ECON 103 FINAL EXAM 2026 WITH 100%
ACCURATE ANSWERS
1. If the Fed decides to sell treasury bonds through open market
operations, what would happen to the overall economy as a result?
Money supply will decrease and AD will increase.
Money supply will decrease and AD will decrease.
Money supply will increase and AD will decrease.
Money supply will increase and AD will increase.
2. What is the relationship between the money supply and bond prices
when the Fed reduces the money supply?
Bond prices remain unchanged.
Bond prices increase.
Bond prices decrease.
Bond prices fluctuate unpredictably.
3. Describe how expansionary fiscal policy can influence economic
growth.
, Expansionary fiscal policy increases government spending
and/or decreases taxes, which boosts aggregate demand and
stimulates economic growth.
Expansionary fiscal policy reduces government spending and
increases taxes to control inflation.
Expansionary fiscal policy only affects unemployment rates.
Expansionary fiscal policy has no effect on economic growth.
4. A bank has $50,000 in checking account deposits and loans of $49,000.
Of the $49,000 loaned out, $43,000 remains in the checking accounts of
the loan recipients. The bank has $50,000 cash on hand, and the reserve
requirement is 25%. The amount of its required reserves equals
$26,750.
$27,000.
$23,250.
$50,000.
5. If asset prices increase significantly and consumer spending rises, what
potential effect might this have on interest rates in the economy?
Interest rates may rise due to increased demand for loans.
Interest rates will remain unchanged regardless of spending
behavior.
Interest rates may fall due to decreased consumer confidence.
Interest rates will fall as a result of increased savings.
6. If personal consumption increases to $120 while all other factors remain
the same, how would this affect the GDP calculation?
GDP would decrease.
, GDP would become negative.
GDP would increase.
GDP would remain the same.
7. Everything else the same, if investment expenditures rise by $300 billion
and imports increase by $300 billion, then GDP:
does not change
increases by $600 billion
decreases by $600 billion
increases by $300 billion
8. Anna deposits $1,500 cash into her checking account. The reserve
requirement is 25%. What is the change in this bank's required reserves?
$1,125
$375
$6,000
$1,500
9. Suppose you decide to watch Christopher Nolan's new movie with your
friends (for three hours) instead of working overtime for $15 an hour.
Your opportunity cost:
will be $45 minus the enjoyment you can receive from watching
the IMAX movie with your friends.
will be the $45 you can earn working.
the enjoyment you can receive from watching the IMAX movie
with your friends.
nothing, because you would rather not watch the movie
, 10. Describe how an increase in consumption spending during full
employment can affect inflation in the long run.
An increase in consumption spending can lead to higher
demand, which may result in inflation if the economy is
already at full employment.
Increased consumption spending has no impact on inflation.
Higher consumption spending will always lead to a decrease in
GDP.
Increased consumption spending will decrease inflation
regardless of employment levels.
11. In the summer of 2008, consumers indicated that they were less
optimistic about the future of the economy. Such a change in sentiment
would:
shift aggregate demand to the left.
increase prices.
increase output.
increase unemployment.
12. What does the production function indicate as essential for long-term
economic growth?
Reduced government spending.
Higher taxation rates.
Increased unemployment rates.
Increased productivity and efficient resource allocation.
13. What would be the effect on the aggregate demand curve?
The AD curve will shift to the left.
ACCURATE ANSWERS
1. If the Fed decides to sell treasury bonds through open market
operations, what would happen to the overall economy as a result?
Money supply will decrease and AD will increase.
Money supply will decrease and AD will decrease.
Money supply will increase and AD will decrease.
Money supply will increase and AD will increase.
2. What is the relationship between the money supply and bond prices
when the Fed reduces the money supply?
Bond prices remain unchanged.
Bond prices increase.
Bond prices decrease.
Bond prices fluctuate unpredictably.
3. Describe how expansionary fiscal policy can influence economic
growth.
, Expansionary fiscal policy increases government spending
and/or decreases taxes, which boosts aggregate demand and
stimulates economic growth.
Expansionary fiscal policy reduces government spending and
increases taxes to control inflation.
Expansionary fiscal policy only affects unemployment rates.
Expansionary fiscal policy has no effect on economic growth.
4. A bank has $50,000 in checking account deposits and loans of $49,000.
Of the $49,000 loaned out, $43,000 remains in the checking accounts of
the loan recipients. The bank has $50,000 cash on hand, and the reserve
requirement is 25%. The amount of its required reserves equals
$26,750.
$27,000.
$23,250.
$50,000.
5. If asset prices increase significantly and consumer spending rises, what
potential effect might this have on interest rates in the economy?
Interest rates may rise due to increased demand for loans.
Interest rates will remain unchanged regardless of spending
behavior.
Interest rates may fall due to decreased consumer confidence.
Interest rates will fall as a result of increased savings.
6. If personal consumption increases to $120 while all other factors remain
the same, how would this affect the GDP calculation?
GDP would decrease.
, GDP would become negative.
GDP would increase.
GDP would remain the same.
7. Everything else the same, if investment expenditures rise by $300 billion
and imports increase by $300 billion, then GDP:
does not change
increases by $600 billion
decreases by $600 billion
increases by $300 billion
8. Anna deposits $1,500 cash into her checking account. The reserve
requirement is 25%. What is the change in this bank's required reserves?
$1,125
$375
$6,000
$1,500
9. Suppose you decide to watch Christopher Nolan's new movie with your
friends (for three hours) instead of working overtime for $15 an hour.
Your opportunity cost:
will be $45 minus the enjoyment you can receive from watching
the IMAX movie with your friends.
will be the $45 you can earn working.
the enjoyment you can receive from watching the IMAX movie
with your friends.
nothing, because you would rather not watch the movie
, 10. Describe how an increase in consumption spending during full
employment can affect inflation in the long run.
An increase in consumption spending can lead to higher
demand, which may result in inflation if the economy is
already at full employment.
Increased consumption spending has no impact on inflation.
Higher consumption spending will always lead to a decrease in
GDP.
Increased consumption spending will decrease inflation
regardless of employment levels.
11. In the summer of 2008, consumers indicated that they were less
optimistic about the future of the economy. Such a change in sentiment
would:
shift aggregate demand to the left.
increase prices.
increase output.
increase unemployment.
12. What does the production function indicate as essential for long-term
economic growth?
Reduced government spending.
Higher taxation rates.
Increased unemployment rates.
Increased productivity and efficient resource allocation.
13. What would be the effect on the aggregate demand curve?
The AD curve will shift to the left.
