Macroeconomics Answers

20. Which of the following would be an indication that a nation has a persistent balance of
payment deficit?
A. it is buying gold abroad
B. it is borrowing abroad to finance capital investments
C. its imports exceed exports
D. Its holdings of foreign reserves are declining.

19. Suppose that the exchange rate between the Fiji currency and the US dollar today is
FJD 1.00 = USD 0.48. What is the value of a USD 800 worth of Samsung G7 mobile phone in
Fiji currency?
A. FJD 384.00
B. FJD 416.00
C. FJD 1538.46
D. FJD 1666.67

17. The cash rate is the interest rate on
A. overnight loans that banks make to each other
B. long-term loans made by banks to the public.
C. government loans from the Reserve Bank
D. public deposits in banks

18. The effect of lowering the cash rate by the Reserve Bank on the inflation rate. The inflation
rate:
A. increases
B. remains unchanged
C. stops
D. decreases

16. A single commercial bank must meet a 25 percent reserve requirement. If it initially has no
excess reserves and then $2000 in cash is deposited in the bank, it can increase its loans by a
maximum of:
A. $2000
B. $1250
C. $1500
D. $1000

15. An increase in the government budget deficit increases the ____ loanable funds and an
increase in the government budget surplus increases the ____ loanable funds.
Select one:
A. supply of; supply of
B. supply of; demand for
C. demand for; supply of
D. demand for; demand for

14. If government expenditure is increased by $200 billion and simultaneously taxes increase by
$200 billion, then
Select one:
A. aggregate demand decreases.
B. aggregate demand increases
C. aggregate demand does not change.
D. potential GDP increases.

13. Which of the following happens automatically when the economy goes into a recession?
A. A budget surplus falls.
B. Induced transfer payments falls.
C. Income taxes rise.
D. Government expenditures on goods and services increase.

11. Imports and income taxes make the AE curve ____ steep and ________ the value of the
multiplier.
Select one:
A. less; increase.
B. more; increase.
C. more; decrease.
D. less, decrease

12. If the M.P.C is 0.6 and investment increases by $6 billion, the equilibrium output (Y) will:
A. increase by $10 billion
B. increase by $15 billion
C. increase by $12 billion
D. decrease by $15 billion

10. The multiplier is 2.0 and, because of an increase in expected future profit, firms increase their
investment by $10 billion. As long as the SAS curve is not horizontal, in the short run,
equilibrium real GDP will
Select one:
A. be unaffected
B. increase by less than $20 billion.
C. increase by more than $20 billion.
D. increase by $20 billion.

9. Other things being equal, a reorganization of the OPEC cartel to permit it to increase oil prices
by 70 percent would most likely have which of the following effects?
A. It would shift the aggregate demand curve to the right
B. It would shift the aggregate supply curve to the right
C. It would shift the aggregate supply curve to the left
D. It would shift the aggregate demand curve right and the aggregate supply curve left