Question 1

Assume that the Federal Reserve injects $6 billion into the financial system. If the reserve requirement is 12%, what is the maximum increase in money supply (in billions)that may result?

Accepted Answer

The maximum increase in money supply can be calculated using the money multiplier formula, which is 1 / reserve requirement ratio. With a reserve requirement of 12%, the multiplier is 1 / 0.12 = 8.33. Multiplying this by the initial injection of $6 billion gives a maximum increase in money supply of $50 billion.

Question 2

Assume the inflation rate in 2016 is 1.5%. If the nominal GDP grew 3.1% and nominal wages grew 2.0%, what are the approximate real growth rates of GDP and wages?

Accepted Answer

The answer of Assume the inflation rate in 2016 is...

Question 3

If the nominal GDP was reported at $211.3 billion and real GDP was reported at $207.7 billion, what was the inflation rate for the period?

Accepted Answer

The inflation rate can be calculated using the formula:
Inflation rate = ((Nominal GDP - Real GDP)/Real GDP) x 100
= (($211.3 billion - $207.7 billion)/$207.7 billion) x 100
= (3.6/207.7) x 100
= 1.73%
Therefore, the correct answer is B) 1.73%.

Question 4

If the Federal Reserve injects $150 billion into the financial system and the money supply increases by a maximum of $750 billion, what must the reserve requirement be?

Accepted Answer

The reserve requirement must be 20% because the maximum increase in the money supply ($750 billion) divided by the initial injection ($150 billion) equals 5, which is the money multiplier. The money multiplier is the reciprocal of the reserve requirement ratio, so 1/5 = 0.20 or 20%.

Question 5

Assume that the Federal Reserve injects $5.32 billion into the financial system. If the reserve requirement is 9.5%, what is the maximum increase in money supply (in billions)that may result?

Accepted Answer

The answer of Assume that the Federal Reserve injects $5.32...

Question 6

Your $1,000,000 investment in Mexican pesos gained 4.5%. If the exchange rate moves from 18.750 pesos per dollar to 19.593 pesos per dollar over the period, what is your total return on this investment?

Accepted Answer

The answer of Your $1,000,000 investment in Mexican pesos gained...

Question 7

If the nominal GDP was reported at $222.1 billion and real GDP was reported at $218.2 billion, what was the inflation rate for the period?

Accepted Answer

The inflation rate is calculated as the percentage change in the nominal GDP minus the percentage change in the real GDP. In this case, the nominal GDP increased by 1.79% ($222.1 billion - $218.2 billion / $218.2 billion * 100) and the real GDP increased by 1.72% ($218.2 billion - $215.2 billion / $215.2 billion * 100). Therefore, the inflation rate is 1.79% - 1.72% = 0.07%.

Question 8

If the nominal GDP was reported at $1,677 billion and inflation was 1.25%, what is the level of real GDP for the period?

Accepted Answer

The answer of If the nominal GDP was reported at...

Question 9

Assume that the Federal Reserve injects $3.2 billion into the financial system. If the reserve requirement is 13%, what is the maximum increase in money supply (in billions)?

Accepted Answer

The maximum increase in money supply can be calculated using the money multiplier formula, which is 1/reserve requirement. With a 13% reserve requirement, the multiplier is 1/0.13 = 7.6923. Multiplying this by the initial injection of $3.2 billion gives a maximum increase in money supply of $24.62 billion.

Question 10

If the nominal GDP was reported at $1,351.90 billion and inflation was 3.8%, what is the level of real GDP for the period (in billions)?

Accepted Answer

Real GDP is calculated by adjusting nominal GDP for inflation. The formula is: Real GDP = Nominal GDP / (1 + Inflation Rate). Using this, Real GDP = $1,351.90 / (1 + 0.038) = $1,302.41 billion.

Question 11

Assume there are 450 million people in the United States, 165 million of which make up the labor force. If 18 million are unemployed, what is the unemployment rate?

Accepted Answer

The unemployment rate is calculated by dividing the number of unemployed individuals by the labor force and multiplying by 100. 
Number of unemployed individuals = 18 million
Labor force = 165 million
Unemployment rate = (18 million / 165 million) x 100 = 10.91% 
Therefore, the answer is C) 10.91%.

Question 12

You invest $20,000 in France when the exchange rate is $1.22/€. Your investment gains 10%, and you subsequently exchange the euros back into dollars at a rate of $1.36/€. What is your total percentage return on this investment?

Accepted Answer

Initially, you invested 20,000 / 1.22 = €16,393.44
After a 10% gain, your investment is worth 1.1 * €16,393.44 = €18,032.79
When you exchange back to dollars at a rate of $1.36/€, you get $18,032.79 * 1.36 = $24,557.40
Your total return in dollars is $24,557.40 - $20,000 = $4,557.40
Your percentage return is ($4,557.40 / $20,000) * 100% = 22.79%
Therefore, the closest answer is D) 22.62% (rounded to the nearest hundredth).

Question 13

Assume that the Federal Reserve injects $3.93 billion into the financial system. If the reserve requirement is 11%, what is the maximum increase in money supply (in billions)that may result?

Accepted Answer

The answer of Assume that the Federal Reserve injects $3.93...

Question 14

Assume that the Federal Reserve injects $45 billion into the financial system. If the money supply increases by a maximum of $300 billion, what must the reserve requirement be?

Accepted Answer

The answer of Assume that the Federal Reserve injects $45...

Question 15

You invest $75,000 in Germany when the exchange rate is $1.25/€. Your investment gains 10%, and you subsequently exchange the euros back into dollars at a rate of $1.30/€. What is your total percentage return on this investment?

Accepted Answer

The answer of You invest $75,000 in Germany when the...

Question 16

If the nominal GDP was reported at $1,239.29 billion and inflation was 2.1%, what is the level of real GDP for the period?

Accepted Answer

Real GDP = Nominal GDP / (1 + inflation rate)
Real GDP = $1,239.29 billion / (1 + 0.021)
Real GDP = $1,213.80 billion (rounded to nearest hundredth)

Question 17

Suppose you are a U.S. investor who is planning to invest $100,000 in China. Your Chinese investment gains 5%. If the exchange rate moves from 7.12 Yuan per dollar to 7.14 Yuan per dollar over the period, what is your total return on this investment?

Accepted Answer

The answer of Suppose you are a U.S. investor who...

Quiz 20: Global Economic Activity and Industry Analysis

Assume that the Federal Reserve injects $6 billion into the financial system. If the reserve requirement is 12%, what is the maximum increase in money supply (in billions) that may result?