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economics 14th global

Questions and Answers of Economics 14th Global

Equality between aggregate expenditure and aggregate output implies that the government's fiscal deficit must equal:A. Private saving - Investment - Net exports.B. Private saving - Investment + Net
Because of a sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and investment spending remain unchanged, which of the
Which curve represents combinations of income and the real interest rate at which planned expenditure equals income?A. The IS curve B. The LM curve C. The aggregate demand curve
An increase in government spending would shift the:A. IS curve and the LM curve.B. IS curve and the aggregate demand curve.C. LM curve and the aggregate demand curve.
An increase in the nominal money supply would shift the:A. IS curve and the LM curve.B. IS curve and the aggregate demand curve.C. LM curve and the aggregate demand curve.
An increase in the price level would shift the:A. IS curve.B. LM curve.C. aggregate demand curve.
As the price level declines along the aggregate demand curve, the interest rate is most likely to:A. decline.B. increase.C. remain unchanged.
The full employment, or natural, level of output is best described as:A. the maximum level obtainable with existing resources.B. the level at which all available workers have jobs consistent with
Which of the following best describes the aggregate supply curve in the short run (e.g., one to two years)? The short run aggregate supply curve is:A. flat because output is more flexible than prices
If wages were automatically adjusted for changes in the price level, the short-run aggregate supply curve would most likely be:A. more flat.B. steeper.C. unchanged.
The least likely cause of a decrease in aggregate demand is:A. higher taxes.B. a weak domestic currency.C. a fall in capacity utilization.
Which of the following is most likely to cause the long-run aggregate supply curve to shift to the left?A. Higher nominal wages B. A decline in productivity C. An increase in corporate taxes
The most likely outcome when both aggregate supply and aggregate demand increase is: A. a rise in inflation.B. higher employment.C. an increase in nominal GDP.
Which of the following is least likely to be caused by a shift in aggregate demand?A. Stagflation B. A recessionary gap C. An inflationary gap
Following a sharp increase in the price of energy, the overall price level is most likely to rise in the short run:A. and remain elevated indefinitely unless the central bank tightens.B. but be
Among developed economies, which of the following sources of economic growth is most likely to explain superior growth performance?A. Technology B. Capital stock C. Labor supply
Which of the following can be measured directly?A. Potential GDP B. Labor productivity C. Total factor productivity
The sustainable growth rate is best estimated as:A. the weighted average of capital and labor growth rates.B. growth in the labor force plus growth of labor productivity.C. growth in total factor
In the neoclassical or Solow growth model, an increase in total factor productivity reflects an increase in:A. returns to scale.B. output for given inputs.C. the sustainable growth rate.
The intercept (1.5) in this equation is best interpreted as:A. the long-run sustainable growth rate.B. the growth rate of total factor productivity.C. above-trend historical growth that is unlikely
The coefficient on the growth rate of labor (0.72) in this equation is best interpreted as:A. the labor force participation rate.B. the marginal productivity of labor.C. the share of income earned by
Convergence of incomes over time between emerging market countries and developed countries is most likely due to:A. total factor productivity.B. diminishing marginal productivity of capital.C. the
Increased household wealth will most likely cause an increase in:A. household saving.B. investment expenditures.C. consumption expenditures.
Business cycle analysis most commonly describes economic activity that is conducted through:A. state enterprises.B. agricultural co-ops.C. private corporations.
The characteristic business cycle patterns of trough, expansion, peak, and contraction are:A. periodic.B. recurrent.C. of similar duration.
During the contraction phase of a business cycle, it is most likely that:A. inflation indicators are stable.B. aggregate economic activity is decreasing.C. investor preference for government
An economic peak is most closely associated with:A. accelerating inflation.B. stable unemployment.C. declining capital spending.
In a recession, companies are most likely to adjust their stock of physical capital by:A. selling it at fire sale prices.B. not maintaining equipment.C. quickly canceling construction activity.
The inventory-to-sales ratio is most likely to be rising:A. as a contraction unfolds.B. partially into a recovery.C. near the top of an economic cycle.
The Austrian economic school attributes the primary cause of the business cycle to:A. misguided government intervention.B. the creative destruction of technological progress.C. sticky price and wage
Monetarists favor a limited role for the government because they argue that:A. government policies operate with a lag.B. firms take time to adjust to systemic shocks to the economy.C. resource use is
The discouraged worker category is defined to include people who:A. are overqualified for their jobs.B. could look for a job but choose not to.C. currently look for work without finding it.
The factor for which it is most difficult to estimate its effect on the unemployment rate is:A. technological progress.B. the use of temporary workers.C. the nature of underemployment.
The category of persons who would be most likely to be harmed by an increase in the rate of inflation is:A. homeowners with fixed 30-year mortgages.B. retirees relying on a fixed annuity payment.C.
The term that describes when inflation declines but nonetheless remains at a positive level is:A. deflation.B. stagflation.C. disinflation.
Deflation is most likely to be associated with:A. a shortage of government revenue.B. substantial macroeconomic contraction.C. explicit monetary policy to combat inflation.
The least likely consequence of a period of hyperinflation is the:A. reduced velocity of money.B. increased supply of money.C. possibility of social unrest.
Assuming the base period for 2010 consumption is November and the initial price index is set at 100, then the inflation rate after calculating the December price index as a Laspeyres index is closest
For the December consumption basket, the value of the Paasche index is closest to:A. 116 .B. 148 .C. 160 . Consumption Baskets and Prices over Two Months Date November 2010 December 2010 Goods
The characteristic of national consumer price indexes that is most typically shared across major economies worldwide is:A. the geographic areas covered in their surveys.B. the weights they place on
Of the following statements regarding the producer price index (PPI), which is the least likely?A. The PPI can influence the future CPI.B. The PPI category weights can vary more widely than analogous
The inflation rate most likely relied on to determine public economic policy is:A. core inflation.B. headline inflation.C. an index of food and energy prices.
What is the most important effect of labor productivity in a cost-push inflation scenario?A. Rising productivity indicates a strong economy and a bias toward inflation.B. The productivity level
As the reserve requirement increases, the money multiplier:A. increases.B. decreases.C. remains the same.
Which is the most accurate statement regarding the demand for money?A. Precautionary money demand is directly related to GDP.B. Transactions money demand is inversely related to returns on bonds.C.
The following exhibit shows the supply and demand for money:There is an excess supply of money when the nominal rate of interest is:A. \(I_{0}\).B. \(I_{1}\).C. \(I_{2}\). Nominal Rate of Interest 12
According to the theory of money neutrality, money supply growth does not affect variables such as real output and employment in:A. the long run.B. the short run.C. the long run and the short run.
Which of the following best describes a fundamental assumption when monetary policy is used to influence the economy?A. Financial markets are efficient.B. Money is not neutral in the short run.C.
Monetarists are most likely to believe that:A. there is a causal relationship running from inflation to money.B. inflation can be affected by changing the money supply growth rate.C. rapid financial
The proposition that the real interest rate is relatively stable is most closely associated with:A. the Fisher effect.B. money neutrality.C. the quantity theory of money.
Which of the following equations is a consequence of the Fisher effect?A. Nominal interest rate \(=\) Real interest rate + Expected rate of inflation B. Real interest rate \(=\) Nominal interest rate
Central banks would typically be most concerned with costs of:A. low levels of inflation that are anticipated.B. moderate levels of inflation that are anticipated.C. moderate levels of inflation that
Monetary policy is least likely to include:A. setting an inflation rate target.B. changing an official interest rate.C. enacting a transfer payment program.
Which role is a central bank least likely to assume?A. Lender of last resort B. Sole supervisor of banks C. Supplier of the currency
Which is the most accurate statement regarding central banks and monetary policy?A. Central bank activities are typically intended to maintain price stability.B. Monetary policies work through the
A central bank that decides the desired levels of interest rates and inflation and the horizon over which the inflation objective is to be achieved is most accurately described as being:A. target
A country that maintains a target exchange rate is most likely to have which outcome when its inflation rate rises above the level of the inflation rate in the target country?A. An increase in
In theory, setting the policy rate equal to the neutral interest rate should promote:A. stable inflation.B. a balanced budget.C. greater employment.
Which of the following is the most likely example of a tool of fiscal policy?A. Public financing of a power plant B. Regulation of the payment system C. Central bank's purchase of government bonds
The least likely goal of a government's fiscal policy is to:A. redistribute income and wealth.B. influence aggregate national output.C. ensure the stability of the purchasing power of its currency.
Given an independent central bank, monetary policy actions are more likely than fiscal policy actions to be:A. implementable quickly.B. effective when a specific group is targeted.C. effective when
Which of the following best represents a contractionary fiscal policy?A. Public spending on a high-speed railway B. A temporary suspension of payroll taxes C. A freeze in discretionary government
A pay-as-you-go rule, which requires that any tax cut or increase in entitlement spending be offset by an increase in other taxes or reduction in other entitlement spending, is an example of which
The most likely argument against high national debt levels is that:A. the debt is owed internally to fellow citizens.B. they create disincentives for economic activity.C. they may finance investment
Which statement regarding fiscal deficits is most accurate?A. Higher government spending may lead to higher interest rates and lower privatesector investing.B. Central bank actions that grow the
Which policy alternative is most likely to be effective for growing both the public and private sectors?A. Easy fiscal policy/easy monetary policy B. Easy fiscal policy/tight monetary policy C. Tight
A country has a comparative advantage in producing a good if:A. it is able to produce the good at a lower cost than its trading partner.B. its opportunity cost of producing the good is less than that
Suppose Mexico exports vegetables to Brazil and imports flashlights used for mining from Brazil. The output per worker per day in each country is as follows:Which country has a comparative advantage
Suppose three countries produce rulers and pencils with output per worker per day in each country as follows:Which country has the greatest comparative advantage in the production of rulers?A. China
In the Ricardian trade model, comparative advantage is determined by:A. technology.B. the capital-to-labor ratio.C. the level of labor productivity.
In the Ricardian trade model, a country captures more of the gains from trade if:A. it produces all products while its trade partner specializes in one good.B. the terms of trade are closer to its
Germany has much more capital per worker than Portugal. In autarky each country produces and consumes both machine tools and wine. Production of machine tools is relatively capital intensive whereas
According to the Heckscher-Ohlin model, when trade opens:A. the scarce factor gains relative to the abundant factor in each country.B. the abundant factor gains relative to the scarce factor in each
The sale of mineral rights would be captured in which of the following balance of payments components?A. Capital account B. Current account C. Financial account
Patent fees and legal services are recorded in which of the following balance of payments components?A. Capital account B. Current account C. Financial account
During the most recent quarter, a steel company in South Korea had the following transactions:- The company bought iron ore from Australia for AUD50 million.- It sold finished steel to the United
Which of the following most likely contributes to a current account deficit?A. High taxes B. Low private savings C. Low private investment
Which of the following chronic deficit conditions is least alarming to the deficit country's creditors?A. High consumption B. High private investment C. High government spending
Which of the following international trade organizations regulates cross-border exchange among nations on a global scale?A. World Bank Group (World Bank)B. World Trade Organization (WTO)C.
Which of the following international trade organizations has a mission to help developing countries fight poverty and enhance environmentally sound economic growth?A. World Bank Group (World Bank)B.
Which of the following organizations helps to keep global systemic risk under control by preventing contagion in scenarios such as the 2010 Greek sovereign debt crisis?A. World Bank Group (World
Which of the following international trade bodies was the only multilateral body governing international trade from 1948 to 1995 ?A. World Trade Organization (WTO)B. International Trade Organization
An exchange rate:A. is most commonly quoted in real terms.B. is the price of one currency in terms of another.C. between two currencies ensures that they are fully convertible.
A decrease in the real exchange rate (quoted in terms of domestic currency per unit of foreign currency) is most likely to be associated with an increase in which of the following?A. Foreign price
In order to minimize the foreign exchange exposure on a euro-denominated receivable due from a German company in 100 days, a British company would most likely initiate a:A. spot transaction.B.
Which of the following counterparties is most likely to be considered a sell-side foreign exchange market participant?A. A large corporation that borrows in foreign currencies B. A sovereign wealth
Which of the following is not a condition of an ideal currency regime?A. Fully convertible currencies B. Fully independent monetary policy C. Independently floating exchange rates
In practice, both a fixed parity regime and a target zone regime allow the exchange rate to float within a band around the parity level. The most likely rationale for the band is that the band allows
A fixed exchange rate regime in which the monetary authority is legally required to hold foreign exchange reserves backing 100 percent of its domestic currency issuance is best described as:A.
A country with a trade deficit will most likely:A. have an offsetting capital account surplus.B. save enough to fund its investment spending.C. buy assets from foreigners to fund the imbalance.
A large industrialized country has recently devalued its currency in an attempt to correct a persistent trade deficit. Which of the following domestic industries is most likely to benefit from the
A country with a persistent trade surplus is being pressured to let its currency appreciate. Which of the following best describes the adjustment that must occur if currency appreciation is to be
Based on Exhibit A, the forward premium or discount for a 360-day INR/GBP forward contract is closest to:A. -1.546 .B. 1.546 .C. 1.576 . Ed Smith is a new trainee in the foreign exchange (FX)
Based on Exhibit B, the most appropriate recommendation regarding the triangular arbitrage trade is to:A. decline the trade, as no arbitrage profits are possible.B. execute the trade; buy BRL in the
Based on Exhibit C, the potential all-in USD return on the carry trade is closest to:A. 1.04 percent.B. 1.40 percent.C. 1.84 percent. Ed Smith is a new trainee in the foreign exchange (FX) services
The factor least likely to lead to a narrow bid/offer spread for the industrial company's needed currency trade is:A. the timing of its trade.B. the company's credit rating.C. the pair of currencies
If Smith's statement on parity conditions is correct, future spot exchange rates are most likely to be forecast by:A. current spot rates.B. forward exchange rates.C. inflation rate differentials. Ed
Which of the following statements given by trainee Jones in describing the approaches used by CGER is most accurate?A. Statement 1 B. Statement 2 C. Statement 3 Ed Smith is a new trainee in the
The international parity condition McFadden is referring to in Statement 1 is:A. purchasing power parity.B. covered interest rate parity.C. uncovered interest rate parity. Connor Wagener, a student
In Statement 2, McFadden is most likely failing to consider:A. the initial gap between the country's imports and exports.B. the price elasticity of export demand versus import demand.C. the lag in

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