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ECON511 FINAL EXAM (Indiana Wesleyan University)

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ECON 511 FINAL EXAM (Indiana)

1.1. What are the costs associated with inflation? (Points : 3)

Question 2.2. Commodities that typically last three years or more are called ________. (Points : 3)

Question 3.3. The decrease in consumption and investment interest-related spending that occurs when the interest rate rises as government spending increases is called ________. (Points : 3)

Question 4.4. Industrial production is an example of a ________. (Points : 3)

Question 5.5. Expansionary monetary policy should be used if ________. (Points : 3)

Question 6.6. An increase in production costs will shift the ________. (Points : 3)

Question 7.7. Spending on the structures, equipment, and software that provide the industrial capacity to produce goods and services for all sectors of the economy is called ________. (Points : 3)

Question 8.8. At a given price level, an increase in expected profits and business confidence will shift the aggregate demand curve ________. (Points : 3)

Question 9.9. During the recession of 2007-2009, the U.S. economy was experiencing a decrease in home prices and consumer wealth, a credit crisis in the financial markets, and declining consumer and business confidence.  What components of aggregate demand were affected and what was the impact on real output?  What were the policy options? (Points : 3)

Question 10.10. An open market purchase of government securities by the Fed would shift the aggregate demand curve leftward. (Points : 3)

Question 11.11. An appreciation of the U.S. dollar would shift the ________. (Points : 3)

Question 12.12. An increase in the costs of resources or inputs of production would shift the ________. (Points : 3)

Question 13.13. Policies adopted by a country's central bank that influence interest rates and credit conditions, which in turn influence consumer and business spending, are called ________. (Points : 3)

Question 14.14. Changes in taxes and spending by the executive and legislative branches of a country's government that can be used to either stimulate or restrain the economy are called ________. (Points : 3)

Question 15.15. In the long-run, an increase in the budget deficit and an expansionary monetary policy would ________. (Points : 3)

Question 16.16. The fraction of deposits banks are required to keep as reserves is called the ________. (Points : 3)

Question 17.17. Describe the fractional reserve banking system. (Points : 3)

Question 18.18. The interest rate that banks charge on loans to their best customers is called the ________. (Points : 3)

Question 19.19. An increase in the real money supply can result from ________. (Points : 3)

Question 20.20. What are the three monetary policy tools of the Fed?  Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy. (Points : 3)

Question 21.21. According to the short-run Phillips curve, if unemployment is 3.2% and inflation is 1.3%, an increase in the inflation rate might result in which of the following? (Points : 3)

Question 22.22. If workers accurately predict the rate of inflation, is there a short-run trade-off between inflation and unemployment, as predicted by the Phillips curve?  Why or why not? (Points : 3)

Question 23.23. By definition, the purchasing power of money always drops when ________. (Points : 3)

Question 24.24. If the nominal interest rate is 9 percent and the anticipated inflation rate is 4 percent, then the real interest rate is ________. (Points : 3)

Question 25.25. What are the costs associated with inflation? (Points : 3)

Question 26.26. The producer price index measures ________. (Points : 3)

Question 27.27. The producer price index focuses on price changes of domestically produced goods and includes services, construction, and imported goods. (Points : 3)

Question 28.28. Assume that the current price of a market basket of goods is $2,500 and the base year price of the same market basket is $1,340.  The price index is ________. (Points : 3)

Question 29.29. Which of the following price indices is designed to measure changes in the prices of goods and services purchased by a typical individual? (Points : 3)

Question 30.30. In 2013, the price for a market basket of consumer goods is $800.  In the base year, the cost of the identical market basket was $1,000.  The price index in this case is ________. (Points : 3)

Question 31.31. In January 2001, the euro/dollar exchange rate was 1.10, and in January 2002, the euro/dollar exchange rate was 1.120.  What happened to the exchange rate during this period? (Points : 3)

Question 32.32. In the foreign exchange market, the quantity of U.S. dollars demanded is a function of ________. (Points : 3)

Question 33.33. A decrease in the supply of dollars on the foreign exchange market, all else equal, will result in ________. (Points : 3)

Question 34.34. In 2003, China's control of the value of the yuan became an economic and political issue for the U.S. because of ________. (Points : 3)

Question 35.35. Using the foreign exchange market diagram, graphically illustrate and explain the impact of an increase in U.S. income, all else constant, on the exchange rate. (Points : 3)

Question 36.36. Assume that China has a comparative advantage in producing corn and exports corn to Japan.  We can conclude that ________. (Points : 3)

Question 37.37. If Japanese workers are more productive than French workers, then trade between Japan and France ________. (Points : 3)

Question 38.38. If Canada has a comparative advantage relative to Mexico in the production of timber, then ________. (Points : 3)

Question 39.39. What are the four main sources of comparative advantage?  Briefly explain each source and provide examples. (Points : 3)

Question 40.40. The simple trade model demonstrates that countries can expand consumption by specializing in the production of goods and services in which they have a comparative advantage.  In reality, we do not see complete specialization in production.  State three reasons why this is case. (Points : 3)

Question 41.41. Figure 7-1

Figure 7-1 shows the U.S. demand and supply for leather footwear.  

Refer to Figure 7-1. Under autarky, the consumer surplus is ________ and the producer surplus is ________. (Points : 3)

Question 42.42. Refer to Figure 7-1. Under autarky, the deadweight loss is ________. (Points : 3)

Question 43.43. Which of the following is not an example of a trade restriction? (Points : 3)

Question 44.44. The main purpose of most tariffs and quotas is to ________. (Points : 3)

Question 45.45. Distinguish between a voluntary export restraint and a quota. (Points : 3)

Question 46.46. The amount of cost-cutting technical innovation introduced into a production process is a function of ________. (Points : 3)

Question 47.47. Increases in both labor and capital productivity will result in ________. (Points : 3)

Question 48.48. As McDonald's expanded globally, it was able to achieve ________. (Points : 3)

Question 49.49. Managers in firms with market power can ________. (Points : 3)

Question 50.50. If a good is price elastic, a decrease in its price will ________. (Points : 3)

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