ECO372 Final Exam Multiple Choice

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  1. A difference between commodity money and fiat money is that: A difference between commodity money and fiat money is that:
  • fiat money does not have any intrinsic value.
  • fiat money cannot be used as a unit of account.
  • commodity money cannot be used as a unit of account.
  • commodity money is used in a barter economy.
  1. Suppose the net foreign investment in Italy is positive. This implies that:
  • foreign direct investment in Italy is higher than foreign portfolio investment in the country.
  • Italy is experiencing a net capital inflow.
  • Italians are buying more foreign assets than foreigners are buying Italian assets.
  • foreigners are buying relatively more Italian assets.
  1. Following the unexpected good performance of Leathex, all its employees were given a one-time bonus. This consequently led to a rightward shift of the demand curve for shoes manufactured by the company and a leftward shift of the demand curve for socks. This shows that shoes are:
  • inferior goods.
  • complementary goods.
  • substitutes.
  • normal goods.

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  1. If the price level in an economy is 120 and the equilibrium price level is 100, _____.
  • the demand for money curve will shift to the left
  • the purchasing power of money will increase
  • the supply of money is likely to exceed the demand for money
  • people will want to hold more money than is supplied by the central bank
  1. The exhibit given below shows the short-run aggregate demand and supply curves in an economy, AD1 and AS1, and the long-run aggregate supply curve, LRAS. The economy was initially in equilibrium when there was a decrease in aggregate demand, causing a shift of the aggregate demand curve from AD1 to AD2. Which of the following is true in this case?
  • The economy will move from point D to point A in the short run and then to point C in the long run.
  • The economy will move from point D to point C in the long run.
  • The economy will move from point B to point A in the short run and then to point C in the long run.
  • The economy will move from point C to point B in the short run and then eventually to point A.
  1. In the long run, a higher saving rate:
  • does not always lead to a higher growth rate of output because of diminishing returns to capital.
  • does not lead to a higher level of income because of deterioration in labor productivity.
  • always leads to a higher growth rate of output because of improvement in the stock of human capital.
  • always leads to a higher level of productivity because of increasing returns to scale.
  1. The buyers and sellers in the country of Perylia use corn as a medium of exchange. This means that:
  • corn cannot be used as a store of value or as a unit of account in Perylia.
  • Perylia uses fiat money.
  • Perylia uses commodity money.
  • corn can be used as a store of value but not as a unit of account in Perylia.
  1. Keynesian economists believe that when an economy is in a recession, the government should:
  • increase the money supply in the economy so that interest rates decline, reducing the cost of borrowing to finance new investment projects.
  • decrease tax rates rather than increase government spending because households always view such tax cuts as permanent and increase their current consumption.
  • increase the money supply in the economy so that an excess supply of money can induce households to increase their consumption expenditure.
  • increase its purchases rather than decrease taxes because households save a part of the increase in their income as a result of tax cuts.
  1. The country of Merilya exported goods and services worth $1.2 million and imported goods and services worth $2.7 million. The net exports of the country was _____.
  • $2 million, and it had a trade surplus
  • −$1.5 million, and it had a trade deficit
  • −$3.9 million, and it had a trade deficit
  • $3.9 million, and it had a trade surplus
  1. Jack is an out-of-work sculptor. He has been looking for a job for the last two years. Unable to find any, he has given up his job search. Which of the following is true in this case?
  • This is an example of frictional unemployment.
  • This is an example of structural unemployment.
  • He is a discouraged worker and will not be included in the calculation of the unemployment rate.
  • He is a part of the unemployed labor force.
  1. In the country of Platonia, firms make the economic decisions of what to produce, how to produce, and for whom to produce. Households decide where to work and how to spend their income. Based on this information, it can be concluded that Platonia has a:
  • mercantile economy.
  • market economy.
  • closed economy.
  • command economy.
  1. A recent survey showed the health benefits of cranberry juice for treating heart and other respiratory disorders. The exhibit below shows that the initial demand curve for cranberry juice is D1. Which of the following is likely to be a consequence of the publication of the survey?
  • The demand curve will shift from D1 to D2.
  • The demand curve will shift from D1 to D3.
  • There will be a movement from point A to point C on D1.
  • There will be a movement from point A to point B on D1.
  1. Which of the following is true according to the circular-flow diagram?
  • Households receive revenue from the government.
  • Firms receive income from households.
  • Households receive wages, rent, and profit from firms.
  • Firms receive wages, rent, and profit from the government
  1. After retirement, Molly deposits $500,000 in a local bank in Merrina. At an interest rate of 4 percent, she will receive approximately _____ after 3 years.
  • $608,326
  • $562,432
  • $750,000
  • $662,345
  1. The table given below shows the total amount of spending in the country of Mesodonia. Mesodonia’s gross domestic product is:
  • $5,660 million.
  • $4,160 million.
  • $4,560 k.
  • $4,710 million.
  1. The Marions purchased a Persian rug worth $5,000 from an Iranian textile mill. Everything else remaining unchanged, this will:
  • decrease the consumption expenditure in the domestic country by $5,000.
  • reduce the net exports of the domestic country by $5,000.
  • increase the gross domestic product of the domestic country by $5,000.
  • decrease the net imports of the domestic country by $5,000.
  1. The circular-flow diagram shows that:
  • firms receive wages and profits from households in the products market.
  • households sell the factors of production to firms in the inputs market.
  • households supply resources to firms in the products market.
  • firms supply labor and other resources to the government in the factor market.
  1. Suppose the net capital outflow from Zenovia is negative. This implies that:
  • the real interest rate in foreign countries is higher than in Zenovia.
  • foreigners are not interested in buying assets in Zenovia.
  • the real interest rate in Zenovia is high.
  • the citizens of Zenovia are investing more in foreign assets than foreigners are investing in assets in Zenovia.
  1. Amelia decides to buy 10 shares each of 5 companies instead of investing in 50 shares of a big company. This is an attempt to:
  • eliminate market risk though diversification.
  • eliminate firm-specific risk though diversification.
  • discount the present value of the income from the stocks.
  • discount the future value of the income from the stocks.
  1. Scarcity occurs because of:
  • the limited supply of resources.
  • limited human needs and wants.
  • the excess of quantity supplied over quantity demanded.
  • overutilization of labor.
  1. The natural rate of unemployment in a country is 4 percent. This implies that:
  • the country has a 4 percent unemployment rate when the labor market is in equilibrium.
  • the country has an unemployment rate of 4 percent in the short run.
  • the unemployment rate is constant at 4 percent over time.
  • 4 percent of the labor force is unemployed at any given point of time.
  1. Suppose an economy is in long-run equilibrium. An increase in consumption expenditure will:
  • increase the price level in the long run but have no effect on real gross domestic product.
  • decrease both the price level and real gross domestic product in the long run.
  • shift the aggregate demand curve rightward and increase the real output in the long run.
  • shift the short-run aggregate supply curve rightward and increase both the price level and real output in the long run.
  1. There is an increase in human capital when _____.
  • Samantha receives training in quality management after joining a new firm
  • Shiroh persuades the management of her company to offer more perks to employees
  • Sue rents a laser printer to teach her employees how to fix it
  • Susie puts in more than 8 hours of work at her workplace every day
  1. If the real exchange rate in the United States is below the equilibrium level, _____.
  • there will be a shortage of dollars
  • the value of dollar will fall
  • the quantity of dollars supplied will exceed the quantity of dollars demanded
  • the demand for dollars by foreigners will balance the supply of dollars from Americans
  1. Ephlon Inc., an Italian bike manufacturer, opens a factory in the United States. This is an example of:
  • a foreign portfolio investment.
  • the catch-up effect.
  • the accumulation of human capital.
  • a foreign direct investment.
  1. Martha lends $200 to a friend who promises to return it after a year. Instead of lending it to her friend, Martha could have put the money in a bank where she could have earned an interest rate of 2 percent per annum. Martha’s opportunity cost of lending the money is _____.
  • $204
  • $2
  • $200
  • $4
  1. Ruth wants to calculate the present value of a sum of money that she will receive after the demise of her grandparents. To calculate the present value, she should use the:
  • value-added method.
  • discounting method.
  • compounding method.
  • expenditure method.
  1. A higher interest rate in a country:
  • discourages investment and decreases the quantity of loanable funds demanded.
  • makes domestic bonds less attractive to foreigners.
  • encourages citizens to buy foreign assets.
  • lowers saving in the country and decreases the quantity of loanable funds supplied.
  1. The Phillips curve shows:
  • the negative relationship between inflation and unemployment.
  • the positive relationship between the interest rate and the supply of money.
  • the negative relationship between the interest rate and the demand for money.
  • the positive relationship between the price level and aggregate supply.
  1. A decrease in the tax rates in an economy will cause a:
  • leftward shift of the aggregate demand curve if the crowding-out effect is smaller than the size of the tax multiplier.
  • leftward shift of the aggregate demand curve if the crowding-out effect is larger than the size of the tax multiplier.
  • rightward shift of the aggregate demand curve if the crowding-out effect is larger than the size of the tax multiplier.
  • rightward shift of the aggregate demand curve if the crowding-out effect is equal to the size of the tax multiplier.

Course: ECO372 Principles Of Macroeconomics
School: University of Phoenix

  • 09/10/2017
  • 60
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