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1、Mid-Term Exam for 2014 Spring Name: _ Student #: _ Multiple Choice (2*20) 1. In a closed economy, the total income of everyone in the economy is exactly equal to the total: A) expenditure on the economys output of goods and services. B) consumption expenditures of everyone in the economy. C) expendi
2、tures of all businesses in the economy. D) government expenditures. 2. When factor supply is fixed and quantity of the factor is graphed on the horizontal axis while factor price is graphed on the vertical axis, the factor: A) supply curve is horizontal. B) supply curve is vertical. C) supply curve
3、slopes up to the right. D) demand curve slopes up to the right. 3. The one-to-one relation between the inflation rate and the nominal interest rate, the Fisher effect, assumes that: A) the money supply is constant. B) velocity is constant. C) the inflation rate is constant. D) the real interest rate
4、 is constant. 4. In the classical model with fixed income, a reduction in the government budget deficit will lead to a: A) higher real interest rate. B) lower real interest rate. C) higher level of output. D) lower level of output. 5. Assume that the consumption function is given by C = 150 + 0.85(Y
5、 -T), the tax function is given by T = t0 + t1Y, and Y is 5,000. If t1 decreases from 0.3 to 0.2, then consumption increases by: A) 85. B) 425. C) 500. D) 525. Page 1 6. If domestic saving is less than domestic investment, then net exports are _ and net capital outflows are _ . A) positive; positive
6、 B) positive; negative C) negative; negative D) negative; positive 7. In the long-run, increased national saving must I: increase total labour income in a closed economy; II: increase total labour income in a small open economy. A) I is true; II is not. B) II is true; I is not. C) Both I and II are
7、true. D) Neither I nor II is true. Use the following to answer question 8: (Exhibit: Market for Real Money Balances) 8. (Exhibit: Market for Real Money Balances) Based on the graph, if the interest rate is r1, then people will _ bonds and the interest rate will _. A) sell; rise B) sell; fall C) buy;
8、 rise D) buy; fall Page 2 9. If the demand function for money is M/P = 0.5Y -100r and if M/P increases by 100, then the LM curve for any given interest rate shifts to the: A) left by 100. B) left by 200. C) right by 100. D) right by 200. 10. If MPC = 0.75 (and there are no income taxes) when G incre
9、ases by 100, then the IS curve for any given interest rate shifts to the right by: A) 100. B) 200. C) 300. D) 400. 11. A tax cut combined with tight money, as was the case both in the United Kingdom and the United States in the early 1980s, should lead to a: A) rise in the real interest rate and a f
10、all in investment. B) fall in the real interest rate and a rise in investment. C) rise in both the real interest rate and investment. D) fall in both the real interest rate and investment. 12. According to the permanent-income hypothesis, if consumers receive a one-time income bonus, then they will:
11、 A) save most of it in the current year. B) spend most of it in the current year. C) spend one half of it and save one-half of it in the current year. D) not alter their consumption or saving in the current year. 13. If the money supply increases 12 percent, velocity decreases 4 percent, and the pri
12、ce level increases 5 percent, then the change in real GDP must be _ percent. A) 3 B) 4 C) 9 D) 11 14. In the Keynesian-cross model, if government expenditures are increased by 250, then the equilibrium level of income: A) increases by 250. B) increases by more than 250. C) decreases by 250. D) incre
13、ases, but by less than 250. Page 3 15. If consumers obey the permanent-income hypothesis and have rational expectations, then _ policy changes influence consumption. A) only unexpected B) only expected C) both expected and unexpected D) neither expected nor unexpected 16. According to the neoclassic
14、al model of investment, the immediate impact of a rise in the real interest rate will be to: A) increase the cost of capital, the rental price of capital, and the rate of investment. B) increase the cost of capital and the rental price of capital, but lower the rate of investment. C) increase the re
15、ntal price of capital and the rate of investment, but leave the cost of capital unchanged. D) increase the cost of capital and lower the rate of investment, but leave the rental price of capital unchanged. 17. Endogenous variables are: A) determined outside the model. B) determined within the model.
16、 C) the inputs of the model. D) from outside the model. 18. During a banking crisis and credit crunch, the _ curve shifts leftward, resulting in a(n) _ in aggregate demand, production, and employment. A) IS; increase B) IS; decrease C) LM; increase D) LM; decrease 19. To increase the monetary base, the Bank of Canada can: A) conduct open-market purchases. B) conduct open-market sales. C) raise the required reserve ra
