1)Expansionary fiscal policy refers to:

i. An increase in government spending (G).

ii.An decrease in taxes on Firms and / or Households.

iii.An increase in the nation's money supply (MS).

A) i and iii B) ii only c)i and il D) iii only E) i only

2)The number of adults (people greater than or equal to 15 years of age) that are considered unemployed (by government - calculated statistics) is typically different from (and usually less than) the number of adults actually without a job.This situation may arise because:

i.The labor force (as calculated by government statistics) is inclusive only of adults who are either employed or actively seeking employment

ii.Full - time students, homemakers, and retirees are not considered part of the labor force, unless they have a job or are actively seeking employment

iii.Some adults without a job may no longer be actively seeking employment, as over time they become discouraged for any number of reasons, including a lack of required skills, training, and education.

A) i, ii and iii B) ii only C) i only

3)Human capital is defined as the:

A) number of factories built for human beings

B) accumulated skill and knowledge of human beings

C) accumulated amount of machinery and factories human beings

D) skills that people are born with O E) amount of machinery human beings have

4) Economic investment (1) refers to:

i. Purchases of common stock (equity securities).

ii. Purchases of bonds (debt securities).

iii. Purchases of new productive equipment (machines and tools).

A) i and ii B) i, ii and iii C) ii only D) i only E) iii only

5) Suppose the nation's Central Bank (CB) decides to engineer an increase in the nation's money supply, and begins the process with an open market operation (OMO), in which the CB purchases 2000t worth of Treasury securities from Household j (HH j). HHj deposits the entire 2,000t in cash into a demand deposit account at Bank A. The CB has set the reserve requirement ratio (ra) at 50%. The maximum possible deposit expansion that results from the initial increase in total bank reserves of 2,000 t in cash, is equal to: A) 5,000 t B) 4.000 t C) 2,000 D) 3,000 t E) 1.000 t

6) Labor productivity is defined as:

A) total real GDP

B) total output multiplied by total hours of labor

C)real GDP per unit of labor

D) real GDP per person

E) hours of work per person

7)The tradeoff of using expansionary fiscal and/or monetary policy to offset and reverse an economic downturn is:

A) A slower return to a greater level of real GDP (Y) and lower unemployment, with a higher average price level (P)

B) A quicker return to a greater level of real GDP (Y) and higher unemployment, with a higher average price level (P).

C) A quicker return to a greater level of real GDP (Y) and higher unemployment, with a lower average price level (P).

D) A quicker return to a greater level of real GDP (Y) and lower unemployment, with a higher average price level (P).

E) A quicker return to a greater level of real GDP (Y) and lower unemployment, with a lower average price level (P).

8) Expansionary fiscal and monetary policies are meant to engineer:

i. An inward shift in the vertical long run aggregrate supply function (LRAS).

ii. An inward shift in the upward sloping short run aggregate supply function (SRAS).

ii. An inward shift in the downward sloping aggregate demand function (AD).

iv. An outward shift in the downward sloping aggregate demand function (AD).

A) i and ii B) iv only C) ii only D) i only

9)Nations tend to rely on foreign investment (direct and indirect):

i. If the overall level of capital stock (K) in the economy is low, resulting in low productivity. ii. If the overall level of domestic savings (S) is an insufficient amount to finance the desired amount of e

iii. Mainly for the sake of developing good relations with neighboring countries.

A) i only B) i, ii and iii C) iii only D) i and ii E) ii only

10) Nominal GDP refers to:

i. The monetary value of the final goods and services produced by a nation, using current prices.

ii. The value of intermediate goods and services.

iii. The amount (quantities) of final goods and services produced by a nation.

A) i and iii B) iii only C) ii only D) i, ii and iii E) i only

11) The value of imports is subtracted from the amount of expenditure in an economy by households (C), firms (1), and government (G), over a specified period of time, because:

i. Total expenditure in an economy by households (C), firms (1), and government (G) includes expenditure on goods and services that are produced in other countries.

ii. Nominal GDP refers only to the value of final goods and services produced within the nation.

iii. The value of imports refers to the value of goods and services which are produced in other nations and sold in the domestic country (ie. Turkey).

A) i only B) ii only C) ii and i O D) i, ii and iii

12)Which of the following variables is used to determine a country's economic growth?

i)real GDP

ii) wages

iii) inflation

A) i and ii B) iii only C) ii only D) ii and iii E) i only

13) The long run aggregate supply (LR AS) diagramatical function is vertical because:

i. The natural rate level of real GDP (YNR) is determined by the nation's stock of capital (K), it's labor force (L), the available land (T), and the level of production technology.

ii. Wages may be slow to adjust to changing economic conditions.

iii. The natural rate level of real GDP (YNR) is not a function of the average price level (P). A) i only B) i, ii and iii C) ii only D) iii only

14) Answer the following question with a starting point of simultaneous long run and short run macroeconomic equilibrium, with the overall production level in the economy at the natural rate level of real GDP (YNr). This equilibrium may be illustrated in a diagram with the average price level (P) measured on the vertical axis, and real GDP (Y) measured on the horizontal axis. The long run equilibrium is represented by the intersection of the vertical long run aggregrate supply function (LRAS), and the downward sloping aggregate demand function (AD). The short run equilibrium is represented by the intersection of the upward sloping short run aggregate supply function (SRAS), and the downward sloping aggregate demand function (AD). (See the diagram on the above panel.)

Question: If a recession were to occur as a result of either an inward shift of the AD function or an inward shift of the SRAS function, an economy would eventually self correct as:

i. Wages eventually adjust downward and firms respond by hiring more labor and increasing production of goods and services at a given average price level (P), resulting in an outward shift of the short run aggregate supply (SR AS) function.

ii. Wages eventually adjust downward and firms respond by hiring more labor and increasing production of goods and services at a given average price level (P), resulting in an outward shift of the long run aggregate supply (LRAS) function.

iii. Wages eventually adjust upward and firms respond by hiring less labor and decreasing production of goods and services at a given average price level (P), resulting in an inward shift of the long run aggregate supply (LRAS) function.

iv. Wages eventually adjust upward and firms respond by hiring less labor and decreasing production of goods and services at a given average price level (P), resulting in an inward shift of the short run aggregate supply (SR AS) function.

A) i and iii B) ii only C) iv only D) i only E) iii only