Introduction to Macroeconomics · Final exam · 27 June 2014
1. Knowing the GDP deflator from 2013 and nominal GDP from
2013, it is possible to calculate
(a) the inflation rate of 2013.
(b) the real interest rate of 2013.
(c) real GDP of 2013.
(d) None of the above
2. Define the goverment budget as government expenditure
minus taxes plus transfers. Then one of the fundamental
macroeconomic identities holds that
(a) savings equal investment minus the government budget
minus net exports.
(b) investment equals savings plus the government budget plus
net exports.
(c) savings equal investment plus the government budget plus
net exports.
(d) None of the above
3. According to the Phillips curve,
(a) a rise in the inflation rate reduces the interest rate.
(b) a rise in the unemployment rate reduces the exchange rate.
(c) a contraction in real GDP causes an increase in the GDP
deflator.
(d) None of the above
4. According to the aggregate supply and aggregate demand
model, a contractionary monetary policy causes
(a) an appreciation of the dollar against the euro and a fall in
the interest rate.
(b) a fall in the inflation rate and an increase in GDP.
(c) the transformation of a supply-side policy into a fiscal
policy and vice versa.
(d) None of the above
5. The interest rate is likely to diminish when
(a) the central bank increases the amount of reserves that banks
must deposit in the central bank.
(b) the government substantially increases the issuance of
government bonds and T-bills.
(c) families reduce their liquidity ratio.
(d) None of the above
6. What sentence is not true?
(a) The currency market model can be used to find the effect on
the exchange rate of a fall in the domestic inflation rate.
(b) The liquidity market model can be used to find the effect on
the interest rate of a fall in the domestic inflation rate.
(c) The aggregate supply and aggregate demand model cannot
be used to find the effect on the domestic inflation rate of a
rise in the real exchange rate.
(d) The aggregate supply and aggregate demand model can be
used to find the effect on the GDP of an expansionary
monetary policy.
7. According to the aggregate supply and demand model, what
could offset the negative impact on GDP of a recession?
(a) A revaluation, under a fixed exchange rate regime.
(b) A contractionary supply-side policy.
(c) An expansionary monetary policy.
(d) None of the above
8. A fall in the interest rate is not to be expected if
(a) the central bank drops to zero the amount of reserves banks
must hold at the central bank.
(b) the government issues financial assets to finance a rise in
the government budget deficit.
(c) households increase their purchases of financial assets.
(d) None of the above
9. The purchasing power parity exchange rate
(a) is a nominal exchange rate.
(b) is a real exchange rate.
(c) is the inflation rate that preserves purchasing power.
(d) None of the above
10. Which association between tool and type of policy is not
correct?
(a) Transfers / fiscal policy
(b) Open market operation / monetary policy
(c) Government subsidies to cover the expenses firms
incurred in activities of research, development, and
innovation / supply-side policy
(d) None of the above
11. According to the Fisher equation,
(a) the nominal exchange rate is the real exchange rate plus
the inflation rate.
(b) the unemployment rate is inversely related to the inflation
rate.
(c) by subtracting the inflation rate from the nominal interest
rate the real interset rate is obtained.
(d) None of the above
12. An expansionary monetary policy combined with a
contractionary fiscal policy
(a) for sure makes GDP bigger.
(b) maybe reduces GDP.
(c) with all certainty leaves the inflation rate unchanged.
(d) None of the above
13. In which case the variable associted with the model is not a
variable directly determined by the model?
(a) Exchange rate and currency market model
(b) Inflation rate and liquidity market model
(c) GDP and aggregate supply and aggregate demand model
(d) None of the above
14. In which case it is foreseeable (or likely) that an increase
in the first variable will cause a fall in the second variable?
(a) GDP and unemployment rate
(b) Aggregate demand and inflation rate
(c) Inflation rate and interest rate
(d) None of the above
15. In which case the two events do not modify the aggregate
demand function in the same direction?
(a) Both the domestic interest rate and the exchange rate go
up.
(b) The number of consumers increases and the government
decrees a raise in the taxes consumers must pay.
(c) GDP of the rest of the world grows and the inflation rate
of the rest of the world increases.
(d) None of the above
16. A slumping economy is characterized by
(a) a fall in the unemployment rate down to negative values.
(b) a contraction in the level of general economic activity (or
a fall in real GDP).
(c) a hyperinflation followed by an inflationary deflation.
(d) None of the above
17. The inflation rate went up and the interest rate went down.
What cannot explain that both events occur simultaneously?
(a) An expansionary monetary policy has been conducted
and a contractionary fiscal policy has been executed.
(b) 50% of all firms and 50% of all banks close down.
(c) The central bank carries out a massive purchase of
financial assets and the government cuts spending.
(d) None of the above
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