Which of the following would shift the FE line to the left?

Which of the following would shift the FE line to the left?

a. A decrease in the future marginal productivity of capital
b. A decrease in the capital stock
c. An increase in labor supply
d. A beneficial supply shock

Answer: B

Which of the following changes shifts the long-run aggregate supply curve to the right?

Which of the following changes shifts the long-run aggregate supply curve to the right?

a. A decrease in the demand for labor
b. A decrease in taxes (assuming Ricardian equivalence doesn't hold)
c. An increase in consumer confidence
d. A demographic change that increases the labor supply

Answer: D

In the Keynesian model, suppose the Fed sets a target for the real interest rate. If the IS curve shifts up and to the right, and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run, it will

In the Keynesian model, suppose the Fed sets a target for the real interest rate. If the IS curve shifts up and to the right, and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run, it will

a. shift the LR curve up.
b. not shift the LR curve.
c. shift the IS curve up and to the right.
d. shift the LR curve down.

Answer: A

Changes in reserve requirements directly and immediately affect

Changes in reserve requirements directly and immediately affect

a. the monetary base.
b. banks' holdings of securities.
c. the money multiplier.
d. the Fed's holdings of foreign exchange.

Answer: C

Suppose the current level of output is 5000 and the elasticity of output with respect to capital is 0.4. A 10% increase in capital would increase the current level of output to

Suppose the current level of output is 5000 and the elasticity of output with respect to capital is 0.4. A 10% increase in capital would increase the current level of output to

a. 5050.
b. 5500.
c. 5200.
d. 5020.

Answer: C

Over the past year, output grew 5%, capital grew 5%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

Over the past year, output grew 5%, capital grew 5%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

a. 1.0%
b. 2.2%
c. 2.8%
d. 0.5%

Answer: C

The value of real GDP in the current year equals

The value of real GDP in the current year equals

a. the value of current-year output in prices of the current year.
b. the value of base-year output in prices of the base year.
c. the value of current-year output in prices of the base year.
d. the value of base-year output in prices of the current year.

Answer: C

The nominal interest rate minus the inflation rate is the

The nominal interest rate minus the inflation rate is the

a. real interest rate.
b. forward rate.
c. depreciation rate.
d. discount rate.

Answer: A

In the long run, an increase in consumer spending would cause output to ________ and the price level to ________.

In the long run, an increase in consumer spending would cause output to ________ and the price level to ________.

a. stay constant; stay constant
b. stay constant; rise
c. rise; stay constant
d. rise; rise

Answer: B

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, which of the following curves slopes downward?

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, which of the following curves slopes downward?

a. (i) SRAS
b. (ii) AD
c. (iii) LRAS
d. None of (i), (ii), and (iii)

Answer: B

Suppose the dollar/euro exchange rate falls. Then

Suppose the dollar/euro exchange rate falls. Then

a. the euro is more valuable relative to the dollar.
b. French firms will import more from the United States into France.
c. the dollar is less valuable relative to the euro.
d. U.S. firms will export less to France.

Answer: B

The price of one currency in terms of another is called

The price of one currency in terms of another is called

a. purchasing power parity.
b. the exchange rate.
c. a currency band.
d. the terms of trade.

Answer: B

The total value of government bonds outstanding at any particular time is called the

The total value of government bonds outstanding at any particular time is called the

a. government debt.
b. seignorage revenue.
c. yield curve.
d. government deficit.

Answer: A

According to the Ricardian equivalence proposition, current deficits

According to the Ricardian equivalence proposition, current deficits

a. will affect both consumption and national saving.
b. will not affect consumption or national saving.
c. will affect national saving but not consumption.
d. will affect consumption but not national saving.

Answer: B

Which of the following would be part of the nation's capital and financial account?

Which of the following would be part of the nation's capital and financial account?

a. A night club show seen by an American in Mexico City
b. A payment to the Philippine government for the use of military bases in their country
c. A dividend from a British equity owned by an American
d. One hundred shares of British Petroleum stock purchased by an American

Answer: D

Consider a small open economy with desired national saving of S(d)= 200 + 10,000r and desired investment of I(d) = 1,000 - 5,000r. If r = 0.05, then net exports equal

Consider a small open economy with desired national saving of S(d)= 200 + 10,000r and desired investment of I(d) = 1,000 - 5,000r. If r = 0.05, then net exports equal

a. -100.
b. -50.
c. 50.
d. 100.

Answer: B

Average labor productivity is the

Average labor productivity is the

a. amount of machines per worker
b. amount of workers per machine
c. amount of output per worker
d. ratio of employed to unemployed workers

Answer: C

The main reason that the United States has such a high standard of living is

The main reason that the United States has such a high standard of living is

a. low unemployment
b. high government budget deficits
c. low inflation
d. high average labor productivity

Answer: D

An increase in the expected real interest rate tends to

An increase in the expected real interest rate tends to

a. raise desired investment only.
b. raise both desired saving and desired investment.
c. raise desired saving only.
d. raise desired saving, but lower desired investment.

Answer: D

Aunt Agatha has just left her nephew $5000. The most likely response is for her nephew to

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.

Answer: D