Finance-QA158

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1) For this question, assume that the economy is initially operating at the natural level of output. When the central bank controls the interest rates, an increase in the price target will cause
 

no change in the real wage in the medium run.

an increase in investment in the medium run.

a reduction in the interest rate in the medium run.

no change in the nominal wage in the medium run.
 

2) Suppose there is an increase in the price of oil. The central bank does not change its price target. The change in the price of oil will cause which of the following in the medium run?
 

a decrease in output

no change in the price level

an increase in the interest rate

all of the above

none of the above
 

3) As product markets become less competitive and the markup rises, we would expect which of the following to occur?
 

no change in the real wage in the medium run

an increase in the aggregate price level as output increases

a reduction in the interest rate in the medium run

no change in output in the medium run

a reduction in the real wage in the medium run
 

4) The aggregate demand curve will shift to the right when which of the following occurs?
 

a decrease in the money supply

a reduction in consumer confidence

a rise in the price level

a decrease in taxes

a decrease in the price level

 
5) Suppose the actual unemployment rate increases. This will cause
 

an upward shift in the wage setting curve.

a downward shift in the wage setting curve.

an upward shift in the price setting curve.

a downward shift in the price setting curve.

none of the above
 

6) Which of the following statements about the adjustment process in the economy is incorrect?
 

Output in excess of the natural level leads to higher prices.

Higher prices increase demand.

An increase in demand increases output.

An increase in output increases employment.

An increase in employment decreases unemployment.
 

7) Which of the following represents the medium-run effect of an increase in the price target?
 

a decline in output

an increase in the interest rate

a decrease in the price level

all of the above

none of the above
 

8) Suppose the minimum wage increases. Given this event, we would expect which of the following to occur?
 

no change in the real wage in the medium run

an increase in the aggregate price level as output decreases

an increase in the interest rate in the short run

all of the above

 

9) Suppose workers and firms expect the overall price level to increase by 4%. Given this information, we would expect that
 

the nominal wage will increase by less than 4%.

the nominal wage will increase by exactly 4%.

the nominal wage will increase by more than 4%.

the real wage will increase by 4%.
 

10) If there were perfect competition, then m (in the price setting equation P = (1+m)W), would equal ________.
 

W

P

1

0.5

none of the above
 

11) Which of the following would cause an increase in the natural level of output?
 

a decrease in government spending

a decrease in the money supply

an increase in taxes

a decrease in taxes

none of the above
 

12) When the central bank keeps the interest rate controlled, a fall in its price target will immediately cause
 

the LM curve to shift downward.

the AD curve to shift leftward.

the price setting curve to shift down.

the wage setting curve to shift upward.

the wage setting curve to shift downward.

 

13) At the current level of output, suppose the actual price level is less than the price level that individuals expect (i.e., Pt < Pet). We know that output is currently below the natural level of output. the interest rate will tend to rise as the economy adjusts to this situation. the nominal wage will tend to increase as individuals revise their expectations of the price level. any subsequent reduction in the aggregate price level will cause an increase in the real money supply and a rightward shift in the aggregate demand curve. none of the above   14) As the unemployment rate rises the proportion of the unemployed finding a job decreases. the separation rate must decrease. the young and unskilled experience larger-than-average increases in unemployment. both a. and c. are right all of the above are right   15) The natural level of employment will increase when which of the following occurs?   an increase in the markup of prices over costs an increase in unemployment benefits an increase in the actual unemployment rate all of the above none of the above   16) The natural level of output is the level of output that occurs when:   the goods market is in equilibrium. the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations in medium-run equilibrium. the financial markets are in equilibrium. the unemployment rate is zero. both the goods and financial markets are in equilibrium.   17) For this question, assume that the economy is initially operating at the natural level of output. Given the wage-setting and price-setting relations in the lectures, an increase in unemployment compensation/benefits will cause   an increase in the real wage in the medium run. a reduction in the real wage in the medium run. no change in the real wage in the medium run. ambiguous effects on the real wage in the medium run.   18) An increase in government spending will, in the short run, cause an increase in   the interest rate. the price level. output. all of the above none of the above   19) For this question, assume the central bank controls the interest rate and the economy is initially operating at the natural level of output. A reduction in taxes must cause   an increase in investment in the medium run. a reduction in investment in the short run. no change in investment in the medium run. an increase in investment in the short run. none of the above   20) When the central bank controls the interest rate, the aggregate demand (AD) curve is downward sloping because   a reduction in the money supply (M) will cause an increase in the interest rate, a reduction in investment, and a reduction in output. a reduction in the aggregate price level (P) will cause the central bank to reduce the interest rate and thus increase output. a reduction in P will cause an increase in the real wage, a reduction in employment, and a reduction in output. as P increases, goods and services become relatively more expensive and individuals respond by reducing the quantity demanded of goods and services.   21) For this question, assume that expected inflation this year is equal to past year's inflation. Also assume that the unemployment rate has been equal to the natural rate of unemployment for some time. Given this information, we know that   the rate of inflation should be zero. the rate of inflation should neither increase nor decrease. the rate of inflation should steadily increase. the rate of inflation should steadily decrease. the natural rate of unemployment should steadily decrease.   22) An increase in government spending will cause which of the following when a liquidity trap situation exists?   Output will increase. The interest rate will increase. Output will decrease. The interest rate will decrease. Output will not change.   23) Which of the following conditions will most likely coincide with the existence of a liquidity trap?   Individuals prefer to hold only money and not bonds. The real interest rate is negative. Inflation is rising. Inflation is constant. Inflation is zero.   24) A change in the saving rate will NOT have any effect on which of the following variables in the long run?   output per worker capital per worker the level of investment the rate of growth of output per worker none of the above   25) The effectiveness of expansionary fiscal policy is limited when which of the following occurs?   Temporary budget deficits leading to high public debt. Temporary budget deficits leading to low public debt. Continual budget deficits leading to high public debt. Continual budget surpluses leading to high public debt. Continual budget surpluses leading to low public debt.   26) If Kt+1/N = Kt/N, we know that   saving per worker equals depreciation per worker in period t. saving per worker is less than depreciation per worker in period t. saving per worker is greater than depreciation per worker in period t. the saving rate fell in period t.   27) Assume that the production function is characterized by constant returns to scale. Now suppose that both capital and labour increase by 1%, output will   not change at all. increase by less than 1%. increase by 1%. increase by 2%. none of the above   28) In New Zealand, the rate of saving is greater than in Australia Given this information, we know, other things equal, that in the long run New Zealand's   growth rate will be greater than the Australian growth rate. output per worker will be greater than Australian output per worker. capital per worker will be no different than the Australian capital per worker. all of the above none of the above   29) Which of the following events will cause an increase in output per capita (Y/N)?   an increase in K an increase in K/N a reduction in K all of the above both of the first two anwers above   30) Constant returns to scale suggests that if N and K both increase by 6%   output (Y) will increase by more than 3%. Y will increase by exactly 3% . Y will increase by less than 3%. the capital-labour ratio (K/N) will decrease.   You can read more about our case study assignment help services here.
 

 

31) If the saving rate is 1 (i.e., s = 1), we know that:
 

Capital per worker, K/N = 0.

Output per worker, Y/N = depreciation per worker.

Consumption per worker, C/N, will be at its highest level.

Output per worker, Y/N = 0.
 

32) A tax cut will cause which of the following when a liquidity trap situation exists?
 

Output will decrease.

Output will increase.

Output will not change.

The interest rate will decrease.

The interest rate will increase.
 

33) When using a logarithmic scale to plot output per capita over time, an upward-sloping curve that becomes increasingly steep indicates
 

output per capita is not changing.

output per capita is growing by a constant amount each year.

output per capita is growing by a constant percentage each year.

output per capita is growing by an increasing percentage each year.

output per capita is not defined.
 

34) When a liquidity trap situation exists, we know that
 

an open market operation will have no effect on the supply of money.

an open market operation will have no effect on the interest rate.

expansionary monetary policy will be deflationary.

fiscal policy will have no effect on the demand for goods.

an open market operation will have no effect on the monetary base.
 

35) If output per capita grows by a constant 6% per year, then the standard of living would grow by about ________ over 3 years.
 

12%

14%

18%

19%

22%
 

36) Which of the following will NOT cause an increase in the natural rate of unemployment?
 

an increase in the markup, m

an increase in unemployment benefits (included in z)

an increase in the expected inflation rate

a reduction in the response of wages to unemployment, α

none of the above
 

37) Suppose there are two countries that are identical in every way with the following exception: Country A has a lower depreciation rate than country B. Given this information, we know with certainty that
 

the steady state growth rate will be the same in the two countries.

the steady state growth rate will be higher in A than in B.

Capital per worker, K/N, will be higher in B.

Output per worker, Y/N, will be higher in B.
 

38) The crisis pushed up borrowing costs, lowered stock prices, and sapped consumer and firm confidence. What effect do these have on the IS curve?
 

The IS curve shifts to the right.

The IS curve becomes vertical.

The IS curve becomes horizontal.

There is no effect on the IS curve.

The IS curve shifts to the left.

 
39) Which of the following will likely cause an increase in output per worker?
 

an increase in education expenditures

an increase in the saving rate

an increase in on-the-job training

all of the above

 

40) Suppose there are two countries that are identical with the following exception. The saving rate in country A is less than the saving rate in country b. Given this information, we know that in the long run
 

the growth rate of output per capita will be greater in B than in A.

the growth rate of output per capita will be greater in A than in B.

output per capita will be greater in B than in A

output per capita will be greater in A than in B

none of the above
 

41) The present discounted value of a future payment becomes larger when
 

the nominal interest rate increases

the payment is postponed further into the future

the payment itself increases

all of the above

none of the above
 

42) Suppose the current one-year interest rate is 2%, and financial markets expect the one-year interest rate next year to be 6%. Given this information, the yield to maturity on a two-year bond will be approximately
 

4%

6.66%

7.5%

8%

10%
 

43) Assume that financial market participants expect short term rates to decrease in the future. Given this information, we would expect
 

an upward sloping yield curve

a downward sloping yield curve

an upward shifting yield curve

a downward shifting yield curve

a horizontal yield curve
 

44) Suppose there is an increase in the saving rate. We know that this will cause an increase in which of the following in the steady state?
 

growth rate of output

level of output

growth rate of capital per worker

growth rate of output per effective worker

none of the above
 

45) Which of the following can help explain the technology gap that exists between some countries?
 

poorly established property rights

political instability

the relative absence of entrepreneurs

all of the above

none of the above
 

46) Which of the following represents a dimension of technological progress?
 

larger quantities of output for given quantities of capital and labour

better products

a larger variety of products

new products

all of the above
 

47) If the nominal interest rate falls, and the expected inflation rate rises, then the real interest rate
 

must rise

must fall

cannot be defined

will rise, but only if the drop in the nominal rate is greater than the increase in expected inflation

will fall, but only if the drop in the nominal rate is smaller than the increase in expected inflation
 

48) An increase in consumer confidence will cause
 
the neutral or medium-run real interest rate to rise

the neutral real interest rate to fall

ambiguous effects on the natural real interest rate

no effect on the neutral real interest rate
 

49) In the medium run, lower money growth is associated with
 
lower real interest rates and lower nominal interest rates

lower real interest rates and higher nominal interest rates

higher real interest rates and higher nominal interest rates

higher real interest rates and lower nominal interest rates

none of the above
 

50) Assume that the one-year interest rate is on the vertical axis of the IS-LM model and that the yield curve is initially upward sloping. If financial market participants now expect a monetary contraction in one year, we know with certainty that
 
the yield curve will become steeper

the yield curve will become flatter

the yield curve will become horizontal

the yield curve will become downward sloping
 

51) Convergence of output per capita across rich countries has come from
 
a convergence of saving rates

a convergence of the accumulation of capital

higher technological progress from the countries that started behind

all of the above

none of the above
 

52) For this question, ignore differences in risk between different bonds. If there is arbitrage between one-year bonds and two-year bonds, we know that the rate of return on one-year bonds
 
must be identical to the expected rate of return from holding a two-year bond for one year

must be identical to the expected rate of return from holding a two-year bond for two years

must be larger than the expected rate of return from holding a two-year bond for one year

must be smaller than the expected rate of return from holding a two-year bond for one year

will be exactly half the rate of return on two-year bonds
 

53) Which of the following will occur when the economy has reached a balanced growth equilibrium?
 
The growth rate of output equals the rate of depreciation

The growth rate of output per effective labour is zero

The growth rate of capital is equal to the rate of depreciation

The growth rate of capital per effective labour is equal to the rate of technological progress

none of the above
 

54) If the nominal interest rate is zero, then the present discounted value of a sequence of future payments is
 
zero

undefined

equal to the last of the payments

equal to the sum of all payments

equal to the square of the sum of all payments
 
55) In the IS-LM model, a decrease in expected inflation will cause
 
a decrease in output

a decrease in the nominal interest rate

an increase in the real interest rate

all of the above

none of the above

 
56) Suppose the yield curve is initially upward sloping. If financial market participants now expect a monetary contraction in one year from now, we know with certainty that now
 
the yield curve will become flatter

the yield curve will become horizontal

the yield curve will become downward sloping

the yield curve will become steeper

 
57) Assume that the rate of depreciation is 10% per year, the population growth rate is 3% per year, and the growth rate of technology is 1% per year. Then the steady-state growth rate of output per worker in this economy is
 
1%

3%

4%

10%

14%
 

58) Suppose the nominal interest rate is going to be 10% per year for the next two years. The present discounted value of $500 to be received in two years is
 
$480.00

$490.00

$350.00

$413.22

$454.45

 
59) Suppose the production function is represented by the following: Y = F(K, AN). Given this production function, constant returns to scale means that output will increase by 10% when
 
K or AN increase by 10%

K and N increase by 10%

N or A increase by 10%

N and A increase by 10%

all of the above
 

60) Assuming the nominal interest rate is greater than 0, rank the following three sequences of payments according to their present value
 
Sequence “A”: $90, $100, $110
Sequence “B”: $100, $100, $100
Sequence “C”: $110, $100, $90
 
A > B > C

A > C > B

C > B > A

C > A > B

B > A > C

 
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