Midterm 2 practice questions: FIXED BLUR

Question 1 (1 point) The "value added" for an individual firm is calculated as O a) total revenue minus the cost of employee wages. O b) total revenue minus the cost of intermediate goods. O c) the cost of employee wages and salaries plus the cost of intermediate goods. O d) adding up all the costs of production for the firm. O e) total revenue plus the cost of intermediate goods. Question 2 (1 point) Consider the modeling of fiscal policy in a simple macroeconomic model. Which of the following government choices would most likely be represented by an decrease in government spending, G? O a) A reduction in spending on imported military equipment. O b) An increase in spending on public schools. O c) A reduction in employment insurance benefits. O d) An increase in pension payments. O e) An increase in the sales tax (GST or HST) rate. Question 3 (1 point) Consider a simple macroeconomic.... characterized by the following equations: . C = 300 + 0.6YD . 1 = 300 . G = 250 . T = 0.25Y . X = 300 . IM = 0.3Y If national income were 1300, then... ( a) Inventories would be falling, companies would respond, and as a result, national income would fall. O b) Inventories would be rising, companies would respond by increasing production, and as a result, national income would rise. O c) Inventories would be falling, companies would respond, and as a result, national income would rise. O d) Inventories would be unchanged, and as a result, national income is at equilibrium. O e) Inventories would be rising, companies would respond, and as a result, national income would fall.Question 4 (1 point) What is the biggest disadvantage of a barter system compared to a system that uses money? O A) A standardized unit of account cannot exist in a barter system. O B) Each trade requires a double coincidence of wants. O g It is difficult to find goods to trade in a barter system that satisfy the needs of society. O D) Commodities are difficult to use as a store of value. O E) All commodities are difficult to transport and therefore inefficient for exchange. Question 5 (1 point) An event such as a global pandemic causes both aggregate demand and aggregate supply to fall leading to no change in prices, but a fall in real GDP. In the context of the AD/AS model, a decision to do nothing, as opposed to implementing expansionary fiscal policy, would cause: O a) Lower GDP in the long-run and higher prices. O b) Higher GDP in the long-run and lower prices. O c) A faster reduction in unemployment rates, but higher prices. O d) A slower reduction in unemployment rates, but lower prices. Question 6 (1 point) When the economy's AS curve is positively sloped, the multiplier in the AD/AS model is O Al constant. O B) equal to one. O C) larger than the simple multiplier. O D) smaller than the simple multiplier. O E) equal to the simple multiplier.Question 7 (1 point) The Phillips curve relates the unemployment rate and the rate of change of nominal wages. When the economy shifts to a recessionary gap, the Phillips curve would show that: O a) Unemployment rates are higher than normal, and wages will fall. O b) Unemployment rates are lower than normal, and wages will rise. O c) Unemployment rates are higher than normal, and wages will rise. O d) Unemployment rates are lower than normal, and wages will fall. Question 8 (1 point) Consider the long-run theory of investment, saving, and growth. We observe that the interest rate has decreased, and the equilibram level of investment and savings has increased. Which of the following would have caused this? O A) An increase in business confidence. O B) An increase in government spending. O C) A decrease in business confidence. O D) An increase in desired household savings. O E) A decrease in potential GDP. Question 9 (1 point) Which of the following would cause the Aggregate Expenditure curve to shift down, and the Aggregate Demand curve to shift to the left? O a) An exogenous increase in domestic prices. O b) An increase in desired savings. O c) A depreciation of the Canadian dollar. O d) An increase in investment spending. O e) An increase in the government transfer payments.Question 10 (1 point) If all the commercial banks in the banking system collectively have $200 million in cash reserves and are satisfying their target reserve ratio of 5%, what is the amount of deposits they have? O A) $1500 million O B) $10 million O C) $4000 million O D) $0 O E) $1000 million Question 11 (1 point) Consider the strength of monetary forces in the economy. Other things being equal, the flatter the AS curve, the O A) more sensitive the aggregate expenditure function to changes in the interest rate. O B) larger the impact on the price level from any given increase in the money supply. O g) smaller the impact on real output from any given increase in the money supply. O D) less sensitive the aggregate expenditure function to changes in the interest rate. O E) smaller the impact on the price level from any given increase in the money supply. Question 12 (1 point) What economists sometimes call the "long-run aggregate supply curve" is O A) horizontal. O B) negatively sloped. O C) nonlinear. O D) vertical. O E) positively sloped