FIN 201 Exam Questions with Verified Solutions Latest Update 2025/2026
A - Answers QN=4(18660)Positive analysis of economic policy
a.examines the economic consequences of policies but does not address the question of
whether those consequences are desirable.
b.generates less agreement among economists than normative analysis.
c.is rare in questions of economic policy.
d.examines the economic consequences of policies and addresses the question of whether
those consequences are desirable.
D - Answers QN=1(18637)When national output rises, the economy is said to be in
a.a deflation
b.an inflation
c.a recession
d.an expansion
A - Answers QN=14(18643)A country is said to be experiencing deflation when
a.prices of most goods and services are falling over time.
b.prices of most goods and services are rising over time.
c.total output is rising over time.
d.total output is falling over time.
B - Answers QN=36(18653)In the United States, monetary policy is determined by
a.the Treasury Department.
b.the Federal Reserve.
c.the president.
d.private citizens.
A - Answers QN=39(18689)If an American construction company built a road in Kuwait, this
activity would be
a.included in U.S. GNP only for that portion that was attributable to American capital and labor.
b.included in U.S. GDP but not in U.S. GNP.
,c.fully included in U.S. GDP.
d.excluded from U.S. GNP.
B - Answers QN=37(18662)Adam Smith's idea of the "invisible hand" says that given a country's
resources and its initial distribution of wealth, the use of markets will
a.eliminate inequalities between the rich and the poor.
b.make people as economically well off as possible.
c.eliminate problems of hunger and dissatisfaction.
d.insulate a nation from the effects of political instability.
B - Answers QN=68(18683)Capital goods are
a.a type of intermediate good.
b.final goods, and they are not used up during a given year.
c.produced in one year, whereas final goods are produced over a period of more than one year.
d.produced in the same year as the related final good, whereas intermediate goods are
produced in different years.
B - Answers QN=415 (19053)The LM curve
a.slopes downward.
b.slopes upward.
c.is vertical.
d.is horizontal.
D - Answers QN=83(18679)Which of the following is included in U.S. GDP?
a.The purchase of a watch from a Swiss company
b.The sale of a used car
c.The sale of a new car from a manufacturer's inventory
d.A newly constructed house
C - Answers QN=72(18675)The equation total production = total income = total expenditure is
called
a.Say's Law.
, b.the total identity.
c.the fundamental identity of national income accounting.
d.the goods-market equilibrium condition.
A - Answers QN=100(18775)An economy has full-employment output of 5000. Government
purchases are 1000. Desired consumption and desired investment are given by: C(d) = 3000 -
2000r + 0.10Y & I(d) = 1000 - 4000r, where Y is output and r is the real interest rate. The real
interest rate that clears the goods market is equal to
a.8.33%.
b.25.00%.
c.1.25%.
d.2.50%.
A - Answers QN=155(18766)Suppose your company is in equilibrium, with its capital stock at its
desired level. A permanent decline in the expected real interest rate now has what effect on your
desired capital stock?
a.Raises it, because the user cost of capital is now lower
b.Lowers it, because the future marginal productivity of capital is lower
c.Lowers it, because the user cost of capital is now higher
d.Raises it, because the future marginal productivity of capital is higher
D - Answers QN=119(18738)Aunt Agatha has just left her nephew $5000. The most likely
response is for her nephew to
a.increase current consumption, but not future consumption.
b.increase future consumption, but not current consumption.
c.decrease current consumption, but increase future consumption.
d.increase both current consumption and future consumption.
A - Answers QN=141(18768)Calculate the tax-adjusted user cost of capital of a machine that
costs $10,000 and depreciates at a rate of 10%, when the real interest rate is 3% and the tax rate
on revenue is 5%.
a.$1368
b.$1300
A - Answers QN=4(18660)Positive analysis of economic policy
a.examines the economic consequences of policies but does not address the question of
whether those consequences are desirable.
b.generates less agreement among economists than normative analysis.
c.is rare in questions of economic policy.
d.examines the economic consequences of policies and addresses the question of whether
those consequences are desirable.
D - Answers QN=1(18637)When national output rises, the economy is said to be in
a.a deflation
b.an inflation
c.a recession
d.an expansion
A - Answers QN=14(18643)A country is said to be experiencing deflation when
a.prices of most goods and services are falling over time.
b.prices of most goods and services are rising over time.
c.total output is rising over time.
d.total output is falling over time.
B - Answers QN=36(18653)In the United States, monetary policy is determined by
a.the Treasury Department.
b.the Federal Reserve.
c.the president.
d.private citizens.
A - Answers QN=39(18689)If an American construction company built a road in Kuwait, this
activity would be
a.included in U.S. GNP only for that portion that was attributable to American capital and labor.
b.included in U.S. GDP but not in U.S. GNP.
,c.fully included in U.S. GDP.
d.excluded from U.S. GNP.
B - Answers QN=37(18662)Adam Smith's idea of the "invisible hand" says that given a country's
resources and its initial distribution of wealth, the use of markets will
a.eliminate inequalities between the rich and the poor.
b.make people as economically well off as possible.
c.eliminate problems of hunger and dissatisfaction.
d.insulate a nation from the effects of political instability.
B - Answers QN=68(18683)Capital goods are
a.a type of intermediate good.
b.final goods, and they are not used up during a given year.
c.produced in one year, whereas final goods are produced over a period of more than one year.
d.produced in the same year as the related final good, whereas intermediate goods are
produced in different years.
B - Answers QN=415 (19053)The LM curve
a.slopes downward.
b.slopes upward.
c.is vertical.
d.is horizontal.
D - Answers QN=83(18679)Which of the following is included in U.S. GDP?
a.The purchase of a watch from a Swiss company
b.The sale of a used car
c.The sale of a new car from a manufacturer's inventory
d.A newly constructed house
C - Answers QN=72(18675)The equation total production = total income = total expenditure is
called
a.Say's Law.
, b.the total identity.
c.the fundamental identity of national income accounting.
d.the goods-market equilibrium condition.
A - Answers QN=100(18775)An economy has full-employment output of 5000. Government
purchases are 1000. Desired consumption and desired investment are given by: C(d) = 3000 -
2000r + 0.10Y & I(d) = 1000 - 4000r, where Y is output and r is the real interest rate. The real
interest rate that clears the goods market is equal to
a.8.33%.
b.25.00%.
c.1.25%.
d.2.50%.
A - Answers QN=155(18766)Suppose your company is in equilibrium, with its capital stock at its
desired level. A permanent decline in the expected real interest rate now has what effect on your
desired capital stock?
a.Raises it, because the user cost of capital is now lower
b.Lowers it, because the future marginal productivity of capital is lower
c.Lowers it, because the user cost of capital is now higher
d.Raises it, because the future marginal productivity of capital is higher
D - Answers QN=119(18738)Aunt Agatha has just left her nephew $5000. The most likely
response is for her nephew to
a.increase current consumption, but not future consumption.
b.increase future consumption, but not current consumption.
c.decrease current consumption, but increase future consumption.
d.increase both current consumption and future consumption.
A - Answers QN=141(18768)Calculate the tax-adjusted user cost of capital of a machine that
costs $10,000 and depreciates at a rate of 10%, when the real interest rate is 3% and the tax rate
on revenue is 5%.
a.$1368
b.$1300
