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2025 ASU ECON 211 FINAL EXAM WITH ACCURATE QUESTIONS
AND VERIFIED ANSWERS COVERING PRINCIPLES OF
MACROECONOMICS, FISCAL POLICY, MONETARY SYSTEMS, AND
ECONOMIC INDICATORS.
If the Fed wants to stimulate the economy....
a) It lowers spending
b) It lowers short-run interest rates
c) It increases tax rates
d) It reduces money supply - ANSWER-b) It lowers short-run interest rates
If the long-run real interest rate falls...
a) unemployment increases
b) the demand for loans decreases
c) investment by firms decreases
d) investment by firms increases - ANSWER-d) investment by firms increases
If the Fed increases the supply of bank reserves,
a) the federal funds rate falls
b) the inflation rate falls
c) consumption falls
d) investment falls - ANSWER-A) the federal funds rate falls
If the Fed wants to lower the federal funds rate through open market operations, it
a) sells bonds
b) buy bonds
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c) increases tax rates
d) decreases tax rates - ANSWER-B) buy bonds
This occurs when the Fed creates a large amount of reserves to buy long-term bonds from
banks
a) Quantitative easing
b) Monetary neutrality
c) Money illusion
d) Budgetary surplus - ANSWER-A) Quantitative easing
Which of the following is likely to happen due to quantitative easing by the Fed?
a) A rightward shift of the demand curve for bank reserves
b) A leftward shift of the demand curve for bank reserves
c) A rightward shift of the supply curve of bank reserves
d) A leftward shift of the supply curve of bank reserves - ANSWER-c) A rightward shift of the
supply curve of bank reserves
The Fed usually prefers the inflation rate to hover around...
a) 2%
b) 5%
c) 6%
d) 10% - ANSWER-a) 2%
The aggregate price level is likely to rise if
a) real GDP grows faster than the stock of money
b) The stock of money grows faster than real GDP
c) The long-run real interest rate rises
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d) The long run nominal interest rate rises - ANSWER-b) The stock of money grows faster than
real GDP
If the Fed conducts a contractionary monetary policy,
a) Banks will make fewer loans
b) Bank deposits will increase
c) Demand for labor will increase
d) The nominal interest rate will decrease - ANSWER-a) Banks will make fewer loans
Which of the following is likely to happen if the Fed conducts a contractionary monetary policy?
a) Banks will make more loans
b) Labor demand will increase
c) The stock of money will increase
d) The rate of inflation will decrease - ANSWER-d) The rate of inflation will decrease
Assuming all else equal, if the Fed is expected to adopt a contractionary monetary policy?
a) The long-run real interest rate will increase
b) Inflation expectations will increase
c) Labor demand will increase
d) Labor supply will increase - ANSWER-a) The long-run real interest rate will increase
Expansionary fiscal policy uses ___________ government spending and __________ taxes to
increase aggregate economic activity.
a) Higher; higher
b) Higher; lower
c) Lower; higher
d) Lower; lower - ANSWER-b) Higher; lower
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Expansionary fiscal policy leads to a...
a) Rightward shift of the labor demand curve
b) Leftward shift of the labor demand curve
c) Rightward shift of the labor supply curve
d) Leftward shift of the labor supply curve - ANSWER-a) Rightward shift of the labor demand
curve
If expenditure by the government of a country increases...
a) The gross domestic product of the country will increase
b) The aggregate price level of the country will decrease
c) The country's expenditure on consumption will decrease
d) The unemployment rate in the coutnry will increase - ANSWER-a) The gross domestic product
of the country will increase
If a $10 increase in government expenditure produces a change of $17 in gross domestic
product, the value of the government expenditure multiplier is
a) 1.7
b) 7
c) 27
d) 170 - ANSWER-a) 1.7
If the expansionary effect of additional government expenditure ________ the contractionary
effect of the fall in private investment, the labor demand curve ________.
a) Exceeds; will shift to the left
b) Exceeds; will remain unchanged
c) Equals; will shift to the right
2025 ASU ECON 211 FINAL EXAM WITH ACCURATE QUESTIONS
AND VERIFIED ANSWERS COVERING PRINCIPLES OF
MACROECONOMICS, FISCAL POLICY, MONETARY SYSTEMS, AND
ECONOMIC INDICATORS.
If the Fed wants to stimulate the economy....
a) It lowers spending
b) It lowers short-run interest rates
c) It increases tax rates
d) It reduces money supply - ANSWER-b) It lowers short-run interest rates
If the long-run real interest rate falls...
a) unemployment increases
b) the demand for loans decreases
c) investment by firms decreases
d) investment by firms increases - ANSWER-d) investment by firms increases
If the Fed increases the supply of bank reserves,
a) the federal funds rate falls
b) the inflation rate falls
c) consumption falls
d) investment falls - ANSWER-A) the federal funds rate falls
If the Fed wants to lower the federal funds rate through open market operations, it
a) sells bonds
b) buy bonds
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c) increases tax rates
d) decreases tax rates - ANSWER-B) buy bonds
This occurs when the Fed creates a large amount of reserves to buy long-term bonds from
banks
a) Quantitative easing
b) Monetary neutrality
c) Money illusion
d) Budgetary surplus - ANSWER-A) Quantitative easing
Which of the following is likely to happen due to quantitative easing by the Fed?
a) A rightward shift of the demand curve for bank reserves
b) A leftward shift of the demand curve for bank reserves
c) A rightward shift of the supply curve of bank reserves
d) A leftward shift of the supply curve of bank reserves - ANSWER-c) A rightward shift of the
supply curve of bank reserves
The Fed usually prefers the inflation rate to hover around...
a) 2%
b) 5%
c) 6%
d) 10% - ANSWER-a) 2%
The aggregate price level is likely to rise if
a) real GDP grows faster than the stock of money
b) The stock of money grows faster than real GDP
c) The long-run real interest rate rises
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d) The long run nominal interest rate rises - ANSWER-b) The stock of money grows faster than
real GDP
If the Fed conducts a contractionary monetary policy,
a) Banks will make fewer loans
b) Bank deposits will increase
c) Demand for labor will increase
d) The nominal interest rate will decrease - ANSWER-a) Banks will make fewer loans
Which of the following is likely to happen if the Fed conducts a contractionary monetary policy?
a) Banks will make more loans
b) Labor demand will increase
c) The stock of money will increase
d) The rate of inflation will decrease - ANSWER-d) The rate of inflation will decrease
Assuming all else equal, if the Fed is expected to adopt a contractionary monetary policy?
a) The long-run real interest rate will increase
b) Inflation expectations will increase
c) Labor demand will increase
d) Labor supply will increase - ANSWER-a) The long-run real interest rate will increase
Expansionary fiscal policy uses ___________ government spending and __________ taxes to
increase aggregate economic activity.
a) Higher; higher
b) Higher; lower
c) Lower; higher
d) Lower; lower - ANSWER-b) Higher; lower
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Expansionary fiscal policy leads to a...
a) Rightward shift of the labor demand curve
b) Leftward shift of the labor demand curve
c) Rightward shift of the labor supply curve
d) Leftward shift of the labor supply curve - ANSWER-a) Rightward shift of the labor demand
curve
If expenditure by the government of a country increases...
a) The gross domestic product of the country will increase
b) The aggregate price level of the country will decrease
c) The country's expenditure on consumption will decrease
d) The unemployment rate in the coutnry will increase - ANSWER-a) The gross domestic product
of the country will increase
If a $10 increase in government expenditure produces a change of $17 in gross domestic
product, the value of the government expenditure multiplier is
a) 1.7
b) 7
c) 27
d) 170 - ANSWER-a) 1.7
If the expansionary effect of additional government expenditure ________ the contractionary
effect of the fall in private investment, the labor demand curve ________.
a) Exceeds; will shift to the left
b) Exceeds; will remain unchanged
c) Equals; will shift to the right
