EC 202 Assignment#4, EC 202
Assignment#3, Economics chapter 7, EC
202 Assignment#2, Quiz 1, EC 202
Assignment #1 (Q&A 2023 Updated) A+
Suppose you
... [Show More] have $200 to invest at a nominal interest rate of 8%. If the inflation rate is
3%, then the real return on your investment is: - ANSWER-$10
If Table 11.3 represents all the investments available to the economy, the nominal
interest rate is 10%, and there is no inflation, what will be the level of investment in the
economy? (Note that the Cost represents the level of investment for each investment
project.) - ANSWER-$100
The present value of a given payment in the future _______ when interest rates rise. -
ANSWER-decreases
Which of the following is not included in M1? - ANSWER-savings accounts
Assume the following information about the DUCK BANK: Bank deposits are $30,000;
Loans are $20,000; Reserves are $5,000; and the reserve requirement is 10%. The
DUCK BANK is holding _______ in excess reserves. - ANSWER-$2,000
If the banking system has a required reserve ratio of 5 percent, then the money
multiplier is: - ANSWER-20
If the FED sells $7.5 million of US bonds and the reserve requirement is 25%, M1 will
eventually: - ANSWER-decrease by $30 million
If the quantity of money demanded exceeds the quantity of money supplied, then the: -
ANSWER-interest rate will increase
If the FED has a major policy objective to decrease unemployment, it should: -
ANSWER-decrease the reserve requirement and/or conduct an open market purchase.
Refer to Fig. 13.1. Assume the initial equilibrium point is the intersection of the solid
money demand and supply lines. Which point is a likely equilibrium outcome if the FED
conducts an open market sale and real income decreases? - ANSWER-E
When money is used to express the value of goods and services, it is functioning as a: -
ANSWER-unit of account
An open market purchase by the Fed: - ANSWER-Increases both investment and
output
Suppose consumer tastes and preferences shift from a desire to go skiing to an interest
in snowboarding. If skis and snowboards are produced by different firms, then firms that
produce snowboards will experience: - ANSWER-a rise in prices, which will induce them
to increase production and increase the number of workers.
Assuming a long-run Classical aggregate supply curve, a decrease in the money supply
results in _______ in output and _______ in prices. (Note there is a typo in the ANS9
answer to question 20 in QUES9, as the answer should state that the long-run Classical
supply is perfectly INELASTIC, not perfectly ELASTIC.) - ANSWER-no change; a
decrease
Assuming a short-run Keynesian aggregate supply curve, a decrease in taxes results in
_______ in output and _______ in prices. - ANSWER-a substantial increase; a slight or
no increase
Consider Fig. 9.2. A simultaneous increase in the labor force due to an increase in
immigration and an increase in government spending would cause a movement from
________ . - ANSWER-B to C
If the government wants to reduce unemployment, government spending should be
________ and/or taxes should be _________. - ANSWER-increased; decreased
In a situation where the government is operating on a budget surplus, it can reduce its
overall debt by ________ . - ANSWER-buying back bonds it has sold to the public.
If firms experience an unplanned increase in inventories, they are likely to: - ANSWERdecrease production.
If the consumption function is C = 50 + 0.75 y, where C is consumption and y is output,
then the marginal propensity to consume is _______ and the Keynesian multipler is
_____. - ANSWER-0.75; 4
Let C = 100 + 0.6 y, and I = 150, where I is investment. Assume no government or
foreign sectors. Then the equlibrium level of output y* equals: - ANSWER-625
Refer to Fig. 10.4. Which diagram illustrates the effect of an increase in the income tax
rate? - ANSWER-A
Although running a budget deficit during a recession should not be a source of concern,
running a deficit when there is no recession is a bad policy due to: - ANSWERCrowding out.
If the demand for goods and services is less than output, then there should be: -
ANSWER-an increase in inventories
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