Name: ________________________ Class: ___________________ Date: __________
ID: A
Commerce College Joint Economics Exam 107-2
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____
1. You are thinking of buying a bond from Bluestone Corporation. You know that this bond is long
____
2.
____
3.
____
4.
____
5.
____
6.
term and you know that Bluestone's business ventures are risky and uncertain. You then consider
another bond with a shorter term to maturity issued by a company with good prospects and an
established reputation. Which of the following is correct?
a. The longer term would tend to make the interest rate on the bond issued by
Bluestone higher, while the higher risk would tend to make the interest rate lower.
b. The longer term would tend to make the interest rate on the bond issued by
Bluestone lower, while the higher risk would tend to make the interest rate higher.
c. Both the longer term and the higher risk would tend to make the interest rate
lower on the bond issued by Bluestone.
d. Both the longer term and the higher risk would tend to make the interest rate
higher on the bond issued by Bluestone.
In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned
$36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor
Plum's salary was highest in
a. 1980 and lowest in 1970.
b. 1980 and lowest in 1990.
c. 1990 and lowest in 1970.
d. 1990 and lowest in 1980.
Unions contribute to
a. structural unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not structural unemployment.
c. both structural unemployment and the natural rate of unemployment.
d. neither structural unemployment nor the natural rate of unemployment.
Which of the following can explain the upward slope of the short-run aggregate supply curve?
a. nominal wages are slow to adjust to changing economic conditions.
b. as the price level falls, the exchange rate falls.
c. an increase in the money supply lowers the interest rate.
d. an increase in the interest rate increases investment spending.
Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5
each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10
per unit and the price of fish was $75 per unit. For 2010,
a. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5.
b. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160.
c. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5.
d. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160.
In 2009 Congress and President Obama approved tax cuts and increased government spending.
According to the short-run Phillips curve these policies should have
a. raised unemployment and inflation.
b. raised unemployment and reduced inflation.
c. reduced unemployment and raised inflation.
d. reduced unemployment and inflation.
1
Name: ________________________
____
ID: A
7. If we were in a liquidity trap,
a. investment would be totally interest insensitive
b. fiscal expansion would be unlikely to drive interest rates up
c. monetary policy would be more powerful than fiscal policy
d. an increase in government spending would be totally offset by a decrease in
____
private investment
8. Figure The figure below illustrates a tariff. On the graph, Q represents quantity and P represents
price.
____
The tariff
a. decreases producer surplus by the area C, decreases consumer surplus by the area
C + D + E, and decreases total surplus by the area D + F.
b. increases producer surplus by the area C, decreases consumer surplus by the area
C + D + E + F, and decreases total surplus by the area D + F.
c. creates government revenue represented by the area B + E and decreases total
surplus by the area D + E + F.
d. increases producer surplus by the area C + G and creates government revenue
represented by the area D + E + F.
9. Assume two countries in the world. Country A can produce a car by using 100 hours of labor and
a motorcycle by using 50 hours. Country B can produce a car by using 50 hours of labor and a
motorcycle by using 30 hours of labor. How should the two countries produce after they open up
to free trade?
a. Country A specializes in producing cars, and Country B specializes in producing
motorcycles.
b. Country A specializes in producing motorcycles, and Country B specializes in
producing cars.
c. Both Country A and Country B produce cars and motorcycles.
d. Country B should import both goods from Country A.
2
Name: ________________________
ID: A
____ 10. Compared with other countries, Country A has lower opportunity costs in producing wine.
____ 11.
____ 12.
____ 13.
____ 14.
____ 15.
Which of the following statements is not necessarily correct according to the model of
comparative advantage?
a. After Country A opens up of trade, the relative price of wine in Country A will
rise.
b. After Country A opens up of trade, Country A will export wine.
c. Country A has an absolute advantage in producing wine.
d. Country B has no comparative advantage in producing wine.
In a certain economy, when income is $1000, consumer spending is $800. The value of the
multiplier for this economy is 2.5. It follows that, when income is $1020, consumer spending is
a. $816. For this economy, an initial increase of $100 in consumer spending
translates into a $250 increase in aggregate demand.
b. $816. For this economy, an initial increase of $100 in consumer spending
translates into a $400 increase in aggregate demand.
c. $812. For this economy, an initial increase of $100 in consumer spending
translates into a $250 increase in aggregate demand.
d. $812. For this economy, an initial increase of $100 in consumer spending
translates into an $800 increase in aggregate demand.
If purchasing-power parity holds, when a country's central bank increases the money supply, its
a. price level rises and its currency appreciates relative to other currencies in the
world.
b. price level rises and its currency depreciates relative to other currencies in the
world.
c. price level falls and its currency appreciates relative to other currencies in the
world.
d. price level falls and its currency depreciates relative to other currencies in the
world.
Which of the following statements is correct?
a. All items that are included in M1 are included also in M2.
b. All items that are included in M2 are included also in M1.
c. Credit cards are included in both M1 and M2.
d. Savings deposits are included in both M1 and M2.
In the Keynesian framework, as long as output is below the equilibrium level, unplanned
and firms will continue to
production.
inventory investment will remain
a. negative; lower
b. negative; raise
c. positive; lower
d. positive; raise
Suppose that in a closed economy GDP is equal to 15,000, government purchases are equal to
3,000, consumption equals 10,500, and taxes equal 3,500. What are private saving and public
saving?
a. 1,500 and -500, respectively
b. 1,500 and 500, respectively
c. 1,000 and -500, respectively
d. 1,000 and 500, respectively
3
Name: ________________________
ID: A
____ 16. Efficiency wages
a. increase productivity and reduce unemployment.
b. increase productivity but increase unemployment.
c. decrease productivity but reduce unemployment.
d. decrease productivity and increase unemployment.
____ 17. The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014.
____ 18.
____ 19.
____ 20.
____ 21.
The price index in 2013 was
a. 100.0
b. 100.7
c. 83.3
d. 84.6
If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7
percent, then by definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.
b. frictional unemployment amounting to 0.5 percent of the labor force.
c. structural unemployment amounting to 0.5 percent of the labor force.
d. search unemployment amounting to 0.5 percent of the labor force.
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could
move the rate back towards its target by
a. buying bonds. This buying would reduce reserves.
b. buying bonds. This buying would increase reserves.
c. selling bonds. This selling would reduce reserves.
d. selling bonds. This selling would increase reserves.
In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that,
when the price level decreases, the real wealth of households
a. increases and as a result consumption spending increases. This effect contributes
to the downward slope of the aggregate-demand curve.
b. decreases and as a result consumption spending increases. This effect contributes
to the upward slope of the aggregate-supply curve.
c. increases and as a result households increase their money holdings; in turn,
interest rates increase and investment spending decreases. This effect contributes
to the downward slope of the aggregate-demand curve.
d. decreases and as a result households increase their money holdings; in turn,
interest rates increase and investment spending decreases. This effect contributes
to the upward slope of the aggregate-supply curve.
The absolute value of the slope of a PPF in an economy of two goods stands for
i. the opportunity cost of producing the good on Y-axis.
ii. the relative price of the good on X-axis.
iii. To produce an additional unit of the good on X-axis, how many units of the good on Y-axis
need to give up.
a. i
b. ii
c. ii and iii
d. i, ii, and iii
4
Name: ________________________
ID: A
____ 22. Suppose the multiplier is 5 and the government increases its purchases by $15 billion. However,
____ 23.
____ 24.
____ 25.
____ 26.
____ 27.
actual shift of AD curve is $55 billion. Then, the extent of crowding out is
a. $75 billion.
b. $40 billion.
c. $30 billion.
d. $20 billion.
An increase in the budget deficit causes domestic interest rates
a. and net capital outflow to rise.
b. to rise and net capital outflow to fall.
c. to fall and net capital outflow to rise.
d. and net capital outflow to fall.
If U.S. net exports are negative, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets
bought by foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets
bought by Americans.
c. negative, so foreign assets bought by Americans are greater than American assets
bought by foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets
bought by Americans.
Which of the following is correct according to the long-run Phillips curve?
a. No government policy, including changes in the money supply growth rate, can
change the natural rate of unemployment.
b. Changes in the money supply growth rate are the only means by which
government policy can change the natural rate of unemployment.
c. Monetary policy cannot change the natural rate of unemployment, but other
government policies can.
d. Monetary policy and other government policies can shift the long-run Phillips
curve.
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the
steel to produce a bicycle, which it sells for $250. Taken together, these two transactions
contribute
a. $150 to GDP.
b. $250 to GDP.
c. between $250 and $400 to GDP, depending on the profit earned by the bicycle
company when it sold the bicycle.
d. $400 to GDP.
An increase in the fiscal policy multiplier can be caused by
a. an increase in the interest sensitivity of investment
b. an increase in the interest sensitivity of money demand
c. a decrease in the interest sensitivity of money demand
d. an increase in the income tax rate
5
Name: ________________________
ID: A
____ 28. If the economy of Talidastan in 2018, consumption was $500, exports were $300, GDP was
____ 29.
____ 30.
____ 31.
____ 32.
$1300, government purchases were $250, and investment was $300. What were Talikastan's
imports in 2017?
a. -$50.
b. -$200
c. $50
d. $150
If the U.S. raised its tariff on tires, then at the original exchange rate there would be a
a. surplus in the market for foreign-currency exchange, so the real exchange rate
would appreciate.
b. surplus in the market for foreign-currency exchange, so the real exchange rate
would depreciate.
c. shortage in the market for foreign-currency exchange, so the real exchange rate
would appreciate.
d. shortage in the market for foreign-currency exchange, so the real exchange rate
would depreciate.
Assume we combine restrictive monetary policy with expansionary fiscal policy. Which is most
likely to occur?
a. unemployment and interest rates will both go down
b. unemployment will go down but interest rates will stay the same
c. investment and consumption will both increase
d. investment will decrease and the budget deficit will increase
If there is shortage of loanable funds, then
a. the supply for loanable funds shifts right and the demand shifts left.
b. the supply for loanable funds shifts left and the demand shifts right.
c. neither curve shifts, but the quantity of loanable funds supplied increases and the
quantity demanded decreases as the interest rate rises to equilibrium.
d. neither curve shifts, but the quantity of loanable funds supplied decreases and the
quantity demanded increases as the interest rate falls to equilibrium.
Tara deposits money into an account with a nominal interest rate of 6 percent. She expects
inflation to be 2 percent. Her tax rate is 20 percent. Tara's after-tax real rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if
inflation turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if
inflation turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if
inflation turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if
inflation turns out to be higher than 2 percent.
6
Name: ________________________
ID: A
____ 33. Suppose that the bank's balance sheet is described as follows:
Assets
Reserves
$1,200
Loans
$8,000
Short-term securities $800
____ 34.
____ 35.
____ 36.
____ 37.
Liabilities and Owners? Equity
Deposits
$9,000
Debt
$800
Capital (owners' equity) $200
This bank's reserve ratio is _____ and the leverage ratio is _____
a. 10 percent; 2.
b. 12 percent; 7.5
c. 13.3 percent; 50
d. 15 percent; 10.
Assume that policy mix A combines restrictive monetary policy with expansionary fiscal policy,
while policy mix B combines expansionary monetary policy with restrictive fiscal policy.
Compared to policy mix B, policy mix A will cause
a. a lower level of investment
b. a higher level of investment
c. a lower level of consumption
d. a higher level of saving
Assume empirical research shows that in a country if inflation rises by 2%, the nominal interest
rate also rises 2%. Which following concept is not related to this result?
a. Fisher effect.
b. Monetary neutrality.
c. Classical dichotomy.
d. Phillips curve.
Which of the following contains a list only of things that increase when the budget deficit of the
U.S. increases?
a. U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
b. U.S. imports, U.S. interest rates, the real exchange rate of the dollar
c. U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
d. the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports
In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket
consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost
$2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was
125, then how much did a magazine cost in 2007?
a. $0.83
b. $2.25
c. $2.50
d. $3.00
7
Name: ________________________
ID: A
____ 38. Figure.. The domestic country is Nicaragua.
____ 39.
____ 40.
____ 41.
____ 42.
Which of the following statements is accurate?
a. Consumer surplus with trade is $3,200.
b. Producer surplus with trade is $375.
c. The gains from trade amount to $800.
d. The gains from trade are represented on the graph by the area bounded by the
points (0, $12), (300, $12), (300, $7) and (0, $7).
Suppose that consumption spending is $6,500 when income is $10,000, and consumption
spending is $7,250 when income is $11,000. The multiplier for this economy is
a. 2.85.
b. 1.53.
c. 4.00.
d. 7.00.
Which of the following choices is a strategy for banks to protect their profits from inflation?
a. Low-interest rate loans.
b. High-interest rate loans.
c. Fixed interest rate loans.
d. Floating interest rate loans.
Which of the following shifts short-run aggregate supply left?
a. an increase in the actual price level.
b. an increase in the expected price level.
c. an increase in the capital stock.
d. None of the above is correct.
Assume the absolute value of the slope of PPF of Country A is steeper than the slope of PPF of
Country B in the graphs of two goods. Which of the following statements is wrong?
a. Country A will import the good on X-axis.
b. Country B has a lower opportunity good in producing the good on X-axis.
c. After the countries open up of trade, consumers in both countries enjoy gains of
trade.
d. After the countries open up of trade, consumers can consume both goods at lower
relative prices.
8
Name: ________________________
ID: A
____ 43. Sectoral changes in demand
a. create frictional unemployment, while firms paying wages above equilibrium to
attract a better pool of candidates creates structural unemployment.
create structural unemployment, while firms paying wages above equilibrium to
attract a better pool of candidates creates frictional unemployment.
c. and firms paying wages above equilibrium to attract a better pool of candidates
both create structural unemployment.
d. and firms paying wages above equilibrium to attract a better pool of candidates
both create frictional unemployment.
Mexico has imposed a tariff on the importation of chocolate. As a consequence of the tariff,
a. Mexico as a whole is better off, since the tariff increases employment and
production in the domestic chocolate industry.
b. Mexico as a whole is better off, since the tariff results in tax revenue for the
Mexican government.
c. Mexico as a whole is worse off, since producer surplus and consumer surplus
both decrease.
d. Mexico as a whole is worse off, since the increase in producer surplus is smaller
than the drop in consumer surplus plus tariff revenues.
Minimum-wage laws and unions are similar to each other but different from efficiency wages in
that minimum-wage law and unions
a. cause unemployment, but efficiency wages do not.
b. cause the quantity of labor supplied to exceed the quantity of labor demanded, but
efficiency wages do not.
c. cause wages to be above the equilibrium level.
d. prevent firms from lowering wages in the presence of a surplus of workers.
Suppose the economy is in long-run equilibrium. If the government increases its expenditures,
eventually the increase in aggregate demand causes price expectations to
a. rise. This rise in price expectations shifts the short-run aggregate supply curve to
the right.
b. rise. This rise in price expectations shifts the short-run aggregate supply curve to
the left.
c. fall. This fall in price expectations shifts the short-run aggregate supply curve to
the right.
d. fall. This fall in price expectations shifts the short-run aggregate supply curve to
the left.
An economic expansion caused by a shift in aggregate demand causes prices to
a. rise in the short run, and rise even more in the long run.
b. rise in the short run, and fall back to their original level in the long run.
c. fall in the short run, and fall even more in the long run.
d. fall in the short run, and rise back to their original level in the long run.
Based on the Keynesian Cross model, what would happen if government spending and taxes
decrease by the same amount?
a. Output increases.
b. Output does not change.
c. Output decreases.
d. Investment increases.
b.
____ 44.
____ 45.
____ 46.
____ 47.
____ 48.
9
Name: ________________________
ID: A
____ 49. Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was
2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million.
What was the growth rate of real GDP per person during the year?
a. 12 percent
b. 10 percent
c. 4 percent
d. 2 percent
____ 50. If investment is not very sensitive to interest rate changes,
a. fiscal policy will be largely ineffective in changing output
b. monetary policy will be very effective in changing output
c. the economy is in the classical case
d. the size of the crowding out effect following expansionary fiscal policy will be
small
10
ID: A
Commerce College Joint Economics Exam 107-2
Answer Section
MULTIPLE CHOICE
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ANS: D
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ANS: C
ANS: B
ANS: A
ANS: B
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ANS: B
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ANS: C
ANS: B
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ANS: A
ANS: D
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ANS: C
ANS: B
ANS: C
ANS: D
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ANS: D
ANS: A
ANS: D
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1.總體經濟與總體指標
2.充 分就 業模型
1.總體經濟與總體指標
6.總合 供需模型
1.總體經濟與總體指標
2.充 分就 業模型
7.財政政策與貨幣政策
8.國際貿 易
8.國際貿 易
8.國際貿 易
3.凱因斯模型
9.國際金融
4.貨幣與銀行
3.凱因斯模型
1.總體經濟與總體指標
2.充 分就 業模型
1.總體經濟與總體指標
2.充 分就 業模型
4.貨幣與銀行
6.總合 供需模型
8.國際貿 易
3.凱因斯模型
9.國際金融
9.國際金融
2.充 分就 業模型
1.總體經濟與總體指標
4.貨幣與銀行
1.總體經濟與總體指標
9.國際金融
7.財政政策與貨幣政策
2.充 分就 業模型
5.通貨膨脹
4.貨幣與銀行
7.財政政策與貨幣政策
5.通貨膨脹
9.國際金融
2.充 分就 業模型
8.國際貿 易
3.凱因斯模型
5.通貨膨脹
6.總合 供需模型
8.國際貿 易
1.總體經濟與總體指標
8.國際貿 易
1
ID: A
45.
46.
47.
48.
49.
50.
ANS: D
ANS: B
ANS: A
ANS: C
ANS: D
ANS: D
TOP:
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TOP:
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1.總體經濟與總體指標
6.總合 供需模型
6.總合 供需模型
3.凱因斯模型
2.充 分就 業模型
7.財政政策與貨幣政策
2