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ECON 201 � Final Exam � Ansbach - Katterbach - Spring 2013, Session 1

Final exam covering fundamental economic principles.

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    ECON 201 – FINAL EXAM – ANSBACH - KATTERBACH - SPRING 2013, SESSION 1 Page 1 of 18 E CON 201 – Final Exam – Ansbach - Katterbach - Spring 2013, Session 1

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    ECON 201 – FINAL EXAM – ANSBACH - KATTERBACH - SPRING 2013, SESSION 1 Page 2 of 18 TRUE / FALSE 1. True False A side benefit of international trade is that it links national interests and increases the opportunity costs of war. 2. True False When C + I g = GDP in a private closed economy, S = I g and there are no unplanned changes in inventories. 3. Tru e False The risk - free interest rate is the rate on long - term U.S. government bonds. 4. True False Bond prices and interest rates are directly or positively related. 5. True False The public debt is the accumulation of all deficits and surpluses that have occurred through time. 6. True False The M 2 money supply may be larger or smaller than the M 1 money supply depending on the size of small - denominated time deposit balances and Money Market Mutual Fund balances held by individuals. 7. True False Excess reserves are the amount by which required reserves exceed actual reserves. 8. True False The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds. 9. True False The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

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    ECON 201 – FINAL EXAM – ANSBACH - KATTERBACH - SPRING 2013, SESSION 1 Page 3 of 18 10. True False Investment is highly stable; it increases over time at a very steady rate. MULTIPLE CHOIC E 11. A recessionary expenditure gap is: A. the amount by which the full - employment GDP exceeds the level of aggregate expenditures. B. the amount by which equilibrium GDP falls short of the full - employment GDP. C. the amount by which investment exceeds saving at the full - employment GDP. D. the amount by which aggregate expenditures exceed the full - employment level of GDP. 12. The multiplier effect indicates that: A. a decline in the interest rate will cause a proportionately larger increase in investment. B . a change in spending will change aggregate income by a larger amount. C. a change in spending will increase aggregate income by the same amount. D. an increase in total income will generate a larger change in aggregate expenditures. 13. Which one of the following is true about the U.S. Federal Reserve System? A. There are 12 regional Federal Reserve Banks. B. The head of the U.S. Treasury also chairs the Federal Reserve Board. C. There are 14 members of the Federal Reserve Board . D. The Open Market Committee is smaller in size than the Federal Reserve Board.

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    ECON 201 – FINAL EXAM – ANSBACH - KATTERBACH - SPRING 2013, SESSION 1 Page 4 of 18 14. If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is: A. 18 percent. B. 24 percent. C . 12 percent. D. 6 percent. 15. Refer to the above diagram for a private closed economy. The equilibrium level of GDP is: A. $400. B. $300. C. $200. D. $100 .

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    ECON 201 – FINAL EXAM – ANSBACH - KATTERBACH - SPRING 2013, SESSION 1 Page 5 of 18 16. Which of the following represents the most expansionary fiscal policy? A. a $10 billion tax cut B . a $10 billion increase in government spending C. a $10 billion tax increase D. a $10 billion decrease in government spending 17. Refer to the above table. The economy shown is a: A. private economy. B. private open economy. C. mixed closed economy. D . mixed open economy.

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