Which of the following argued that a long-run trade-off between inflation and
unemployment could not exist?
A) Friedman and Phelps
B) Hicks and Hansen
C) Modigliani and Friedman
D) Lucas and Sargent
E) Tobin and Jorgenson
The zero lower bound refers to the situation that
A) the lowest the central bank can decrease the nominal policy rate is 0%.
B) real interest rate is 0%.
C) inflation rate is 0%.
D) risk premium is 0%.
Patent protection is important in affecting technological progress because it makes
research and development
A) diffuse more quickly.
B) more fertile.
C) more easily available.
D) more appropriable.
E) none of the above
Which of the theory is better to think about policy?
A) game theory
B) optimal control theory
C) expectations theory
D) none of the above
In 2010, the deficit-to-GDP ratio for the United States was approximately equal to
A) 10%.
B) 17%.
C) 37%.
D) 67%.
Based on our understanding of the determinants of the interest rate and bond prices, we
know that a reduction in income will cause
A) an increase in bond prices and an increase in the interest rate (i).
B) a reduction in bond prices and an increase in i.
C) an increase in bond prices and a reduction in i.
D) a reduction in bond prices and a reduction in i.
E) none of the above
Which of the following will cause an increase in the debt-to-GDP ratio?
A) a reduction in the real interest rate
B) a reduction in the ratio of the primary deficit to GDP
C) a reduction in the growth rate of output
D) all of the above
Figures on “mean wealth” of the elderly (ages 65-69) show that most wealth consists of
A) home equity.
B) personal savings.
C) stocks and bonds.
D) social security benefits.
E) collectibles, like stamps, coins and art.
In 2005, China increased the price of its currency while continuing to pursue a fixed
exchange rate. This change in policy is called
A) an appreciation.
B) a depreciation.
C) a peg.
D) a devaluation.
E) a revaluation.
Which of the following types of government spending is included when calculating
GDP?
A) spending at the federal level
B) spending at the state level
C) spending at the municipal level
D) all of the above
E) only A and B
Which of the following is always true after an economy reaches a balanced growth
equilibrium?
A) the growth rate of output equals the rate of depreciation
B) population growth is zero
C) the growth rate of capital is equal to the growth rate of the effective work force
D) the growth rate of capital is equal to the savings rate
E) none of the above
The Phillips curve shows that when the unemployment rate is higher than the natural
rate,
A) inflation is higher than expected.
B) inflation is lower than expected.
C) policy rate is higher than expected.
D) policy rate is lower than expected.
Changes in future expected interest rates can affect current consumption. Suppose
individuals expect future interest rates to decrease. Consumption will change as a result
of this lower expected future interest rate because of its effects on which of the
following?
A) human wealth
B) the value of stocks
C) the value of bonds
D) all of the above
E) none of the above
The capital ratio is the ratio of a bank’s
A) assets divided by its liabilities.
B) income divided by its assets.
C) capital divided by its assets.
D) capital divided by its total liabilities.
In a fixed exchange rate regime, which of the following policies could be implemented
to reduce a trade deficit and leave aggregate demand constant?
A) devalue the currency
B) increase government spending
C) decrease government spending
D) decrease government spending and devalue the currency
E) increase government spending and revalue the currency
The capital-labor ratio will tend to increase over time when
A) investment per worker equals saving per worker.
B) investment per worker exceeds saving per worker.
C) investment per worker is less than depreciation per worker.
D) saving per worker equals depreciation per worker.
E) output per worker is less than capital per worker.
European currencies taken out of circulation and replaced with the Euro in
A) 1992.
B) 1997.
C) 1999.
D) 2004.
E) none of the above
For this question, assume that the economy is initially operating at the natural level of
output. An increase in consumer confidence will cause
A) a reduction in the real wage in the medium run.
B) an increase in the real wage in the medium run.
C) no change in the real wage in the medium run.
D) ambiguous effects on the real wage in the medium run.
Securitization can not help financial intermediaries
A) diversify their portfolios.
B) avoid bankruptcy.
C) attract more investors to buy and hold their securities.
D) decrease the cost of borrowing.
Which of the following would increase the gap in wages between skilled and unskilled
workers?
A) less technological progress of the kind we’ve experienced in the past 15 years
B) new types of production technology that require workers to have more skills
C) an increase in the costs of going to college
D) all of the above
E) none of the above
“In the long run, we’re all dead” was Keynes’ way of saying that
A) intellectual pursuits, like understanding the economy, are unimportant in the scheme
of things.
B) no one would appreciate his theories during his lifetime.
C) there is no point in saving for retirement.
D) it is very important to save for one’s retirement.
E) none of the above
Prices for which of the following are included in the GDP deflator, but not included in
the Consumer Price Index?
A) firms’ purchases of new equipment
B) intermediate goods and services
C) consumption of goods
D) consumption of services
Which of the following problems would lead an economist to use instrument variable
methods?
A) The dependent variable has an impact on the independent variable.
B) There are too few quarters of data.
C) There are too many independent variables.
D) The R2 is too high.
E) The residuals are too small.
We would expect which of the following to occur when the central bank pursues
contractionary monetary policy?
A) an increase in bond prices and an increase in the interest rate (i)
B) a reduction in bond prices and an increase in i
C) an increase in bond prices and a reduction in i
D) a reduction in bond prices and a reduction in i
E) none of the above
Today, about ________ of U.S. workers have their wages set by collective bargaining
agreements.
A) 10%
B) 15%
C) 20%
D) 25%
Assume an economy experiences, for a given period, a 4% increase in output and a 2%
increase in productivity. Given this information, we know that which of the following
occurred for this economy during this period?
A) The unemployment rate increased during this period.
B) The unemployment rate decreased during this period.
C) The unemployment rate did not change during this period.
D) The effects on the unemployment rate are ambiguous.
E) none of the above
Those who are concerned about balanced budget amendments typically argue that
balanced budget amendments
A) cause interest rates to be higher than they otherwise would be.
B) would make fluctuations in output around the natural level of output greater.
C) would increase spending in a recession.
D) would reduce national saving.
The Social Security system in the United States was introduced in which year?
A) 1915
B) 1935
C) 1945
D) 1955
E) none of the above
When the dollar appreciates relative to the pound, the pound price of the dollar
A) increases.
B) decreases.
C) does not change.
D) increases or decreases, depending on the amount of the depreciation.
E) changes in the next period.
The IS curve will shift to the right when which of the following occurs?
A) an increase in the money supply
B) an increase in government spending
C) a reduction in the interest rate
D) all of the above
E) none of the above
Suppose the interest parity condition holds and that the domestic interest rate is greater
than the foreign interest rate. What does this imply about the current versus future
expected exchange rate? Explain.
Explain what the J-curve is and why it occurs.
First, briefly explain what the user cost or rental cost of capital represents. Second,
explain what factors would cause an increase in the user cost or rental cost of capital.
Suppose the central bank implements a monetary expansion in the current period and is
expected to continue this monetary expansion in the future. Use the IS-LM model to
illustrate graphically and explain the effects of this policy on current output and the
current interest rate.
Explain why the demand for domestic goods curve (ZZ) has a different shape than the
domestic demand curve (DD).
Research by Alberto Alesina has documented differences and similarities in the average
annual rates of growth in output during each year of Democratic and Republican
administrations. Briefly explain what the pattern of these differences and similarities is.
Suppose the central bank implements a monetary contraction in the current period and
is not expected to continue this policy in the future. Explain what effect this policy will
have on the shape of the yield curve and on stock prices.
For a country pursuing a fixed exchange rate regime, what does the interest parity
condition imply about domestic and foreign interest rates? Explain.
Assume a country has presidential elections every three years. If a political business
cycle exists in this country, explain any differences in the average annual growth rates
of output for each year of a typical administration.
Explain the Phillips curve.
In an economy operating under flexible exchange rates, explain why the IS curve is
downward sloping.
Explain why the multiplier in an open economy is different from the multiplier in a
closed economy.
Explain what effect changes in each of the following variables has on the demand for
central bank money: 1. the interest rate, i; and (b) real income, Y.
Discuss some of the implications of rational expectations.
Explain seignorage.
Suppose individuals expect future output to be higher and future interest rates to be
higher. Given this information, how will individuals alter consumption in the current
period? Explain.