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FIN 370 Final Exam # 54 Questions with ANSWERS # THE NEW EXAM!!! # 1st Set # BUY THIS ONE #.doc

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1) The largest source of household income in the U.S. is obtained from
A. stock dividends
B. wages and salaries
C. interest earnings
D. rental income
2) The market where business sell goods and services to households and the government is called
the
A. goods market
B. factor market
C. capital market
D. money market
3) Real gross domestic product is best defined as
A. the market value of intermediate goods and services produced in an economy,
including exports
B. all goods and services produced in an economy, stated in the prices of a given year
and multiplied by quantity
C. the market value of all final goods and services produced in an economy, stated
in the prices of a given year
D. the market value of goods and services produced in an economy, stated in current-
year prices
4) Underemployment includes people
A. who work "off-the-books" to avoid tax liabilities
B. who are working part time, or not using all their skills at a full-time job
C. who are tired of looking for a job, so they quit looking, but still want one
D. whose skills are not in demand anymore
5) The Bureau of Economic Analysis is responsible for which of the following?
A. Setting interest rates
B. Managing the money supply
C. Calculating U.S. gross domestic product]
D. Paying unemployment benefits
6) The Federal Reserve provides which of the following data?
A. Federal funds rate
B. Stock price of GE
C. Bond yields of corporations
D. Debt to GDP of Ireland
7) Consider if the government instituted a 10 percent income tax surcharge. In terms of the
AS/AD model, this change should have
A. shifted the AD curve to the left
B. shifted the AD curve to the right

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C. made the AD curve flatter
D. made the AD curve steeper
8) If the depreciation of a country's currency increases its aggregate expenditures by 20, the AD
curve will
A. shift right by more than 20
B. shift right by less than 20
C. shift right by exactly 20
D. not shift at all
9) Aggregate demand management policies are designed most directly to
A. minimize unemployment
B. minimize inflation
C. control the aggregate level of spending in the economy
D. prevent budget deficits or surpluses
10) Suppose that consumer spending is expected to decrease in the near future. If output is at
potential output, which of the following policies is most appropriate according to the AS/AD
model?
A. An increase in government spending
B. An increase in taxes
C. A reduction in government spending
D. No change in taxes or government spending
11) According to Keynes, market economies
A. never experience significant declines in aggregate demand
B. quickly recover after they experience a significant decline in aggregate demand
C. may recover slowly after they experience a significant decline in aggregate
demand
D. are constantly experiencing significant declines in aggregate demand
12) The laissez-faire policy prescription to eliminate unemployment was to
A. eliminate labor unions and government policies that hold real wages too high
B. strengthen unions and government regulations protecting unions and workers
C. increase real wages so that people are encouraged to work
D. have government guarantee jobs for everyone
13) In the AS/AD model, an expansionary monetary policy has the greatest effect on the price
level when it
A. increases both nominal and real income
B. increases real income but not nominal income
C. increases nominal income but not real income
D. doesn't increase real or nominal income
14) The Federal funds rate

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A. is always slightly higher than the discount rate
B. can never be close to zero
C. may sometimes have to be targeted at zero
D. is an intermediate target
15) What tool of monetary policy will the Federal Reserve use to increase the federal funds rate
from 1% to 1.25%?
A. Open-market operations
B. The discount rate
C. A change in reserve requirements
D. Margin requirements
16) If the Federal Reserve increases the required reserves, financial institutions will likely lend
out
A. more than before, increasing the money supply
B. less than before, decreasing the money supply
C. more than before, decreasing the money supply
D. less than before, increasing the money supply
17) Suppose the money multiplier in the U.S. is 3. Suppose further that if the Federal Reserve
changes the discount rate by 1 percentage point, banks change their reserves by 300. To increase
the money supply by 2700 the Federal Reserve should
A. reduce the discount rate by 3 percentage points
B. reduce the discount rate by 10 percentage points
C. raise the discount rate by 3 percentage points
D. raise the discount rate by 10 percentage points
18) If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent. This
policy would most likely
A. increase both the money multiplier and the money supply
B. increase the money multiplier but decrease the money supply
C. decrease the money multiplier but increase the money supply
D. decrease both the money multiplier and the money supply
19) A country can have a trade deficit as long as it can
A. purchase foreign assets
B. make loans to other countries
C. borrow from or sell assets to foreigners
D. produce more than it consumes.
20) A weaker dollar
A. raises inflation and contracts the economy.
B. reduces inflation and contracts the economy
C. raises inflation and expands the economy
D. reduces inflation and expands the economy

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1) The largest source of household income in the U.S. is obtained fromA. stock dividendsB. wages and salariesC. interest earningsD. rental income2) The market where business sell goods and services to households and the government is called theA. goods marketB. factor marketC. capital marketD. money market3) Real gross domestic product is best defined asA. the market value of intermediate goods and services produced in an economy, including exportsB. all goods and services produced in an economy, stated in the prices of a given year and multiplied by quantityC. the market value of all final goods and services produced in an economy, stated in the prices of a given yearD. the market value of goods and services produced in an economy, stated in current-year prices4) Underemployment includes people A. who work "off-the-books" to avoid tax liabilitiesB. who are working part time, or not using all their skills at a full-time jobC. who are tired of looking for a job, so they quit looking, but still want oneD. whose skills are not in demand anymore5) The Bureau of Economic Analysis is responsible for which of the following?A. Setting interest ratesB. Managing the money supplyC. Calculating U.S. gross domestic product]D. Paying unemployment benefits6) The Federal Reserve provides which of the following data?A. Federal funds rateB. Stock price of GEC. Bond yields of corpora ...
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