Macroeconomics Answers

. What would you expect to happen to spending on food at home and spending on food in

restaurants during a decline in economic activity? How would income elasticity of

demand help explain these changes? Justify your stance.

Assume R = 10%

b)   Suppose the bank’s investment portfolio value goes up from its initial level by 10%. Show the bank’s changed balance sheet. What would be the bank’s new capital and new leverage ratio? Show the percentage changes in bank capital and in its leverage ratio.

c)   Suppose due to a sudden stock market crash, the bank’s investment portfolio goes down from the initial level by 15%. Show the bank’s changed balance sheet. What would be the bank’s new capital and leverage ratio? Show the percentage changes in bank capital and in leverage ratio.  

a) Define nominal exchange rate (NER) and real exchange rate (RER).

b) What happens to the U. S. real exchange rate (RER) and its net exports (NX) under the following situations?

i)    The U.S. NER is unchanged, the U.S. price rises, foreign price stays the same.

ii) The U.S. NER is unchanged, the U.S. price unchanged, foreign price rises.

iii) The U.S. NER rises, the U.S. price remains same, foreign price stays the same.

iv) The U.S. NER is unchanged, the U.S. price falls, foreign price falls.

v) The U.S. NER falls, the U.S. price rises, foreign price stays the same

Suppose because of anticipated higher inflation in the near future, the Fed wants to decrease country’s money supply by $100 billion now.

a)   If the reserve ratio R = 10% and the Fed wants to use its open market operations policy tool, will it buy or sell U. S. government bonds?

b)   What would be the amount of bonds the Fed will buy or sell in the market? Show your calculations.

do you think increase in government expenditures can be a cause of inflation?

QUESTION 24

If high-income countries want low-income countries to reduce their greenhouse emission gasses:

1. All they have to do is ask.
2. A simple explanation of the costs and benefits involved will carry the day.
3. It will require armed conflict.
4. Then the high-income countries may need to pay some of the costs.
5. All of the above.  

QUESTION 25

Countries with higher income levels:

1. Will always be the worst polluters.
2. Produce the least pollution.
3. May be willing to place a relatively greater emphasis on environmental protection.
4. May be willing to place a lower emphasis on environmental protection.
5. Cannot be helped. 

QUESTION 26

We may fairly easily quantify the economic benefits of additional oil in the U.S.:

1. And they are definitely higher than the social costs.
2. And they are definitely lower than the social costs.
3. But we cannot quantify the explicit costs.
4. But the social costs are more challenging to measure.
5. Finally, we are done with this quiz.

QUESTION 21

Economists value a human life on the basis of studies of the value that people:

1. Actually place on human lives in their own decisions.
2. Actually place on human lives in other’s decisions.
3. Actually place on animals’ lives.
4. Actually place on their spare time.
5. Actually place on their property.

QUESTION 22

Findings suggest that any regulation that costs more than fifty million dollars per life saved:

1. Actually saves lives.
2. Has no impact on people’s lives.
3. Actually costs lives rather than saving them.
4. Is too much for our budget to handle.
5. Are beneficial to society.

QUESTION 23

No nation can by itself reduce emissions of carbon dioxide and other gasses:

1. Unless they are a poor nation.
2. If they are a poor nation.
3. By enough to solve the problem of global warming.
4. By enough to slow down global warming.
5. Unless the rest of the world agrees to do the same.

QUESTION 18

Because some environmental regulations have had benefits much higher than costs:

1. Does not prove that every individual regulation is a sensible idea.
2. Proves that every individual regulation is a sensible idea.
3. Means that more regulations would be beneficial to society.
4. Means that more regulations will be harmful to society.
5. All of the above. 

QUESTION 19

A substantial expansion of both rhino and elephant populations is broadly credited to:

1. Producers of pollution.
2. Consumers of pollution.
3. The military.
4. Ecotourism.
5. Economists.
6. Ethnocentrists.

QUESTION 20

The marginal costs of reducing pollution are generally:

1. Irrelevant.
2. Unknowable.
3. Substantial.
4. Decreasing.
5. Increasing.

QUESTION 16

The advantage of market-oriented environmental tools is:

1. That they reduce pollution by more than other methods.
2. That they reduce pollution by less than the other methods.
3. That they can achieve any desired reduction in pollution at a lower cost to society.
4. That they can achieve any desired reduction in pollution at a higher cost to society.
5. All of the above.

QUESTION 17

A more recent study estimated that the environmental benefits to Americans of the Clean Air Act:

1. Will exceed their costs by a margin of one to four.
2. Will exceed their costs by a margin of four to one.
3. Will exceed their costs by a margin of ten to one.
4. Will exceed their costs by a margin of 200 to one.
5. Will not be worth the costs of implementation.  

QUESTION 13

A pollution charge gives a profit-maximizing firm an incentive to:

1. Work harder.
2. Hire more workers.
3. Hire fewer workers.
4. Determine ways to reduce its emissions.
5. Determine ways to increase its emissions.

QUESTION 14

Compared with a command-and-control regulation, a pollution tax:

1. Actually increases pollution.
2. Reduces pollution in a more flexible, expensive way.
3. Reduces pollution in a less flexible, cheaper way.
4. Reduces pollution in a more flexible, cheaper way.
5. Wins more hearts. 

QUESTION 15

Buying and selling the marketable pollution permits will determine:

1. Exactly which firms reduce pollution and by how much.
2. Exactly which firms reduce pollution, but has no impact on the amount.
3. The amount of pollution reduction, but cannot allocate the reduction between firms.
4. Which consumers benefit.
5. How much tax revenue the government will collect.