econ 203 exam 3 || with 100% Error-free Solutions.
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Course
Econ 203
Institution
Econ 203
1) If the MPC is 0.95, then a $10 million increase in disposable income will:
A) increase consumption by $200 million.
B) increase consumption by $9.5 million.
C) decrease consumption by $105 million
D) increase consumption by $950 million. correct answers B) increase consumption by $9.5 millio...
econ 203 exam 3 || with 100% Error-free Solutions.
1) If the MPC is 0.95, then a $10 million increase in disposable income will:
A) increase consumption by $200 million.
B) increase consumption by $9.5 million.
C) decrease consumption by $105 million
D) increase consumption by $950 million. correct answers B) increase consumption by $9.5
million.
3) The basic aggregate demand and aggregate supply curve model helps explain
A) short-term fluctuations in real GDP and the price level.
B) long-term growth.
C) price fluctuations in an individual market.
D) output fluctuations in an individual market. correct answers A) short-term fluctuations in real
GDP and the price level.
4) An economy can improve its standard of living by
A) organizing production so that the quantity of goods produced per hour will decrease.
B) reducing the amount of human capital workers have.
C) increasing the amount of capital available per hour worked.
D) all of the above correct answers C) increasing the amount of capital available per hour
worked.
5) If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to
save?
A) 0.2
B) 0.8
C) 5.8
D) 9.1 correct answers A) 0.2
6) The purchase of $1 million of Treasury securities by the Federal Reserve, if there is no change
in the quantity of currency, will cause reserves at banks to
A) increase by $1 million.
B) increase by less than $1 million.
C) decrease by $1 million.
D) decrease by less than $1 million. correct answers A) increase by $1 million.
7) The three main monetary policy tools used by the Federal Reserve to manage the money
supply are
A) interest rates, tax rates, and government spending.
B) tax rates, government purchases, and government transfer payments.
C) open market operations, discount policy, and reserve requirements.
D) open market operations, the exchange rate of the dollar against foreign currencies, and
government purchases. correct answers C) open market operations, discount policy, and reserve
requirements.
, 10) If the per-worker production function shifts down,
A) it now takes more capital per hour worked to get the same amount of real GDP per hour
worked.
B) an economy can increase its real GDP per hour worked without changing the level of capital
per hour worked.
C) the per-worker production function becomes steeper.
D) positive technological change has occurred in the economy. correct answers A) it now takes
more capital per hour worked to get the same amount of real GDP per hour worked.
11) The statement, "My iPhone is worth $300" represents money's function as
A) a medium of exchange.
B) a unit of account.
C) a store of value.
D) a standard of deferred payment. correct answers B) a unit of account.
12) In the long run, a country will experience an increasing standard of living only if it
experiences
A) a high rate of consumption.
B) positive technological change.
C) a high rate of labor force growth.
D) a slow rate of population growth. correct answers B) positive technological change.
13) The portion of ________ that a bank does not loan out or spend on securities is known as
________.
A) loans; reserves
B) deposits; reserves
C) deposits; securities
D) loans; securities correct answers B) deposits; reserves
15) Which of the following would cause the short-run aggregate supply curve to shift to the
right?
A) an increase in the price level
B) a decrease in inflation expectations
C) a technological advance
D) an increase in interest rates correct answers C) a technological advance
17) Workers and firms both expect that prices will be 2.5% higher next year than they are this
year. As a result,
A) workers will be willing to take lower wages next year, but not lower than a 2.5 percent
decrease.
B) the purchasing power of wages will rise if wages increase by 2.5%.
C) the short-run aggregate supply curve will shift to the left as wages increase.
D) aggregate demand will increase by 2.5%. correct answers B) the purchasing power of wages
will rise if wages increase by 2.5%.
21) The quantity equation states that
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