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advanced macro test 2 with 100% correct answers |
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advanced macro test 2a bond that is due to mature in three years has a face value of 20,000 and pays 1500 in
interest per year, interest is paid once a year and compounded annually. If the market rate of
interest of securities on a similar risk and duration is 6% what is the value of this bond. -
correct answer-1500/(1.06) + 1500/(1.06)^2 + 1500/(1.06)^3 + 20000/(1.06)^3 = 20,801.9
A rapid increase in household wealth due for example to a stock market crash would cause -
correct answer-a downward shift of the economy's consumption function
according to the conventional economic theory, an increase in interest rates - correct
answer-will cause economic agents to want to hold less money
an increase in income tax rates - correct answer-will cause the Keynesian multiplier to fall
An increase in interest rates - correct answer-will cause bond prices to fall
At the equilibrium level of aggregate output, what will be the level of consumption spending -
correct answer-Find tax bill
T = .06 x 406,804.73 = 24408.2838
Find Yd
Yd = Y - T = 406,804.73 - 24,408.2838 = 382,396.446
C = 15,000 + .92(382,396.446) = 366,804.73
automatic stabilizers are - correct answer-changes in the level of government spending and
taxation - for example, unemployment benefits - that occur automatically
ceteris parabus if the economy's capacity utilization rate is high we can expect that - correct
answer-businesses will be more likely to increase investment spending
ceteris parabus, a decrease in aggregate income will - correct answer-lead to a decrease in
the demand for money
ceteris parabus, a decrease in tax rates on household incomes is likely to - correct
answer-reduce leakages from the circuit of income and spending and therefore cause
aggregate output and employment to rise
ceteris parabus, the higher the marginal propensity to consume - correct answer-the higher
will be the multiplier
Economists generally suppose that the level of investment spending - correct answer-is an
inverse function of the interest rate
If aggregate demand exceeds the value of the economy's output, it is likely that - correct
answer-inventories are falling
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