2000 Economics Challenge Play-off
MACROECONOMICS
Round I

1. Most modern banking systems are based upon
   1. money of intrinsic value.
   2. commodity money.
   3. 100 percent reserves.
   4. fractional reserves.

   

   FIGURE 1  

2. Which of the following movements is consistent with the traditional conception of the Phillips Curve?
   1. the movement from b1 to b2
   2. the movement from b1 to c1.
   3. the movement from c1 to b2.
   4. the movement from b2 to b1.
   5. none of the above.

    

3. A reduction in aggregate demand is likely to result in
   1. inflation.
   2. recession.
   3. a sudden spurt of growth in production.
   4. increased consumption of crushed rock for concrete foundations.

    

4. Many economists would argue that, all things being equal, a large budget deficit could likely
   1. decrease domestic interest rates, decrease the value of the dollar on international exchange markets, and increase American net exports.
   2. increase domestic interest rates, increase the value of the dollar on international exchange markets, and decrease American net exports.
   3. increase domestic interest rates, decrease the international value of the dollar, and increase American net exports.
   4. increase domestic interest rates, increase the international value of the dollar, and increase American net exports.

    

5. If the general level of money wage rates increases by 6 percent and the productivity of labor increases by 2 percent in a given year, then labor costs per unit of output will
   1. either increase or decrease, depending upon what happens to the price level.
   2. increase by about 8 percent.
   3. decrease by about 8 percent.
   4. increase by about 4 percent.
   5. decrease by about 4 percent.

    

6. The development of a nationwide, computerized job bank listing all job openings would be most likely to reduce
   1. structural unemployment.
   2. frictional unemployment.
   3. seasonal unemployment.
   4. cyclical unemployment.

    

7. “When the Federal Reserve announces that it intends to increase the money supply, people will expect inflation to occur. Therefore inflationary premiums will immediately get built into interest rates, wage demands, prices of raw materials, etc. and the price level will rise.”

   This quotation best represents

   1. rational expectations.
   2. old classical economics
   3. Keynesian economics.
   4. monetarism.

    

8. To tighten the money supply, the Federal Reserve
   1. decreases the reserve ratio.
   2. purchases government securities in the open market.
   3. sells government securities in the open market.
   4. decreases the discount rate.

    

9. Usury laws set limits on how
   1. much money can be borrowed.
   2. much interest can be charged.
   3. much money can be loaned.
   4. borrowed money can be used.

    

10. Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will
    1. fall by about 20 percent.
    2. fall by about 2 percent.
    3. rise by about 15 percent.
    4. rise by about 25 percent.

     

11. Which of the following would be included in the GDP?
    1. diesel fuel bought for a delivery truck
    2. fertilizer purchased by a farm supplier
    3. a haircut
    4. Acura windows purchased by a Honda assembly plant

     

12. Which of the following holds the largest proportion of the public debt?
    1. the American public, that is individuals, businesses and commercial banks, and federal government agencies
    2. foreign individuals and governments
    3. our central bank
    4. None of the above.

     

13. The “crowding out” effect suggests that
    1. government spending is increasing at the expense of private investment.
    2. imports are replacing domestic production.
    3. private investment is increasing at the expense of government spending.
    4. consumption is increasing at the expense of investment.

     

14. The big losers in an unexpected inflation period will be
    1. wage earners.
    2. borrowers.
    3. lenders.
    4. the government.

     

15. Y=C+I+G
    C=200+1/2DI
    I=200
    G=250
    T=200
    DI=Y-T
    X=IM
    What is the equilibrium level of income(Y) for the above macro model?
    1. 1,100
    2. 1,000
    3. 550
    4. 1,200

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