Question

1. Which of the following would be considered INTANGIBLE capital? (a) a farmer’s tractor; (b) a tennis player’s racket; (c) a refrigerator in a restaurant; (d) WiFi at a Starbuck’s.

2. More than likely, the economic value of production and the social value of production: (a) equal the size of the GDP; (b) are equal to one another; (c) depend upon IRS regulations; (d) can diverge from one another, perhaps because of environmental spillover effects from the creation of output.

3. Which form of economic model attempts to capture a macroeconomic outcome by using only one or just a handful of explanatory variables? (a) a fashion model; (b) a reduced-form model; (c) a naïve model; (d) multi-equation structural model that corrects for the homoskedasticity of its error terms.

4. A body of economic theory concedes that, in equilibrium, an economy does NOT necessarily reach full employment. This body of theory is most commonly associated with: (a) Jerome Powell; (b) Milton Friedman; (c) John Maynard Keynes; (d) John McCain.

5. When analyzing a partial equilibrium, whenever the 45-degree line (which serves as a proxy for aggregate supply) is above the aggregate demand curve at a particular level of national income: (a) there likely is dissaving taking place in the economy; (b) the money multiplier is greater than 1.00; (c) unintended accumulation of inventories likely is taking place; (d) multicollinearity across model equations are distorting the Durbin-Watson statistic.

6. Over the long run, simply increasing the money supply, all else remaining the same, can best be expected to: (a) increase inflation without increasing real GDP; (b) decrease real GDP and decrease inflation; (c) shift the long-run aggregate supply curve to the left; (d) have no impacts at all on the nominal GDP growth rate.

7. Keynes’s conjecture refers principally to which of the following?: (a) the relationship between money supply growth and inflation; (b) the notion that the marginal propensity to consume lies between 0% and 100%; (c) that only males over the age of 75 years old can serve as POTUS regardless of whether they have periodic losses of memory; (d) that monetary policy is always the best way to influence the cyclical condition of the economy at the margin.

8. Optimization of consumer spending best takes place where: (a) the consumer’s budget constraint is tangent to his/her highest indifference curve between current and future spending; (b) there is online access to Amazon; (c) savings rates are the highest; (d) marginal tax rates are the highest.

9. The U.S. is said to have an “elastic” currency or money supply. That’s because: (a) the elasticity of the U.S. money supply with respect to its foreign exchange value equals 1.0; (b) the Federal Reserve determines the supply of currency; (c) the U.S. Treasury determines the money supply, consistent with its borrowing needs; (d) the money supply expands faster or slower depending upon the pace of real economic activity.

10. Please indicate the proper order of maturities of Treasury securities, from the shortest duration to the longest duration: (a) bonds, notes, bills; (b) bonds, bills, notes; (c) bills, notes, bonds; (d) bonds, stocks, derivatives.

11. Which of the following is LEAST likely to be a large-scale USE of borrowed funds by businesses? (a) capital expenditures; (b) financing of mergers and acquisitions; (c) repayment of revolving credit; (d) share buybacks and dividend payouts.

12. According to the acceleration principle: (a) a relatively small increase in consumer spending results in a relatively larger increase in real GDP; (b) a relatively small increase in consumer spending perceived to be permanent results in a relatively larger increase in investment; (c) a relatively small increase in capital investment results in an even LARGER increase in capital spending (due to momentum); (d) the faster interest rates decline, the faster investment spending declines.

13. From among the following, a simplified examination of funding for investment suggests that the most expensive source typically is: (a) retained earnings; (b) bond issuance; (c) credit in the form of bank loans; (d) issuance of new shares of stock.

14. In the early stages of an economic boom, a borrower’s risk is likely to be: (a) related to deflation; (b) due to sub-par food in the cafeteria; (c) due mainly to the solvency of the lender; (d) relatively low.

15. Of the following, which is LEAST likely to be a consideration in determining the rate of return on investment necessary to validate a capital investment? (a) the rate of depreciation of the capital good purchased; (b) consumer confidence; (c) the rate of business profit taxation; (d) the present value of the future stream of returns.

16. According to the permanent income hypothesis, current consumption is a function of: (a) current income, only; (b) expected income over a three-year time horizon; (c) wealth, including human capital; (d) all of the above.

17. The velocity of money is BEST defined as: (a) the speed with which a holder of currency can convert illiquid assets into cash; (b) the business of retail stores; (c) the speed of adjustment of the money supply to the Fed’s open market operations; (d) the ratio of nominal GDP to the money supply.

18. Demand for U.S. Treasury securities globally increased sharply in 2020. One possible explanation for the surge in demand, despite their low nominal yields might be: (a) these securities are backed by the full faith and credit of the New York Fed against default; (b) U.S. inflation expectations are unusually high for years, if not decades, to come; (c) whenever Donald Trump does not dye his hair, it gets gray very quickly and support for him diminishes; (d) while relatively low historically, yields on Treasuries are higher than those of comparable securities issues by other major countries.

19. An increase in government spending of $200 million financed by a new tax of $200 million in an economy with a marginal propensity to consume of .90 could result in an increase in nominal GDP (assuming a closed economy with no leakages) of up to how much? (a) $0; (b) $2,000 million; (c) $180 million; (d) $200 million.

20. In order to shift a long-term aggregate supply curve to the right: (a) inflation must diminish; (b) the growth rate of productivity must fall; (c) a determinant of aggregate supply, like the quality of the capital stock, must improve; (d) immigration must be cut off.

21. If the growth rate of nominal GDP is 8% and the growth rate in the same quarter of real GDP is 4%, then inflation in that quarter must have been: (a) 4%; (b) 12%; (c) minus 12%; (d) an amount that cannot be calculated from the data in this question.

22. Which of the following refers to a set of economic policies that involve adjusting the level and structure of taxes and the level and composition of government spending? (a) monetary policy; (b) fiscal policy; (c) regulatory policy; (d) market capitulation.

23. Whenever data recurrently tend to move upward or downward due to conditions such as time of day, day of week, week of year, or occurrence of holidays, statisticians tend to do which of the following with the data? (a) dollar cost averaging; (b) calculation of deviations from a trend line; (c) fudge them; (d) seasonal adjustment.

24. Which of the following is a transfer payment? (a) wages paid to government worker; (b) interest paid to owners of Treasury securities; (c) payments to a defense contractor for building a tank; (d) Medicaid.

25. According to Keynes, to increase real GDP during a time of recession, the government should: (a) reduce taxes and increase government spending; (b) reduce taxes and reduce government spending; (c) increase taxes and reduce government spending; (d) decrease the money supply, but increase government spending.

26. When looking at the equation of exchange, we note that M times V increased by 8%. Accordingly, P times Q: (a) decreased by 8%; (b) remained the same; (c) likely experienced an increase of 8% split between inflation and real economic growth; (d) led to an adjustment in the Fed’s inflation target.

Answer 1

As per Chegg guidelines, in case of multiple questions only the first 4 questions are to be answered

Kindly ask rest of the questions in a separate post.

1.Which of the following would be considered INTANGIBLE capital? (d) WiFi at a Starbuck’s.

Reason: An intangible capital is a type of capital which cannot be seen physically, but only be used.

For e.g. WIFI, license to work etc.

2.More than likely, the economic value of production and the social value of production: (d) can diverge from one another, perhaps because of environmental spillover effects from the creation of output.

Reason: The slipover effect on environment due to output produced, makes the economic value of output different from social value

3.Which form of economic model attempts to capture a macroeconomic outcome by using only one or just a handful of explanatory variables? (b) a reduced-form model

Reason: A Reduced form model captures macro outcome by using only a few explanatory variables.

4.A body of economic theory concedes that, in equilibrium, an economy does NOT necessarily reach full employment. This body of theory is most commonly associated with: (c) John Maynard Keynes

Reason: This is because according JM Keynes, AD is not always automatically high enough to provide firms with an incentive to hire enough workers to reach full employment.