ECO5POE Practice Final Answers

For each question identify the one best answer, and mark your answer on the computer sheet
(do not rewrite your answer in the script book).
.
1) When the interest rate falls in the money market, the quantity of money demanded ________ and the quantity of money supplied ________.
A) decreases; increases
B) increases; decreases
C) increases; stays the same
D) stays the same; decreases
2) In short-run macroeconomic equilibrium,
A) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
B) real GDP equals potential GDP and aggregate demand determines the price level.
C) the price level is fixed and short-run aggregate supply determines real GDP.
D) real GDP is less than potential GDP.
3) The idea that a government budget deficit decreases investment is called
B) the crowding-out effect.
A) the capital investment effect.
C) the Ricardo-Barro effect.
D) government dissaving.
4) As labour increases, there is a
A) shift of the aggregate production function, but no movement along it.
B) movement along the aggregate production function and real GDP will increase less with each additional increase in labour.
C) movement along the aggregate production function, but no shift in it.
D) movement along the aggregate production function and real GDP will decrease less with each additional increase in labour.
5) Net investment equals
A) the total quantity of plant, equipment and buildings.
B) gross investment/depreciation.
C) gross investment minus depreciation.
D) capital stock minus depreciation.
6) If real GDP decreases, the demand for money curve will shift
A) rightward and the interest rate will fall.
B) leftward and the interest rate will rise.
C) leftward and the interest rate will fall.
D) rightward and the interest rate will rise.

7) Factors that influence labour productivity include ________.
A) the labour demand curve
B) the inflation rate, the real wage rate, and the exchange rate
C) physical capital, the real wage rate, and