Dwarf Printing

3. According to the Money Demand and Supply model,
(a) the quantity demanded of physical currency increases as the interest rate offered increases.
(b) the interest rate has no affect on the quantity supplied of money.
(c) an increase in the money supply curve results in an increase of the interest rate.
(d) the money demand curve is a straight, horizontal line.

4. The Federal Reserve Bank was originally formed for which direct purpose?
(a) “Lender of Last Resort”.
(b) Strict control over the money supply.
(c) Augmentation of the implicit interest rate.
(d) both (b) and (c).

5. An assumption of the neoclassical theory of growth is that
(a) knowledge has diminishing returns.
(b) people earn only a subsistence wage.
(c) technology booms increase the level of possible investment.
(d) all technology advances are the result of chance.

6. Which is not a correct result of an expansionary gap, according to Keynesian theory?
(a) Potential GDP is less than real GDP.
(b) The price level increases.
(c) Cyclical unemployment increases.
(d) The economy is in a short-run equilibrium.

7. Which of the following is NOT a correct empirical result of modern Economic Development theory?
(a) Fertility rates should increase when children can increase the household income.
(b) Fertility rates should decrease when the infant death rate increases.
(c) Fertility rates should decrease when an institutionalized social security system is in place.
(d) Fertility rates should decrease when working opportunities increase for women.

8. Suppose that kapital per hour rises by 10 units, increasing output per hour of labor by 1 unit. Then
a further 10 increase in kapital per hour will
(a) increase output per hour of labor by less than 1 unit.
(b) increase output per hour of labor by more than 1 unit.
(c) increase output per hour of labor by 1 unit.
(d) decrease output per hour of labor by less than 1 unit.

9. Suppose an economy is in recession. You are given four proposal plans to solve the current economic situation. As an astute economist, which plan would you recommend?
(a) Decrease the wage rate and cause aggregate demand to decrease.
(b) Decrease real GDP by increasing the wage rate.
(c) Increase potential GDP by increasing the quantity of kapital and/or labor.
(d) Increase the short-run aggregate supply curve by decreasing the wage rate.

10. The productivity curve shows that an increase in technological progress results in
(a) a decrease in the level of real GDP per hour of labor at any level of kapital per hour.
(b) no change in the level of real GDP per hour of labor at any level of kapital per hour.
(c) an increase in the quantity of labor.
(d) an increase in the level real GDP per hour of labor at any level of kapital per hour.

11. Potential GDP, or the “trendline” of the business cycle,
(a) is cyclical.
(b) measures the output that could be produced if the economy is at full employment.
(c) measures the actual production from year to year.
(d) Both (a) and (b) are correct.

12. Classical growth theory proposes that real GDP growth is “?” and that real GDP per person will “?”
the subsistence level.
(a) permanent; temporarily be above.
(b) permanent; always be above.
(c) temporary; be above and below.
(d) temporary; temporarily be above.

13. Because of the choices people make in the pursuit of profit, new growth theory argues that
(a) the kapital stock experiences diminishing returns.
(b) the economy can enjoy indefinite growth.
(c) technology growth slows down in the long-run.
(d) population growth increases will bring the wage rate back to subsistence level.

14. When an economy prints more currency without increasing the monetary base,
(a) interest rates increase.
(b) the value of each unit of currency decreases.
(c) the price level of all goods and services decreases.
(d) both (a) and (c).
(e) All of the above.

15. Economies naturally evolve away from the barter system because
(a) the creation of currencies and coins is just too profitable.
(b) certain metals become a more valuable commodity and is too heavy to carry around.
(c) the exchange of goods and services for other goods and services becomes inefficient due to possible mismatches.
(d) the concepts of loans, deposits and interest rates lead an economy to establish a standard currency.

16. According to the fiat system of currency,
(a) a currency is printed by numerous institutions but extremely regulated by the federal government.
(b) a currency is backed by either gold or silver, but controlled by the central bank.
(c) a currency is printed strictly by the central bank and/or nationalized mints.
(d) a currency is backed by the confidence of the economy’s growth and institutions.

17. Which population era was described having huge “Death Shocks” and an increasing population growth
rate?
(a) Pre-Agricultural.
(b) Settled Agriculture to Industrial Revolution.
(c) Industrial Rev