If nominal GDP increased from $8000 billion in the base year to $8800 billion in the
following year and real GDP stayed the same, which of the following statements is
true?
GDP deflator increased from 100 to 110
GDP deflator increased from 90 to 100.
GDP deflator increased from 80 to 100.
GDP deflator stayed at 100.
GDP deflator stayed at 110.
raise real interest rates by 0.5 percent
raise nominal interest rates by 0.5 percent
raise real interest rates by 1.5 percent
raise nominal interest rates by 1.5 percent
keep interest rates constant
Assume that there is a short-run trade-off between inflation and unemployment as
suggested by the short-run Phillips curve, but there is no long-run trade-off. The
policymaker targets an output level that is higher than the potential output.
The economy ends up with lower unemployment.
Both inflation and output remain unchanged.
The economy ends up with higher inflation.
The economy ends up with output that is higher than potential output.
The economy ends up with lower inflation and higher output.
Money supply and government purchases are endogenous variables of the model.
Output and interest rate are exogenous variables of the model.
Which of the following statements is false?
An adverse supply shock shifts the aggregate supply curve leftward.
Fiscal policy actions are more rapid than monetary policy actions.
Assuring the independence of central bank can minimize the problem of time
inconsistency.
The sacrifices ratio is the percentage of output loss for each one point reduction in
inflation rate.
Okun’s law describes the relation between change in unemployment rate and GDP
growth.
causes interest rates to decline, thereby reducing private investment
causes interest rates to decline, thereby reducing government purchases
causes interest rates to rise, thereby reducing private investment
causes interest rates to rise, thereby reducing government purchases
None of the above.
Assume that government budget deficit decreased by $25 billion, private domestic
saving decreased by $20 billion, exports increased by $15 billion, and imports
increased $20 billion. By how much did private domestic investment change?
Private domestic investment increased by $10 billion.
Private domestic investment increased by $20 billion.
Private domestic investment increased by $30 billion.
Private domestic investment did not change at all.
The change in private domestic investment cannot be determined from this
information.
Which of the following statements is false?
Purchasing power parity implies that real exchange rate is equal to one.
Monetary policy is powerless under fixed exchange rates with perfect capital
mobility.
For an open economy, saving-investment gap must equal to its capital account.
Balance of payments is defined as the sum of current account and capital account.
Under fixed exchange rates, balance of payments must equal to the changes in
official reserves.
A country finds itself with unemployment can intervene to depreciate the nominal
exchange rate and thus increase net exports. Such policies are known as
Bailouts
Beggar-they-neighbor policies
Sterilization policies
Capital controls
Open market operations
Terms of trade are equal to the inverse of real exchange rate.
A depreciation of real exchange rate makes domestic goods more competitive.
According to the theory of relative purchasing power parity, the change in the
nominal exchange rate is determined by price level changes in both domestic and
foreign countries.
Under flexible exchange rates, changes in nominal exchange rate account for most
of the changes in real exchange rate.
Which of the following statements is false?
The gains from trade are based on comparative advantage, not absolute advantage.
Beethoven recordings have less elastic demand than classical music recordings in
general.
Economists find that spending on restaurant meals declines more during economic
downturns than does spending on food to be eaten at home.
Because bread and butter are often eaten together, they are substitutes.
Catchup and hamburger buns are complements to hamburger, and if they are priced
low enough, consumption of hamburger may rise.
Which of the following statements is false?
Pollutions are negative externalities.
Technology spillovers are positive externalities
Positive externalities cause the socially optimal quantity in a market to be less than
the equilibrium quantity.
Coase theorem states that if private parties can bargain without cost over the
allocation of resources, they can solve the problem of externalities on their own.
Taxes enacted to correct the effects of negative externalities are called Pigovian
taxes.
Firm A experiences constant returns to scale.
Firm A experiences diseconomies of scale.
None of the above.
Both Firm A and Firm B experience economies of scale.
Firm B experiences diseconomies of scale.
Which of the following statements about perfectly competitive market is false?
Firm are able to make a non-zero profit in a perfectly competitive market.
Firms can enter the market freely.
Firms can exit the market freely.
Firms are price takers.
Marginal cost of production of a firm is equal to the market price.
Suppose the payoffs to alternative trade policies between the United States and Mexico
are as follows:
The first number in each parenthesis is the payoff to the United States while the second
number is the payoff to Mexico.
The dominant strategy for the United States is low tariffs.
The dominant strategy for Mexico is low tariffs.
None of the above is true.
Which of the follows is not an attribute of monopolistic competition?
Many sellers
Product differentiation
Price exceeds marginal cost of production
Decreasing marginal cost of production
Free entry
If hiring an additional worker would increase a firm’s total revenue by more than it
would increase a firm’s total cost, then the firm should
hire the additional worker
not hire the additional worker
only hire the worker if another worker quits
decrease the current number of workers
None of the above.
Continue the previous question. Now consider the Stackelberg competition. Let firm
A be the leader and firm B be the follower. Firm A's profit maximizing strategy is to choose
None of the above.
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