Question 1

________ increases real GDP.

Accepted Answer

An increase in employment would lead to an increase in labor productivity, which would result in an increase in real GDP.

Question 2

The opportunity cost of holding money is the

Accepted Answer

The opportunity cost of holding money is the nominal interest rate because it represents the foregone interest that could have been earned if the money was invested instead of being held as cash.

Question 3

According to the quantity theory of money,

Accepted Answer

According to the quantity theory of money, the price level is directly proportional to the quantity of money in circulation. Therefore, a decrease in the quantity of money will decrease the price level. Option A is incorrect because changes in monetary policy, such as changes in the reserve requirement or the discount rate, can also affect the quantity of money. Option B is incorrect because changes in the discount rate affect the cost of borrowing for banks and do not necessarily lead to changes in real GDP. Option C is incorrect because changes in the quantity of money can affect the velocity of circulation, but it is not a direct relationship according to the quantity theory of money.

Question 4

If the Fed hikes the U.S.interest rate relative to interest rates in other countries,in the foreign exchange market the demand for dollars will ________,the supply of dollars will ________,and the exchange rate will ________.

Accepted Answer

If the Fed hikes the U.S. interest rate relative to interest rates in other countries, it will increase the demand for dollars as investors seek higher returns. However, it will decrease the supply of dollars as the higher interest rates make it more expensive for U.S. corporations and government to borrow. Therefore, the exchange rate will rise as demand outstrips supply.

Question 5

When money is accepted as payment in a market transaction,it is functioning as

Accepted Answer

Money serves as a medium of exchange in market transactions. It is used to facilitate the exchange of goods and services between buyers and sellers. Factors that shift the aggregate production function, such as changes in technology or capital stock, are not related to the use of money in transactions. Velocity of circulation refers to the speed at which money changes hands, but it is not the same as the function of money as a medium of exchange. The real interest rate relates to the cost of borrowing money, but it is not directly related to the function of money in market transactions.

Question 6

If productivity constantly increases,then the real wage rate ________ and employment ________.

Accepted Answer

If productivity constantly increases, it means that workers are producing more output per hour worked. This allows firms to pay higher wages while also remaining cost-competitive. Therefore, the real wage rate (i.e. the wage adjusted for inflation) will constantly rise. Additionally, as firms become more productive, they are able to expand output and this creates more employment opportunities, leading to employment constantly increasing.

Question 7

The velocity of circulation is

Accepted Answer

The velocity of circulation is the average number of times a dollar bill is used in a year to buy the goods and services in GDP.

Question 8

An increase in the amount of capital leads to ________ the aggregate production function and a technological advance leads to ________ the aggregate production function.

Accepted Answer

An increase in the amount of capital leads to an upward shift of the aggregate production function since more capital means more output can be produced. 
A technological advance also leads to an upward shift of the aggregate production function, as it improves productivity and increases output.

Question 9

If two currencies allow for the equal value of money so that the same bundle of goods cost the same in two countries,there is

Accepted Answer

The concept described in the statement is Purchasing Power Parity (PPP), which states that the same bundle of goods should have the same cost in different countries, adjusted for the exchange rate. PPP determines the exchange rate between two currencies in the long run based on the relative inflation rates of the two countries. Therefore, the correct choice is D. The other options, trade equalization parity, interest rate parity, and tariff application parity, do not relate to the given concept.

Question 10

An increase in the population will ________ potential GDP,________ employment,and ________ the real wage.

Accepted Answer

An increase in population raises potential GDP due to a larger labor force, increases employment as more people are available to work, and lowers the real wage due to increased labor supply.

Question 11

If the U.S.interest rate differential ________,the demand for dollars ________ and the U.S.exchange rate ________.

Accepted Answer

When the U.S. interest rate differential increases, it makes U.S. assets more attractive to investors, leading to an increased demand for dollars and causing the U.S. exchange rate to appreciate.

Question 12

An increase in the productivity will ________ potential GDP,________ employment,and ________ the real wage.

Accepted Answer

An increase in productivity will lead to an increase in potential GDP, as output can be produced at a lower cost. This increase in GDP will lead to an increase in employment, as businesses will require additional workers to meet the demand for their products/services. Finally, an increase in productivity will lead to higher real wages, as workers are able to produce more output in the same amount of time, which will increase their bargaining power for higher wages.

Question 13

The ________ growth theory assumes that population growth is not driven by real GDP per person and the ________ growth theory predicts that differences in the economic growth rate can last indefinitely.

Accepted Answer

The neoclassical growth theory assumes that population growth is not driven by real GDP per person, while the new growth theory predicts that differences in the economic growth rate can last indefinitely. Therefore, option B is the correct answer as it includes both neoclassical and new growth theory.

Question 14

Purchasing new capital ________.

Accepted Answer

Purchasing new capital shifts the aggregate production function upward because it increases the economy's productivity and output potential. This is because the new capital introduces new and more efficient methods of production.

Question 15

If the Fed makes an open market ________ of securities,in the quantity theory M ________ and V ________.

Accepted Answer

The answer of If the Fed makes an open market...

Question 16

The major component of the capital and finance account is

Accepted Answer

The capital and finance account includes investment both abroad and domestically, which is the major component. Net exports and imports and exports of services fall under the current account, and the official settlements account is a subcategory of the capital and finance account, not the major component.

Question 17

The demand for labor ________ and the accumulated skill and knowledge of human is called ________.

Accepted Answer

The demand for labor depends on the real wage rate, which is reflected in the opportunity cost of employing labor. Additionally, the accumulated skill and knowledge of human workers is referred to as human capital.

Question 18

In the foreign exchange market,if the supply of dollars ________ and simultaneously the demand for dollars ________,then the exchange rate definitely ________.

Accepted Answer

When the supply of dollars increases, there are more dollars in the market, which leads to a decrease in the value of each dollar. Simultaneously, if the demand for dollars decreases, there are fewer people in the market willing to buy dollars, which also leads to a decrease in the value of the dollar. This decrease in the exchange rate is known as depreciation. Therefore, the correct answer is C-when the supply of dollars increases and demand for dollars decreases, the exchange rate definitely depreciates.

Question 19

The main component of the current account is

Accepted Answer

The current account is a measure of a country's trade balance and includes the balance of trade in goods and services, as well as primary and secondary income (such as net interest income and remittances). Net exports are the largest component of the current account, as they represent the difference between a country's exports and imports of goods and services.

Quiz 18: Macroeconomic Trends

________ increases real GDP.

The opportunity cost of holding money is the

According to the quantity theory of money,

If the Fed hikes the U.S.interest rate relative to interest rates in other countries,in the foreign exchange market the demand for dollars will ,the supply of dollars will ,and the exchange rate will .

When money is accepted as payment in a market transaction,it is functioning as

If productivity constantly increases,then the real wage rate and employment .

The velocity of circulation is

An increase in the amount of capital leads to the aggregate production function and a technological advance leads to the aggregate production function.

If two currencies allow for the equal value of money so that the same bundle of goods cost the same in two countries,there is

An increase in the population will potential GDP, employment,and the real wage.

If the U.S.interest rate differential ,the demand for dollars and the U.S.exchange rate .

An increase in the productivity will potential GDP, employment,and the real wage.

The growth theory assumes that population growth is not driven by real GDP per person and the growth theory predicts that differences in the economic growth rate can last indefinitely.

Purchasing new capital ________.

If the Fed makes an open market of securities,in the quantity theory M and V .

The major component of the capital and finance account is

The demand for labor and the accumulated skill and knowledge of human is called .

In the foreign exchange market,if the supply of dollars and simultaneously the demand for dollars ,then the exchange rate definitely .

The main component of the current account is