Economics 101
Barrons Final Test 1. In the long run an increase in the money supply results in E a proportional increase in price level because the classical notion of monetary neutrality is based on the idea that the money supply and the price level is proportionally related.
2. You buy 100 shares in XYZ Corporation on the internet and your broker charges you
$29.95 C this increase the GDP by $29.95 because financial transactions are not counted in
GDP but the commission is.
3. Given the graph above, the opportunity cost of four additional units of butter as the economy moves from a to b is b 30 units of guns because at point a the economy is producing 60 guns and 3 units of butter and at point b production is 30 guns and 7 units of butter so the 4 extra units of butter will come at the cost of 30 guns.
4. In the short run, contractionary monetary policy causes aggregate demand to D decrease, output to decrease and the price level to decrease because contractionary monetary policy is a decrease in the money supply and shifts AD to the left.
5. Assume the reserve requirement is five percent. If the DEF sells $10 million worth of government securities in an open market operation, then the money supply can potentially b decrease by $200 million if the reserve requirement is 5% then the money multiplier is 20. If the bank falls by 10 million the the money supply falls 200 million.
6. Give the table below, which statement is true. Labour hours needed to produce a unit of wine & cheese. C France has the comparative advantage in cheese because Belgium’s cost is 4 wine while France’s is 2 wine.
7. At P’ in the diagram above, b inventories will be unitentionally increased, and the price level will rise since AS is less than AD at P’ inventories will unintentionally
2. You buy 100 shares in XYZ Corporation on the internet and your broker charges you
$29.95 C this increase the GDP by $29.95 because financial transactions are not counted in
GDP but the commission is.
3. Given the graph above, the opportunity cost of four additional units of butter as the economy moves from a to b is b 30 units of guns because at point a the economy is producing 60 guns and 3 units of butter and at point b production is 30 guns and 7 units of butter so the 4 extra units of butter will come at the cost of 30 guns.
4. In the short run, contractionary monetary policy causes aggregate demand to D decrease, output to decrease and the price level to decrease because contractionary monetary policy is a decrease in the money supply and shifts AD to the left.
5. Assume the reserve requirement is five percent. If the DEF sells $10 million worth of government securities in an open market operation, then the money supply can potentially b decrease by $200 million if the reserve requirement is 5% then the money multiplier is 20. If the bank falls by 10 million the the money supply falls 200 million.
6. Give the table below, which statement is true. Labour hours needed to produce a unit of wine & cheese. C France has the comparative advantage in cheese because Belgium’s cost is 4 wine while France’s is 2 wine.
7. At P’ in the diagram above, b inventories will be unitentionally increased, and the price level will rise since AS is less than AD at P’ inventories will unintentionally