Q1 Other things equal, an increase of 2.0% in the price of product X results in a 1.4% increase in the quantity demanded of product Y and a 0.7% decrease in the quantity demanded of product Z. Which statement about products X, Y and Z is least accurate? A) Products Y and Z are complements B) Products X and Z are complements C) Products X and Y are substitutes Q2 According to real business cycle theory, economic cycles result from: A) changes in the rate of productivity growth B) unexpected changes in aggregate demand C) increases and decreases in business confidence Q3 Potential real GDP is least likely to increase as a result of a(n): A) improvement in technology B) decrease in the income tax rate C) increase in the money wage rate Q4 A decrease in the target U.S. federal funds rate is least likely to result in: A) a proportionate decrease in long-term interest rates B) depreciation of the U.S. dollar on foreign exchange market C) an increase in consumer spending on durable goods Q5 Assume the market for a good is in equilibrium and supply and demand are neither perfectly elastic nor perfectly inelastic. Will an inefficient allocation of resources always result if production of this good is subsidized or if a quote is placed on output? A) Both will always result in an inefficient allocation of resources. B) Neither will always result in an inefficient allocation of resources. C) Only one of these will always result in an inefficient allocation of resources. Q6 What effect will an increase in the expected rate of inflation most likely have on aggregate demand and short-run aggregate supply? A) One will increase and one will decrease B) Both will decrease C) Both will increase Q7 Which one of these statements is correct? A) A Laffer curve must being at the zero tax revenue and end at zero tax revenue. B) A Laffer curve beings at the 100% tax revenue and approaches zero tax revenue over time. C) A Laffer curve begins at zero tax revenue and ends at 100% tax revenue. Q8 The type of theory that refers to the fact that increases in the current deficit mean greater taxes in the future is: A) The Ricardo-Barro Effect B) Generational Effect C) The Mainstream Business theory Q9 A strategy designed to match the growth rate of the monetary base to the long-term growth rate of real GDP plus the target inflation rate is: A) the McCallum rule B) Inflation targeting C) Taylor rule Q10 Assume the Federal Reserve purchases $1 billion in securities in the open market. What is the maximum increase in the money supply that can result from this action, if the required reserve ratio is 15% and there is no currently drain? A) $6.67 billion B) $5.75 billion C) $7.52 billion
- C 2. B 3. A 4. B 5. A 6. A 7. A 8. B 9. B 10. C (forgot the formula for this, took a guess)
1-A 2-A 3-B 4-A 5-C 6-C 7-A 8-B 9-A 10-A
- C 2. A 3. C 4. A 5. A 6. C 7. A 8. B 9. B 10. A
- C 2) B 3) C 4) B 5) A 6) C 7) A 8) B 9) A 10) A
- A 2. A 3. C 4. A 5. C 6. C 7. A 8. A 9. A 10. A
waddi08 - answered 20% correctly. jkrecords - answered 70% correctly. jgrandits - answered 50% correctly. cfacowtown - answered 40% correctly. sbmarti2 - answered 90% correctly.
In Q1, if Y and Z were complements wouldn’t demand have to increase for both?
A A C B C C A B A A
Nvm. Answered my own question.
gauri - answered 70% correctly.
Nice job sbmarti2, its back to the drawing board for economics. Although, typically its 72%, not 40%…outch.
aacbcaaaaa Great quiz! Could you please post the answers?
cfacowtown Wrote: ------------------------------------------------------- > Nice job sbmarti2, its back to the drawing board > for economics. Although, typically its 72%, not > 40%…outch. Don’t beat yourself up too much- the questions related to the McCallum rule and the Ricardo-Barra effect are pretty obscure details. I doubt we’ll see much on the exam regarding them.
Correct Answers: 1. A 2. A 3. C 4. A 5. C 6. A 7. A 8. A 9. A 10. A
woohoo 90%! Would have been 100% but I read question 4 wrong 
Bah, damn question six. I correctly deduced that increased inflation expectations will lead to increases in aggregate demand and the money wage rate, but fool that I am, I forgot that an increase in the money wage rate leads to a decrease in short run aggregate supply. I even pictured the shift of the curve to the left… at least I think that’s why I got it wrong anyway.