of the above diagrams
describes what will happen in the market for concert tickets, which are normal goods? -
Answers Decrease in aggregate demand
Suppose property taxes are one of the costs of providing rental housing. Which of the above
diagrams describes what will happen in the market for rental housing, if the property tax
decreases? - Answers Increase in money supply
Suppose an increase in the minimum wage raises the wages paid to fast food workers. Which
of the above diagrams describes what will happen in the market for fast food hamburgers? -
Answers Decrease in money supply
A beloved football star's Mom endorses chicken soup. Which of the above diagrams describes
what will happen in the market for chicken soup? - Answers Increase in aggregate demand
Suppose a new drilling technology allows old natural gas wells to be reopened. Which of the
above diagrams shows what is likely to happen in the market for natural gas? - Answers
Increase in money supply
The article says that the cauliflower market has "the makings of a major shortage." This means
that - Answers the price of cauliflower will be below the equilibrium price
Here are some excerpts from an October 4, 2016 Washington Post article, "As Demand for Cars
Falters, Auto Prices are Poised to Fall." The article implies that new cars and used cars are -
Answers substitute goods
Among the reasons that housing prices increased so much between 1998 and 2006 were -
Answers Home buyers came to expect the future price of houses to rise, so they increased their
demand for houses
,Here are some excerpts from an October 4, 2016 Washington Post article, "As Demand for Cars
Falters, Auto Prices are Poised to Fall." The article says "While the U.S. inched its way out of the
Great Recession, consumers went car shopping in droves." It also says that "Auto prices have
risen every year since the Great Recession." This implies that cars are - Answers normal goods.
In the macroeconomic model, if the supply of the dollar in the exchange market decreases, -
Answers the exchange value of the dollar rises and aggregate demand in the goods market
decreases.
In the macroeconomic model, if the real interest rate in the money market increases, - Answers
the demand for the dollar increases in the exchange market, and the value of the dollar rises
Which of the following is a counter-cyclical monetary policy? - Answers Increasing the discount
rate during a time of rising inflation
Use the above Federal budget scatter diagram and trendline to answer this question. The
diagram uses data from 1987 through 2013.
The Federal budget scatter points and the trendline imply that during the 1987-2013 period, -
Answers Fiscal policy was usually counter-cyclical
The above scatter diagram from the work of Alesina and Summers implies that - Answers there
is a negative correlation between central bank independence and inflation
In the midst of the Great Depression of 1931, the Federal Reserve increased the discount rate.
They did this because - Answers international investors were selling their U.S. assets, and higher
interest rates would make holding U.S. assets more attractive.
Here's an excerpt from the article "Central Banks Act With a New Boldness to Revitalize
Economies," New York Times, May 28, 2013.
Which of the following statements explains the economic conditions and policies described in
this article? - Answers The Bank of England is using open market operations, buying bonds for
money, to try to stimulate aggregate demand. However, banks are holding a large amount of the
new money as reserves, decreasing the money multiplier and limiting the growth of the money
supply.
Here are some excerpts from the article "Low Inflation Seen Amid Solid Growth In Economy,"
New York Times, August 29, 1997. Read these excerpts and answer the question.
Which money market diagram best represents the Federal Reserve policy that economists were
, expecting in 1997? - Answers decrease in money supply
Here's an excerpt from the article "Central Banks Act With a New Boldness to Revitalize
Economies," New York Times, May 28, 2013.
Which of the following best explains the economic conditiions and policies described in this
article? - Answers The Japanese government is pursuing an expansionary fiscal policy in an
attempt to stimulate aggregate demand. The Bank of Japan is buying government bonds,
holding down interest rates. The low interest rates are helping to reduce the exchange value of
the Japanese yen, which should help encourage Japanese exports.
Here is the introduction to an economic forecast for the United States, prepared by the
Research Seminar on Quantitative Economics (RSQE) at the University of Michigan in November
2013. Read this excerpt and answer the question. - Answers The Fed announced that it would
soon reduce its open market purchases of assets, and financial markets responded with
reduced lending. The resulting higher interest rates slowed investment spending growth.
Here is an excerpt from the Federal Reserve's policy statement from March 19, 2014.
Which of the following best represents the Federal Reserve's monetary policy as of March 19,
2014? - Answers The Fed is buying bonds to increase the money supply, but improvements in
the economy are allowing the Fed to "taper" the amount of bonds it buys. The Fed will hold
interest rates near record lows as long as inflation remains low.
Tariffs on imported goods affect the goods market by - Answers raising the prices of imports,
which reduces import spending; causing retaliation by other countries, which reduces export
spending; and raising the cost of imported inputs, which decreases aggregate supply
Which series of graphs best describes what happens when a tariff is imposed on imported
goods? - Answers First increase in aggregate demand, then decrease in aggregate demand,
then decrease in money supply, bringing it back to equilibrium
Here are some excerpts from the article, "Ammunition for a Trade War Between U.S. and
Mexico," New York Times, September 27, 2012.
If the agreement expires, Mexico fears that the U.S. will impose tariffs on Mexican tomatoes. If
tariffs are imposed, - Answers American tomato growers will increase production, Mexico may
retaliate by imposing tariffs on other U.S. products, reducing the production of these U.S.
products, and U.S. consumers may pay higher prices for tomatoes.
