ECON 1015 Final Exam Questions with Correct Answers Graded A+
In econ, Money is defined as? - Answers any asset people generally accept in exchange for
goods and services
An increase in the interest rate should _____ the demand for dollars and the value of the dollar,
and net exports should _____. - Answers increase; decrease
According to the text, the situation in which short-term interest rates are pushed to zero, leaving
the central bank unable to lower them further is known as...? - Answers A liquidity trap
In response to already low interest rates doing little to stimulate the economy, the Fed began
buying 10 year Treasury notes and certain mortgage-backed securities to keep interest rates
low. This policy is known as? - Answers Quantitative easing
Part of the spending on the Caldecott Tunnel project in northern Cali cam from the American
Reinvestment and Recovery Act, which is an example of _____ aimed at increasing real GDP and
employment. - Answers Discretionary Fiscal policy
The increase in the amt that the government collects in taxes when the economy expands and
the decrease in the amount that the government collects in taxes when the economy goes into a
recession is an example of ? - Answers Automatic Stabilizers
What is US formal definition of the poverty line? - Answers it is a level of annual income equal to
three times the amt of money necessary to purchase the minimal quantity of food required for
adequate nutrition
what is the poverty rate? - Answers the percentage of the population earning an annual income
below the poverty line, according to the federal government's definition
How does technological change contribute to income inequality? - Answers technology
complements the skills of the well-educated while rendering redundant the labor services of
unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled
workers relative to other workers.
As the value of the Gini coefficient approaches zero... - Answers income distribution becomes
less unequal
In the US, the ____ ____ income distribution of income is more equal than the ___ ____ distribution
- Answers after-tax; before- tax
Currency traders expect the dollar to appreciate. What impact will this have on equilibrium in the
foreign exchange market? - Answers the dollar will appreciate, and the change in the equilibrium
quantity of dollars exchanged cannot be determined
If net exports are equal to net foreign investment, - Answers *the balance of payment is zero
, *the current account balance is equal to the negative of the financial account balance
*net capital inflows are equal to imports minus exports
An increase in the US federal government budget deficit that raises US interest rates relative to
the rest of the world should - Answers lead to a current account deficit
How does a decrease in the federal budget deficit affect the demand for dollars and the supply
of dollars on the foreign exchange market? - Answers the demand for dollars falls, and the
supply of dollars rises
If the Fed does not take into account the additional policy channels available in an open
economy then _____ when conducting contractionary monetary policy, - Answers it is likely to
decrease GDP too much and cause a recession
How does expansionary monetary policy affect net exports? - Answers expansionary monetary
policy increases exports and reduces imports
how does an increase in the relative price of a country's goods in terms of foreign goods, or real
exchange rate, affect its balance in trade? - Answers an increase in the real exchange rate raises
imports, reduces exports, and reduces the balance of trade.
What is the effect on the exchange rate graph if there is a decrease in the US budget deficit that
decreases the US interest rates on the demand and supply of the US dollars for euros? -
Answers there is a shift in the demand curve to the left and a shift in the supply curve to the
right
(decrease in D and increase in S)
What is the effect on the exchange rate graph if the American demand for purchases of British
goods has decreased? - Answers there would be a shift in the supply curve to the left (a
decrease in S)
What is the effect on the exchange rate graph if there is an increase in incomes in the US? -
Answers there will be a shift in the supply curve to the right ( an increase in S)
What is the effect on the exchange rate graph if american demand for purchases of Mexican
goods has increased? - Answers there will be a shift in the supply curve to the right ( an increase
in S)
What is the effect on the exchange rate graph if there is an increase in government purchases
financed by an increase in the deficit? - Answers there will be a shift in the supply to the left and
a shift in the demand to the right ( decrease in S and increase in D)
What is an example of a legal tender? - Answers $50 dollar bill
Who is (are) always voting members of the Federal Open Market Committee Meetings? -
In econ, Money is defined as? - Answers any asset people generally accept in exchange for
goods and services
An increase in the interest rate should _____ the demand for dollars and the value of the dollar,
and net exports should _____. - Answers increase; decrease
According to the text, the situation in which short-term interest rates are pushed to zero, leaving
the central bank unable to lower them further is known as...? - Answers A liquidity trap
In response to already low interest rates doing little to stimulate the economy, the Fed began
buying 10 year Treasury notes and certain mortgage-backed securities to keep interest rates
low. This policy is known as? - Answers Quantitative easing
Part of the spending on the Caldecott Tunnel project in northern Cali cam from the American
Reinvestment and Recovery Act, which is an example of _____ aimed at increasing real GDP and
employment. - Answers Discretionary Fiscal policy
The increase in the amt that the government collects in taxes when the economy expands and
the decrease in the amount that the government collects in taxes when the economy goes into a
recession is an example of ? - Answers Automatic Stabilizers
What is US formal definition of the poverty line? - Answers it is a level of annual income equal to
three times the amt of money necessary to purchase the minimal quantity of food required for
adequate nutrition
what is the poverty rate? - Answers the percentage of the population earning an annual income
below the poverty line, according to the federal government's definition
How does technological change contribute to income inequality? - Answers technology
complements the skills of the well-educated while rendering redundant the labor services of
unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled
workers relative to other workers.
As the value of the Gini coefficient approaches zero... - Answers income distribution becomes
less unequal
In the US, the ____ ____ income distribution of income is more equal than the ___ ____ distribution
- Answers after-tax; before- tax
Currency traders expect the dollar to appreciate. What impact will this have on equilibrium in the
foreign exchange market? - Answers the dollar will appreciate, and the change in the equilibrium
quantity of dollars exchanged cannot be determined
If net exports are equal to net foreign investment, - Answers *the balance of payment is zero
, *the current account balance is equal to the negative of the financial account balance
*net capital inflows are equal to imports minus exports
An increase in the US federal government budget deficit that raises US interest rates relative to
the rest of the world should - Answers lead to a current account deficit
How does a decrease in the federal budget deficit affect the demand for dollars and the supply
of dollars on the foreign exchange market? - Answers the demand for dollars falls, and the
supply of dollars rises
If the Fed does not take into account the additional policy channels available in an open
economy then _____ when conducting contractionary monetary policy, - Answers it is likely to
decrease GDP too much and cause a recession
How does expansionary monetary policy affect net exports? - Answers expansionary monetary
policy increases exports and reduces imports
how does an increase in the relative price of a country's goods in terms of foreign goods, or real
exchange rate, affect its balance in trade? - Answers an increase in the real exchange rate raises
imports, reduces exports, and reduces the balance of trade.
What is the effect on the exchange rate graph if there is a decrease in the US budget deficit that
decreases the US interest rates on the demand and supply of the US dollars for euros? -
Answers there is a shift in the demand curve to the left and a shift in the supply curve to the
right
(decrease in D and increase in S)
What is the effect on the exchange rate graph if the American demand for purchases of British
goods has decreased? - Answers there would be a shift in the supply curve to the left (a
decrease in S)
What is the effect on the exchange rate graph if there is an increase in incomes in the US? -
Answers there will be a shift in the supply curve to the right ( an increase in S)
What is the effect on the exchange rate graph if american demand for purchases of Mexican
goods has increased? - Answers there will be a shift in the supply curve to the right ( an increase
in S)
What is the effect on the exchange rate graph if there is an increase in government purchases
financed by an increase in the deficit? - Answers there will be a shift in the supply to the left and
a shift in the demand to the right ( decrease in S and increase in D)
What is an example of a legal tender? - Answers $50 dollar bill
Who is (are) always voting members of the Federal Open Market Committee Meetings? -
