5. The current Chairman of the Board of Governors of the Federal Reserve System
ID: 1209263 • Letter: 5
Question
5. The current Chairman of the Board of Governors of the Federal Reserve System (the “Fed”) is
A. Alan Greenspan.
B. Adam Smith.
C. Janet Yellen.
D. Timothy Geithner.
6. The federal government currently subsidizes cotton farming by cash payments and other methods that amount to over $4 billion per year. Say that Congress votes to increase this subsidy by 10%. The likely effect of this on US cotton production would be that
A. cotton production will increase.
B. cotton production will remain unchanged.
C. cotton production will decrease.
D. the effect on cotton production cannot be determined.
7. Refer to the equation below which calculates the rate of inflation for a country for year t, where t is the current year and t-1 refers to the previous year. Now, let the GDP deflator be the price index variable. If the GDP deflator was 114.3 last year and is 118.2 for this year, what is this year’s inflation rate?
A. 1.7%
B. 3.4%
C. 3.9%
D. 4.7%
8. Refer to Figure 3 below. What is the slope of this production possibilities curve, measured from point A to point B?
A. -1.33
B. -0.75
C. 0.75
D. 1.33
E. 3.0
9. Nominal GDP for year t is computed by summing the dollar value, measured in year t’s prices, of all goods and services produced within a nation during year t. If the table below represents all production within an economy, what was the value of nominal GDP in 2005?
A. $1650.
B. $1980.
C. $2030.
D. $2400.
10. Two nations, Alpha and Bravo, are similar in many ways. Alpha, however, has a much more generous system of unemployment and welfare benefits. All else equal, what would you expect to be true of Alpha’s level of unemployment?
A. Unemployment will be much higher in Alpha than in Bravo.
B. Unemployment will be about the same in Alpha as in Bravo.
C. Unemployment will be much lower in Alpha than in Bravo.
D. No comparison of unemployment in Alpha and Bravo is possible.
11. According to the World Bank, in 2011, Denmark’s economy produced approximately $40,983 worth of goods and services per person. Hungary, meanwhile, produced only $21,610 worth of goods and services per person. Which of the following is most likely NOT an explanation for the differences in the economies of Denmark and Hungary?
A. Denmark’s economy has more efficient machines and factories.
B. Denmark’s workers are naturally more productive than Hungary’s.
C. Denmark devotes more resources to education and training than does Hungary.
D. Denmark’s legal system has a stronger system of support for property rights than does Hungary’s.
12. After graduation, you take a job in Buffalo, NY, very near the Canadian border. Apartments on the American side can be rented for 800 US dollars per month while apartments on the Canadian side of the border rent for 1200 Canadian dollars per month. If travel time to your job is the same from either apartment, you should
A. rent the American apartment because 800 dollars is cheaper than 1200 dollars per month.
B. rent the Canadian apartment because a 1200 dollar apartment likely is much nicer than an 800 dollar apartment.
C. rent the American apartment because it is illegal to live in one country and work in another.
D. You cannot compare the apartments unless you know the exchange rate between Canadian and American dollars.
13. Suppose the Alabama state government implements a massive new public spending program throughout the state. Which of the following would be most consistent, in the short run, with the aggregate supply and aggregate demand model?
A. An increase in Alabama’s unemployment rate and price level.
B. A decrease in Alabama’s unemployment rate and price level.
C. An increase in Alabama’s unemployment rate and a decrease in its price level.
D. A decrease in Alabama’s unemployment rate and an increase in its price level.
14. Suppose that the Federal Reserve conducts an open market purchase of US Treasury bonds. Assuming no other changes, what effect should we expect to see on interest rates?
A. Interest rates will increase.
B. Interest rates will remain unchanged.
C. Interest rates will decrease.
D. The effect on interest rates cannot be determined.
15. Once a week you go to the local ice cream shop. Over the past 6 months you have noticed a decrease in the price of ice cream and a decrease in the amount of ice cream sold each day. Which of the following could explain the changes in the ice cream market?
A. The supply of ice cream has increased.
B. The supply of ice cream has decreased.
C. The demand for ice cream has increased.
D. The demand for ice cream has decreased.
Explanation / Answer
5. C - Janet yellen
6. D - it can not be determined as in the Short Run the subsidies would not have a significant volume change in cotton plantation as it is not possible to alter the production plans in the short run. Whereas farmers will benefit from the subsidies and further incentivise them to grow more cotton, therefore, in the long run the production of cotton will increase.
7. B - 3.4%
8. A - (-1.33) (Change in Y axis/Change in X axis)
9. D - $2400 ($100*16 + $160*5)
10. D
11. B
12. D
13. D
14. A - Interest rates will increase as the open market purchase states that the money supply in the economy will decrease or rather shift left which means money demand being the same, a shift in money supply to the left increases the interest rate.
15. D - the demand for ice cream has decreased because of which the amount of ice cream sold each day is decreasing and even if the prices are decreased, people are not demanding ice cream.
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