Question 1

Suppose the U.S. government increases its spending without raising taxes, resulting in a larger budget deficit. According to the concept of 'crowding out,' what is the most likely macroeconomic consequence?

Accepted Answer

An increase in interest rates, reducing private investment

Question 2

If the British pound exchange rate is $$0.722$$ per U.S. dollar, what is the price in pounds of a box of English tea that costs $$4.75 U.S. $$dollars? (Round to two decimal places.)

Accepted Answer

$$4.75 	imes 0.722 = 3.43$$

Question 3

If the EURO exchange rate changes from $$1.32$$ per U.S. dollar on Tuesday to $$1.27 on $$Wednesday, what has happened to the U.S. dollar relative to the EURO, and what is the likely effect on U.S. exports?

Accepted Answer

The U.S. dollar has depreciated; U.S. exports would likely increase.

Question 4

Which of the following is the best definition of 'comparative advantage'?

Accepted Answer

A country has a lower opportunity cost in the production of a good than another country.

Question 5

Suppose the U.S. dollar weakens against most major foreign currencies. Which of the following is most likely to occur?

Accepted Answer

U.S. exports become more affordable to other countries.

Question 6

Which of the following is NOT an effect of a tariff imposed on an imported product?

Accepted Answer

The domestic price falls.

Question 7

Which of the following acts is thought to have magnified the Great Depression and overall world depression during the early 1930s by restricting trade?

Accepted Answer

Smoot-Hawley Act

Question 8

If the Federal Reserve wants to increase the money supply, which of the following actions would it most likely take?

Accepted Answer

Buy bonds in the open market

Question 9

A leftward shift in the demand curve for an inferior good is most likely caused by:

Accepted Answer

An increase in consumer income

Question 10

Which of the following will NOT shift a supply curve?

Accepted Answer

A change in the good’s price

Question 11

At a price above equilibrium, what is the market condition?

Accepted Answer

A surplus

Question 12

If the number of buyers in a market decreases, what is the likely effect on the demand curve?

Accepted Answer

Leftward shift in the demand curve

Question 13

As the price of good A rises, the demand for good B rises. What is the relationship between goods A and B?

Accepted Answer

Substitutes

Question 14

Which of the following is NOT an argument used against free trade?

Accepted Answer

Comparative advantage

Question 15

When a tariff is imposed on an imported product, which of the following is most likely to occur?

Accepted Answer

The domestic industry benefits from higher prices and increased output.

Question 16

If the supply curve in the money market shifts to the right, what is the most likely effect on interest rates?

Accepted Answer

Interest rates decrease

Question 17

Which of the following is a sure result of increased trade according to economic theory?

Accepted Answer

Improved efficiency and potential gains for both trading partners

Question 18

If the federal government finances its expenditures through Treasury Bills and Treasury Notes, which of the following is true?

Accepted Answer

They are borrowing from the public to finance the deficit.

Question 19

Suppose the price of a round of golf increases. What is the likely effect on the demand for golf balls?

Accepted Answer

A leftward shift in the demand curve for golf balls

Question 20

Which of the following best describes the relationship between taxes paid by the American public and the national debt?

Accepted Answer

Taxes are used to help pay the interest on the national debt.

Macroeconomics Final Exam Review – Step-by-Step Guidance

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