Liberty University ECON 214 exam 4 complete solutions correct answers A+ work

Liberty University ECON 214 exam 4 complete solutions correct answers A+ work

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Question 1 Which of the following explains why the money supply is not completely controlled by the Federal Reserve?

Question 2 A tariff:

Question 3 Which of the following statements is true about monetary policy and the unemployment rate?

Question 4 An example of an import quota is:

Question 5 If the Central Reserve Bank of Peru (the Pervian central bank) were to take steps to devalue the sol (the Peruvian currency) in foreign currency markets, the Peruvian aggregate demand curve would ____________ in the short run and the Peruvian short­run aggregate supply curve would ____________ in the long run.

Question 6 The combination of high unemployment rates and high inflation is called:

Question 7 According to the principle of comparative advantage, trade between two countries will benefit:

Question 8 Use the following graph to answer the questions that follow. If this is a nontrading (closed) economy, how many cars (in thousands) will be exchanged?

Question 9 According to the Fisher equation, if a bank extends a loan for 3% and the inflation rate ends up being 2%:

Question 10 Under normal economic conditions, including the situation in which there is no surprise inflation, we expect the unemployment rate to:

Question 11 When a smaller country with fewer resources specializes its production and gains access to larger, international markets, this can create:

Question 12 The following two graphs depict the equilibrium price of a pound of grapes in California and West Virginia, respectively. Assume the type and quality of the grapes being sold in the two states are identical. Further, assume grape sellers incur zero costs to transport grapes between the two states and there are no other barriers to trade. Use these graphs to answer the questions that follow: Which of the following pairs of prices is consistent with the law of one price?

Question 13 The following table shows the number of U.S. dollars required to buy one Mexican peso and the number of U.S. dollars required to buy one Japanese yen between January 1, 2013, and April 1, 2013. Use this table to answer the questions that follow: According to the law of ____________, the quantity of yen demanded by U.S. consumers will ___________ when the price of yen in terms of U.S. dollars falls.

Question 14 Stagflation is:

Question 15 Use the following scenario to answer the questions that follow: Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour. Based on the scenario, which of the following is true?

Question 16 Suppose a Chinese citizen buys a box of Nestlé Kit Kat candy bars from America and Nestlé decides to hold on to the Chinese currency. How will this transaction enter into the U.S. balance of payments?

Question 17 Currency ___________ occurs when a currency decreases in value relative to other currencies.

Question 18 The arrows in Figures A–D represent possible movements of the exchange rate (euros per U.S. dollar) and the quantity of U.S. dollars buyers are willing and able to buy. Use these figures to answer the questions that follow: A deprecation of the euro against the U.S. dollar is represented by Figure ___________, and a depreciation of the U.S. dollar against the euro is represented by Figure _____________.

Question 19 The following table shows the number of various foreign currencies required to buy a U.S. dollar on April 12, 2008, and April 12, 2013. Use this table to answer the questions that  follow. On April 12, 2008, a haircut in Japan cost 2,000 yen. Using the exchange rates in the above table, that haircut cost approximately ____________ U.S. dollars or ____________ Australian dollars.

Question 20 Suppose that a Sony Playstation (manufactured in Japan) sells for a lower price in China than in the United States. What is the most likely reason for the difference in prices in the two locations?

Question 21 Use the following scenario to answer the questions that follow: Esther and Albert produce hamburgers and hot dogs. Esther can produce six hamburgers per hour or four hot dogs per hour. Albert can produce three hamburgers per hour or one hot dog per hour. Based on the scenario, Albert’s opportunity cost of one hot dog is:

Question 22 Contractionary monetary policy occurs when:

Question 23 The ability of one person or nation to produce more of a good while using the same quantity of resources as another is called a(n):

Question 24 Use the following scenario to answer the questions that follow: Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour. Based on the scenario, which of the following is true?

Question 25 Refer to the following figure to answer the questions that follow: According to the figure, if the policy is fully expected, expansionary monetary policy will cause an economy initially in full­employment equilibrium to see its price level:

Question 26 The following two graphs depict the equilibrium price of a pound of grapes in California and West Virginia, respectively. Assume the type and quality of the grapes being sold in the two states are identical. Further, assume grape sellers incur zero costs to transport grapes between the two states and there are no other barriers to trade. Use these graphs to answer the questions that follow: According to the law of one price, the supply curve in the California grape market will ______________, and the supply curve in the West Virginia grape market will _____________.

Question 27 Which of the following explains why resource prices are often the slowest prices to adjust?

Question 28 The following two graphs depict the equilibrium price of a pound of grapes in California and West Virginia, respectively. Assume the type and quality of the grapes being sold in the two states are identical. Further, assume grape sellers incur zero costs to transport grapes between the two states and there are no other barriers to trade. Use these graphs to answer the questions that follow: According to the law of one price, the price of grapes will:

Question 29 The United States feels that it has become too dependent on oil from Saudi Arabia, so it charges a tax of $10 per barrel on oil that can be imported from Saudi Arabia. This is an example of a(n):

Question 30 A limit imposed on the volume of total imports of a particular good is known as a(n):

Question 31 Use the following scenario to answer the questions that follow: RayRay and Andrew produce baseballs and golf balls. RayRay can produce six baseballs per hour or four golf balls per hour. Andrew can produce three baseballs per hour or one golf ball per hour. Based on the scenario, which of the following is true?

Question 32 An increase in imports, ceteris paribus, indicates:

Question 33 Which of the following aggregate demand–aggregate supply models illustrates the shortrun effects of expansionary monetary policy?

Question 34 Use the following scenario to answer the questions that follow: Karl and Pete produce cars and trucks. Karl can produce 10 cars per hour or 5 trucks per hour. Pete can produce 12 cars per hour or 4 trucks per hour. Based on the scenario, which of the following is true?

Question 35 Exporting nations often agree to voluntary export restraints in an attempt to:

Question 36 The following graph depicts the market for potatoes in West Virginia. Assume there are similar markets for potatoes in all other U.S. states and that the potatoes sold in all states are identical. Further, assume potato sellers incur zero costs to transport potatoes between any U.S. state and that there are no other barriers to trade. Use this graph to answer the questions that follow: Suppose the equilibrium price of a pound of potatoes in all U.S. states is initially $1.20. Further, suppose there is an increase in potato demand in all U.S. states except West Virginia. This increase in demand causes potato prices in all U.S. states, except West Virginia, to increase. If the law of one price holds, potato sellers will eventually adjust the relative quantity of potatoes they sell in all U.S. states, including West Virginia. After this adjustment:

Question 37 Assume there is a 35% tariff on bananas imported into the United States. Also, assume that the market competition is at its beginning and the law of one price is not in effect. If the domestic market price of Hawaiian bananas is one dollar per bunch, imported bananas will sell for:

Question 38 Many people argue that certain industries, such as weapons, energy, and transportation, should be protected by trade barriers in the interest of:

Question 39 When central banks purposefully choose to only stabilize money and price levels through monetary policy, it is known as:

Question 40 The following figure depicts the supply of U.S. dollars in the foreign currency exchange market. Use this figure to answer the questions that follow: The U.S. central bank has the power to increase or decrease the supply of U.S. dollars. If the U.S. central bank increases the supply of U.S. dollars, the supply curve in the above figure will ____________; if the U.S. central bank decreases the supply of U.S. dollars, the supply curve in the above figure will ____________.

Question 1 Many people argue that certain industries, such as weapons, energy, and transportation, should be protected by trade barriers in the interest of:

Question 2 The figure below depicts the three possible aggregate demand curves. If the Bank of Canada (the Canadian central bank) ____________, the Canadian dollar will depreciate and the aggregate demand curve will shift from AD2 to ____________.

Question 3 Unexpected inflation harms workers and other resource suppliers who have _________ prices in the _________ run.

Question 4 Assuming the theory of purchasing power parity holds, what is the exchange rate between the United States and Mexico if the price of an identical Under Armour shirt costs $25 in the United States and 350 pesos in Mexico (rounded to the nearest penny)?

Question 5 Use the following scenario to answer the questions that follow: An economy has two workers, Smith and Ricardo. Every day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones. What is the opportunity cost for Ricardo to produce one computer?

Question 6 Which of the following situations will arise in the domestic market following the removal of an import quota?

Question 7 Refer to the following figure to answer the questions that follow: According to the figure, if the policy is fully expected, expansionary monetary policy will cause an economy initially in full­employment equilibrium to see its price level:

Question 8 Assume that a country currently has a trade surplus. If that country experiences an expansion in economic activity, what would we expect to happen to the trade surplus?

Question 9 If a currency becomes ___________ valuable in world markets, then its price falls, and this decrease is called ____________.

Question 10 Expansionary monetary policy:

Question 11 The following two figures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the questions that follow: Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is Y1?

Question 12 The United States feels that it has become too dependent on oil from Saudi Arabia, so it charges a tax of $10 per barrel on oil that can be imported from Saudi Arabia. This is an example of a(n):

Question 13 The following table shows the number of British pounds required to buy one U.S. dollar between September 3, 2012, and April 1, 2013. Use this table to answer the questions that follow: Between February 1, 2013, and March 1, 2013, the U.S. dollar __________ against the British pound, and the British pound __________ against the U.S. dollar.

Question 14 The national government or central bank of country X might take steps to purposefully depreciate their currency because:

Question 15 What will economists today likely state should have been done to limit the severity of the Great Depression?

Question 16 An increase in imports, ceteris paribus, indicates:

Question 17 Use the following graph to answer the questions that follow. If this is a nontrading (closed) economy, the number of TVs exchanged (in thousands) will be:

Question 18 When an employer is forced to increase wages at the same rate of inflation:

Question 19 Which of the following figures illustrates the effects of contractionary monetary policy on the loanable funds market?

Question 20 Expansionary monetary policy ____________ interest rates, which can be shown in the ______________________.

Question 21 Use the following scenario to answer the questions that follow: Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Amy’s opportunity cost of producing one pound of cheese is _____________ house(s).

Question 22 The following table shows the number of British pounds required to buy one U.S. dollar and the number of euros required to buy one U.S. dollar between September 3, 2012, and April 1, 2013: Between December 3, 2012, and January 1, 2013, the U.S. dollar ____________ against the British pound, and the U.S. dollar __________ against the euro.

Question 23 Only the short­run Phillips curve is downward sloping because:

Question 24 _____________ exchange rates are exchange rates that are fixed at a certain level through the actions of a government.

Question 25 The following figure depicts the supply of U.S. dollars in the foreign currency exchange market. Use this figure to answer the questions that follow: The U.S. central bank has the power to increase or decrease the supply of U.S. dollars. If the U.S. central bank increases the supply of U.S. dollars, the supply curve in the above figure will ____________; if the U.S. central bank decreases the supply of U.S. dollars, the supply curve in the above figure will ____________.

Question 26 The following table shows the number of U.S. dollars required to buy one British pound between September 3, 2012, and April 1, 2013. Use this table to answer the questions that follow: Between January 1, 2013, and March 1, 2013, the U.S. dollar ___________ against the British pound, and the British pound ___________ against the U.S. dollar.

Question 27 If the theory of purchasing power parity holds, then how much does an oil change for a Toyota Prius cost in Japan if the same oil change for the same Toyota Prius costs $29.95 in the United States and the exchange rate is $0.011 per Japanese yen?

Question 28 The following figure depicts the demand for Chinese yuan in the foreign currency exchange market. Use this figure to answer the questions that follow: If the interest rates in China rise relative to interest rates in the United States, the demand curve in the figure above:

Question 29 Use the following scenario to answer the questions that follow: An economy has two workers, Smith and Ricardo. Every day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones. What is the opportunity cost for Smith to produce one computer?

Question 30 The following table shows the number of U.S. dollars required to buy one Mexican peso and the number of U.S. dollars required to buy one Japanese yen between January 1, 2013, and April 1, 2013. Use this table to answer the questions that follow: On April 1, 2013, Carlos paid 800,000 Japanese yen for a solid gold iPhone case in Fukushima, Japan. Because he only had Mexican pesos, he needed to exchange his pesos at a nearby bank in order to get the 800,000 yen he used to pay for the iPhone case. The bank is able to buy and sell U.S. dollars, Mexican pesos, and Japanese yen at the exchange rates shown in the table. Approximately how much did the iPhone case cost Carlos in terms of Mexican pesos?

Question 31 Which of the following would be entered into the U.S. current account?

Question 32 Which of the following explains contractionary monetary policy in the long run?

Question 33 To avoid the negative effects of unexpected inflation, workers have an incentive to:

Question 34 If interest rates in Australia decrease relative to the rest of the world, it means that (1) Australian bonds will provide a ___________ return than previously and (2) ___________ for these bonds will _____________.

Question 35 If the U.S. dollar ____________, it becomes ___________ valuable in world markets.

Question 36 As expected inflation decreases, the short­run Phillips curve:

Question 37 Use the following scenario to answer the questions that follow: Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour. Based on the scenario, Rosa’s opportunity cost of one basketball is:

Question 38 Use the following scenario to answer the questions that follow: Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Jim’s opportunity cost of producing one house is _____________ pound(s) of cheese.

Question 39 Central banks can use monetary policy to:

Question 40 Which of the following statements about expectations theory is true?

Mandatory outlays are different than discretionary outlays because:

Why do Social Security and Medicare pose problems for the federal government budget?

If policymakers are concerned about the unequal distribution of income within society, then they should

prefer a:

Using the table, what is the total federal income tax bill for someone who makes $67,000 per year?

Using the table, what is the marginal income tax rate for someone who makes $67,000 per year?

What is the most appropriate way to compare budget deficits/surpluses across time?

If government revenues in 2011 were $2.2 trillion and government outlays were $3.8 trillion:

In recent years, the growth in foreign-owned debt has:

The goal of expansionary fiscal policy is to shift the _________ curve to the _________.

If the unemployment rate falls below the natural rate of unemployment (u*):

If your income increases by $1,500 and you only consume $900 of it, your marginal propensity to consume

would be equal to:

If the spending multiplier is 5, what is the marginal propensity to consume in the economy?

An example of the multiplier effect is when:

A recognition lag happens because:

If the effects of contractionary fiscal policy hit when the economy is already contracting:

Automatic stabilizers:

Crowding-out occurs when:

According to the figure, the amount of private investment after government borrowing is:

Lowering marginal income tax rates for individuals:

If I were to give cash to my mother for her birthday and she kept the cash under her mattress, which of the following changes would take place?

I have decided to use my credit card to purchase a new television. What is the immediate consequence of this purchase?

If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place?

I have a checking account at the local bank, and my sister has a car loan at the same bank. How does each of these appear on the bank’s balance sheet?

Imagine that you deposit $25,000 in currency (which you had been storing in your closet), you’re your checking account at the bank. Assume that this institution has a required reserve ratio of 25%.

As a result of this deposit, by how much will the bank’s excess reserves increase?

As a result of this deposit, what is the maximum amount in loans that can be made by all the banks in the banking system?

If a bank has a required reserve ratio of 30%, excess reserves of $45,000,000, and deposits of $100,000,000, how much can the bank lend out?

To the extent a bank holds excess reserves, which of the following is a consequence?

If the required reserve ratio is 10%, what is the simple deposit multiplier?

The purchase of existing U.S. Treasury securities by the Federal Reserve:

Expansionary monetary policy:

Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank ever stop increasing the money supply?

_______________________ would be hurt by unexpected inflation.

Which of the following explains why the money supply is not completely controlled by the Federal Reserve?

Expectations:

According to the theory of monetary neutrality, in the long run:

According to the figure, if the policy is fully expected, expansionary monetary policy will cause an economy

initially in full-employment equilibrium to move from:

Only the short-run Phillips curve is downward sloping because:

Studying alternative theories of how people form expectations is particularly relevant to monetary policy because:

When inflation is not a surprise:

As expected inflation decreases, the short-run Phillips curve:

The following table shows the number of U.S. dollars required to buy one British pound between September 3, 2012, and April 1, 2013. Use this table to answer questions 41 and 42:

Between February 1, 2013, and March 1, 2013, the U.S. dollar ___________ against the British pound, and the British pound ___________ against the U.S. dollar.

On March 1, 2013, the price of a surfboard was 1,200 U.S. dollars in La Jolla, California. Based on the exchange rates quoted in the table, a surfboard was approximately __________ British pounds.

The figure below depicts the supply of U.S. dollars in the foreign currency exchange market. A shift from D1 to D3 in the above figure could have been caused by:

The national government or central bank of country X might take steps to purposefully depreciate their currency because:

In order to maintain a pegged exchange rate in China:

If the theory of purchasing power parity holds, then how much does an Egyptian tapestry cost in the United States if the same tapestry sells for 15,000 Egyptian pounds in Egypt and the exchange rate is $0.14 per Egyptian pound?

Suppose that sugar produced in Cuba sells for a lower price in Mexico than it does in the United States. What is the most likely reason for the difference in prices in the two locations?

Which of the following would be entered into the U.S. capital account?

Suppose a Chinese citizen buys a box of Nestlé Kit Kat candy bars from America and Nestlé decides to hold on to the Chinese currency. How will this transaction enter into the U.S. balance of payments?

Suppose the United States experiences an increase in its trade deficit. Which of the following is a possible explanation for this growing trade deficit? There has been:

In the economy with efficient institutions, technological advancement

In 1950, Brazil’s economy was roughly the same size as Nicaragua’s. Today, Brazil’s economy is almost five times as large as Nicaragua’s. Which of the following best explains this difference?

Long-run per capita world income growth was basically flat until around what year?

Is having abundant resources an absolute guarantee of economic growth and prosperity?

Per capita real gross domestic product (GDP) is higher in the United States than in Mexico. Based on that, we could predict the United States to have a higher rate of ___________ and a lower rate of ___________.

According to modern growth theory, convergence in the level of wealth across countries depends mainly on:

What is the relationship between institutions, such as private property rights, and productive resources in terms of encouraging economic growth?

When the amount of physical capital is increased, then all else the same, the marginal product of capital will:

According to the textbook, which of the following countries is not considered a “wealthy nation”?

Suppose that in the economy the level of capital is 500 units, the depreciation rate is 4%, and the level of investment is 20 units. In this case:

Refer to the following figure to answer the questions that follow.
Based on the figure, starting at point A, if there is an increase in government spending, then in the short run we would move to point __________ and in the long run to point __________.

A decline in U.S. wealth would tend to cause:

When U.S. housing prices declined prior to and during the Great Recession, it caused aggregate demand to decrease because:

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the price level _________ and real gross domestic product (GDP) _________.

Which of the following economic statements would a classical economist tend to support?

The Great Recession lasted from _________ to _________.

Use the following graph to answer the questions that follow. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS).
During the Great Recession, real gross domestic product (GDP) fell yet the price level was largely unchanged, as depicted in the graph. Because of this, we know that:

An increase in long-run aggregate supply can be expected to _________ the price level and _________ the natural rate of unemployment.

An increase in the general price level will lead to:

An economy has experienced a rightward shift of its long-run aggregate supply curve and is now producing on that new long-run aggregate supply curve. It is reasonable to expect that:

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

The use of government spending and taxes to influence the economy is:

Excise taxes are levied on:

An illustration of the relationship between tax rates and tax revenues is called:

In regard to describing how the economy functions, Keynesian economists claim that:

Refer to the following table to answer the questions that follow.
Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $67,000 per year?

During which of the following situations would you advise for expansionary fiscal policy?

____________ a mandated federal program that funds health care for retired persons.

Which of the following figures illustrates what happens when the government enters the loanable funds market in order to borrow?

It is difficult to determine when the economy is turning up or down. This is because there is ___________ that delays the effects of changes in fiscal policy.

_______________________ would be hurt by unexpected inflation.

When the Fed buys bonds from financial institutions, new money moves directly:

According to rational expectations theory, if the last three years of inflation were 0%, 2%, and 4%, respectively, one would expect inflation the following year to be:

The Federal Reserve actively worked to keep the federal funds rate at nearly _________ for several years following the Great Recession.

Stagflation is:

As financial intermediaries, how do commercial banks pay their expenses and earn a profit?

If a bank that faces a 10% reserve ratio received a deposit of $50,000 and makes a loan to a customer for $5,000, what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?

Injecting new money into the economy eventually causes:

Expansionary monetary policy can have immediate real short-run effects; initially, no prices have adjusted. But as prices adjust in the long run:

The Phillips curve:

Suppose market forces outside of the control of the Chinese government are causing the price of Chinese yuan in terms of Japanese yen to rise. In order to maintain the current value of the yuan, the Chinese government must:

The following table shows the number of U.S. dollars required to buy one British pound between September 3, 2012, and April 1, 2013. Use this table to answer the questions that follow:

Between January 1, 2013, and March 1, 2013, the U.S. dollar ___________ against the British pound, and the British pound ___________ against the U.S. dollar.

For country A, an export is a good produced in:

Use the following graph to answer the questions that follow.
In a trading (open) economy, the quantity supplied of TVs (in thousands) in the domestic market will be:

Suppose a Chinese citizen buys a box of Nestlé Kit Kat candy bars from America and Nestlé uses the currency to buy Chinese-produced machinery. How will this transaction enter into the U.S. balance of payments?

Which of the following situations will arise in the domestic market following the imposition of a voluntary quota?

In 2011, 60% of goods imported by the United States came from just seven nations. Which of the following nations was NOT one of those seven?

Use the following scenario to answer the questions that follow:
Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour.
Based on the scenario, which of the following is true?

Use the following scenario to answer the questions that follow:
An economy has two workers, Smith and Ricardo. Every day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones.
To maximize total output, Smith should specialize in producing ___________, whereas Ricardo should specialize in producing ____________.

Use the following scenario to answer the questions that follow:
Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year.
Amy’s opportunity cost of producing one pound of cheese is _____________ house(s).