47. The total value of T-bonds, including T-notes and T-bills, in existence at any point in time is:

A. The federal government spending deficit.

B. The trade deficit.

C. Less than government spending.

D. Necessarily less than GDP.

E. The national debt.

48. Which of the following would be a valid statement about a government plan to eliminate a trade deficit?

A. A decrease in trade deficit will decrease investment in the country.

B. An effective strategy would be to increase the money supply and increase the value of the national currency.

C. An effective strategy would be to increase interest rates and increase the value of the national currency.

D. This could be achieved through dramatically increasing aggregate supply.

E. The increase in net exports will result in a decrease in aggregate demand.

49. Crowding out has the effect(s) of:

A. Reducing the effectiveness of monetary policy if the crowding out occurs in financial markets.

B. Decreasing the value of a nation's currency if the crowding out occurs in financial markets.

C. Increasing the effectiveness of fiscal policy if the crowding out occurs in financial markets and increasing the effectiveness of monetary policy if the crowding out occurs in product markets.

D. Decreasing the effectiveness of fiscal policy if the crowding out occurs in financial markets and decreasing the effectiveness of both fiscal and monetary policy if the crowding out occurs in product markets.

E. Increasing the price of government bonds if the crowding out occurs in financial markets.

50. Which of the following will make crowding out in credit markets more serve?

A. A steep investment demand curve.

B. A global credit market.

C. Tax increases.

D. A steep supply curve in the loanable funds market.

E. None of the above.

51. The Fed is conducting expansionary monetary policy if it:

A. Increases the discount rate, buy bonds, and sets a lower target for the federal funds rate.

B. Decreases the discount rate and sells bonds.

C. Sets a lower target for the federal funds rate and buy bonds in the open market.

D. Increases reserve requirements and buys bonds in the open market.

E. Buys bonds in the open market and raises the discount rate.

52. If banks become concerned about future condition and decide to hold larger excess

reserves, which of the following is a likely result?

A. A rise in interest rates.

B. An increase in bond prices.

C. An increase in aggregate demand.

D. An increase in the money supply.

E. Both C and D.

53. The Fed is under no obligation to coordinate its actions with fiscal policy. And in fact, the Fed may take actions specifically designed to counteract some piece of fiscal policy. An example of fiscal and monetary policies with opposite effects is:

A. An increase in taxes and increased sales of bonds by the Fed.

B. A decrease in government spending and an increase in the discount rate.

C. A decrease in taxes and a decrease in the target for the federal funds rate.

D. An increase in government spending and an increase in reserve requirements.

E. A decrease in taxes and increased purchases of bonds by the Fed.

54. In the fictitious nation of Zagora, a worker can produce either 5 bonds or 10 televisions in an hour. In neighboring Plovdiv, a worker can produce either 3 books or 5 televisions in an hour. Which statements about this situation is true?

A. Zagora has comparative advantage in the production of books.

B. Zagora has comparative advantage in the production of televisions.

C. Workers in Plovdiv can't possibility compete against the super-productive workers in Zagora.

D. Workers in Zagora can't be expected to compete against the low-wage workers in Plovdiv.

E. None of the above.

55. Given the U.S. has a current account deficit, a large increase in the demand for U.S.

computer programs among Japanese residents will have all the following effects except:

A. An increase in the exchange rate, expressed in yen per dollar.

B. An increase in the U.S. capital account surplus.

C. An increase in investment in Japan.

D. A decrease in the U.S. trade deficit.

E. It may have all the above effects.

56. Fiscal policy affects exchange rates because:

A. As government spending increases, the government must buy more and more goods and services from foreign countries.

B. As government debt increases, interest rates rise, and the value of the currency rises.

C. As government debt increases, interest rates rise, and the value of currency falls.

D. As the money supply increases, interest rates fall, and the valueof the currency rises.

E. As the money supply increases, interest rates fall, and the value of the currency falls.

57. There are many kinds of trade restrictions, and trade restrictions are put into place for

many reasons. Which of the following is not a reason to use trade restrictions?

A. To save natural habitats from over-use.

B. To protect the jobs of workers in certain industries.

C. To make a political statement regarding the labor policies of another nation.

D. To compensate for higher taxes placed on domestic producers.

E. To create a lower price for domestic consumers.

58. If the value of the U.S. dollar in foreign exchange markets rise:

A. U.S. exports will become relatively less expensive.

B. Capital inflows into the U.S. will increase.

C. People in the U.S. will purchase fewer imports.

D. U.S. exports will likely decrease.

E. All of the above.

59. Saving that leakages equal injections give the equation: A. T + S + X= G + I + M.

B. Y=C + S + T.

C. Y=C + I + G + X - M.

D. T + S+ M=C + G + I + X.

E. T+S+M=G+I+X.

60. An economy producing at a level between full employment and full capacity is likely to

experience:

A. Zero unemployment.

B. Demand-pull inflation.

C. Cost-push inflation.

D. A high level of cyclical unemployment.

E. A high level of seasonal unemployment.