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ECO4223 Final Exam Review: Questions & Answers
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ECO4223 Final Exam Review: Questions & Answers
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ECO4223 Final Exam Review: Questions & Answers Which of the following contributes to GDP? Correct Ans - D) Value of all final goods and services.Which of the following is true regarding GDP? Correct Ans - A) GDP does not include intermediate goods, which are used to produce other final goods. (Example: Tires used to make a car)
If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to 2005 is Correct Ans - D) -10%
If the Nominal GDP in 2001 is $9 trillion, and 2001 real GDP in 1996 price is $6 trillion, the GDP deflator price index is Correct Ans - B) 150
If the CPI is 120 in 1996 and 180 in 2002, then between 1996 and 2002, prices
have increased by Correct Ans - D) 50%
What is the inflation rate if the GDP deflator in 2012 was 112, and the GDP deflator in 2013 was 115? Correct Ans - A) 2.68%
What is the nominal GDP in 2010, if real GDP in 2009 was $12 billion and the GDP deflator is 108? Correct Ans - D) $12.96 billion
If the expected inflation decreases, the real cost of borrowing _____________ and the supply of bonds decreases causing the supply curve to shift ____________. Correct Ans - B) Rises, shifts to the left
If the nominal rate of interest is 2 percent, and the expected inflation rate is -
10 percent, the real rate of interest is Correct Ans - C) 12%
If you expect the inflation rate to be 12% and a 1-year bond has a yield to maturity of 7%, then the real interest rate on this bond is Correct Ans - C) -5%
If you expect the inflation rate to be 15% next year and a 1-year bond has a yield to maturity of 7%, then the real interest rate on this bond is Correct Ans - C) -8% A zero coupon bond pays annual interest and has a future value of $1,000, matures in 4 years and has a yield to maturity of 6.5%. What is the present value of this bond? Correct Ans - D) $777.32
The price of a zero coupon bond and the yield to maturity are ___________ related; that is, as the yield to maturity ______________, the price of the bond ___________. Correct Ans - A) negatively, rises, falls
As the price of a coupon bond increases the YTM __________. Correct Ans - B) decreases
If the interest rate on a bond rises, and you want to sell it before maturity, you will most likely experience a _____________. Correct Ans - D) loss
The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today. Correct Ans - C) present value
The problem created by asymmetric information before the transaction occurs is called ___________, while the problem created after the transaction occurred is called _____________. Correct Ans - B) adverse selection, moral hazard
Dennis notices that jackets are on sale for $99. In this case money is functioning as a Correct Ans - C) unit of account
High interest rates might __________ purchasing a house of car but at the same time high interest rates might ___________ saving. Correct Ans - C) discourage, encourage
The bond markets are important because they are Correct Ans - D) the markets where interest rates are determined
If bad credit risks are the ones who most actively seek loans then financial intermediaries face the problem of Correct Ans - A) adverse selection
An example of _________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for a cruise for all of their employees and their family members. Correct Ans - D) moral hazard
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