ECONOMICS 372 Final Exam Guide 1- ECO 372 Final Exam 1 Study Guide Questions and Answers
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Course
ECONOMICS
Institution
ECONOMICS
1.
Martha lends $200 to a friend who promises to return it after a year. Instead of lending it to her friend, Martha could have put the money in a bank where she could have earned an interest rate of 2 percent per annum. Martha’s opportunity cost of lending the money is _____.
•
$2
�...
1.
Martha lends $200 to a friend who promises to return it after a year. Instead of lending it to her friend,
Martha could have put the money in a bank where she could have earned an interest rate of 2 percent
per annum. Martha’s opportunity cost of lending the money is _____.
ï‚·
$2
ï‚·
$204
ï‚·
$200
ï‚·
$4
2
The exhibit given below shows the short-run aggregate demand and supply curves in an economy,
AD1 and AS1, and the long-run aggregate supply curve, LRAS. The economy was initially in equilibrium
when there was a decrease in aggregate demand, causing a shift of the aggregate demand curve from
AD1 to AD2. Which of
the following is true in this case?
ï‚·
, The economy will move from point B to point A in the short run and then to point C in the long
run.
ï‚·
The economy will move from point C to point B in the short run and then eventually to point A.
ï‚·
The economy will move from point D to point A in the short run and then to point C in the long
run.
ï‚·
The economy will move from point D to point C in the long run.
3
Suppose an economy is in long-run equilibrium. An increase in consumption expenditure will:
a) shift the short-run aggregate supply curve rightward and increase both the price level and real
output in the long run.
b) decrease both the price level and real gross domestic product in the long run.
c) increase the price level in the long run but have no effect on real gross domestic product.
d) shift the aggregate demand curve rightward and increase the real output in the long run.
4
In the long run, a higher saving rate:
, always leads to a higher level of productivity because of increasing returns to scale.
does not lead to a higher level of income because of deterioration in labor productivity.
always leads to a higher growth rate of output because of improvement in the stock of human capital.
does not always lead to a higher growth rate of output because of diminishing returns to capital.
5.
Suppose the net foreign investment in Italy is positive. This implies that:
ï‚·
Italians are buying more foreign assets than foreigners are buying Italian assets.
ï‚·
foreigners are buying relatively more Italian assets.
ï‚·
Italy is experiencing a net capital inflow.
ï‚·
foreign direct investment in Italy is higher than foreign portfolio investment in the country.
5)
Suppose the net foreign investment in Italy is positive. This implies that:
Italians are buying more foreign assets than foreigners are buying Italian assets.
foreigners are buying relatively more Italian assets.
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