Download ECON4110 Sample Final Exam MULTIPLE CHOICE. Choose the

ECON4110 Sample Final Exam
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Fluctuations in velocity indicate that
A) changes in money holdings cannot be completely explained by changes in the price level.
B) inflation must be accelerating.
C) the Fed will have an easier time in hitting monetary aggregate targets than in hitting interest rate targets.
D) changes in money holdings cannot be completely explained by changes in the volume of transactions.
2) The quantity theory of money
A) included income, but did not include the interest rate as a factor in the demand for money.
B) included the interest rate, but did not include income as a factor in the demand for money.
C) did not include either income or the interest rate as factors in the demand for money.
D) included both income and the interest rate as factors in the demand for money.
3) The expression for velocity derived from Keynes's liquidity preference theory is
A) V = Y/L(Y,i).
B) V = L(Y,i)/P.
C) V = P/L(Y,i).
D) V = L(Y,i)/Y.
4) The money market includes trade in
A) only currency and checkable deposits.
B) only checkable deposits.
C) only currency.
D) currency, checkable deposits, and other close substitutes for cash.
5) In a closed economy the goods market is in equilibrium when
A) Y = C + I + G.
C) C + S = I + G.
B) C + I = S + G.
D) Y = S + I + G.
6) In the savings-investment diagram, we know that an increase in the real interest rate raises the level of saving
because
A) the saving curve slopes up.
B) it causes a rightward shift in the investment curve.
C) it causes a leftward shift in the investment curve.
D) the saving curve slopes down.
7) At points not on the IS curve,
A) the interest rate must not equal the inflation rate.
B) the demand for money must not equal the supply of money.
C) the federal government's budget must not be balanced.
D) saving must not equal investment.
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8) At a point below the IS curve
A) the real interest rate is above its equilibrium value.
B) there is an excess demand for goods.
C) saving exceeds investment.
D) there is an excess supply of goods.
9) Which of the following is the correct expression for the nominal market interest rate?
A) i = r + pe
B) r = ipe
C) r = i + pe
D) i = rpe
10) If the demand for real money balances were completely insensitive to the opportunity cost of holding money,
A) the LM curve would be vertical.
B) the money market would never be in equilibrium.
C) the LM curve would be horizontal.
D) the goods market would never be in equilibrium.
11) An increase in the supply of real money balances will cause
A) the LM curve to shift up and to the left.
B) the IS curve to shift up and to the left.
C) the IS curve to shift down and to the right.
D) the LM curve to shift down and to the right.
12) In the long run a rightward shift of the FE line will result in
A) the IS curve shifting up and to the left.
B) an increase in the real interest rate.
C) the LM curve shifting down and to the right.
D) an increase in the price level.
13) In the long run, a permanent increase in the nominal money supply will
A) have no affect on the level of output, the price level, or the level of investment spending.
B) lead to a permanently higher level of real output.
C) lead to a permanently higher price level.
D) lead to a permanently higher level of investment spending.
14) The aggregate supply curve represents levels of output that producers are willing to sell at
A) each price level.
B) each inflation rate.
C) each level of real GDP.
D) each level of the real interest rate.
15) Most economists believe that the aggregate supply curve is
A) vertical in both the short run and in the long run.
B) upward sloping in the long run, but vertical in the short run.
C) upward sloping in both the short run and in the long run.
D) upward sloping in the short run, but vertical in the long run.
16) If wages and prices in long-term contracts were fully indexed,
A) prices would be more sticky in the short run.
B) prices would be more sticky in the long run.
C) the stickiness of prices would not be affected.
D) prices would be less sticky in the short run.
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17) An increase in the expected price level
A) results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run
aggregate supply curve.
B) shifts the short-run aggregate supply curve down and to the right.
C) shifts the short-run aggregate supply curve up and to the left.
D) has no effect on the short-run aggregate supply curve.
18) If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place, in the
short run aggregate output will
A) remain at full employment in both the new classical and new Keynesian views.
B) fall in the new classical view, but not in the new Keynesian view.
C) fall in both the new Keynesian and new classical views.
D) fall in the new Keynesian view, but not in the new classical view.
19) Which of the following would cause the long-run aggregate supply curve to shift?
A) a decrease in the expected price level
B) an increase in the price level
C) an increase in labor productivity
D) an autonomous increase in consumption spending
20) In the aggregate demand-aggregate supply model, if the Federal Reserve decides to decrease the nominal
money supply,
A) current output will fall, but the price level will rise.
B) current output and the price level will both rise.
C) current output and the price level will both fall.
D) current output will rise, but the price level will fall.
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Answer Key
Testname: E4110F03FSAMPLE.TST
1) Answer: D
2) Answer: A
3) Answer: A
4) Answer: D
5) Answer: A
6) Answer: A
7) Answer: D
8) Answer: B
9) Answer: A
10) Answer: A
11) Answer: D
12) Answer: C
13) Answer: C
14) Answer: A
15) Answer: D
16) Answer: D
17) Answer: C
18) Answer: C
19) Answer: D
20) Answer: C
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