Question: 1. One method of privatization used by command socialist economies in the transition to free markets is to: Select one:
a. establish a system of money and capital markets.
b. allow the central bank to regulate the money supply.
c. give away ownership shares for all government property
d. sell domestic currency on the foreign exchange market.
2. Setting a specific income level and then defining a person (or household) as poor if his or her (or its) income falls below that income level is called a(n): Select one:
a. means-tested test.
b. relative income test.
c. absolute income test.
d. nominal income test.
3. The multiplier effect indicates that Select one:
a. the aggregate demand curve is downward sloping.
b. a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect
c. a change in income causes a magnified change in investment.
d. a change in any autonomous component of aggregate expenditure brings about a magnified change in income.
4. Suppose your firm is considering an investment project that will generate an expected return of 15%. The project costs $200,000. Suppose further that your firm has $100,000 of retained earnings. If the market interest rate is 10%, your firm should Select one:
a. loan the retained earnings out at 5%.
b. loan the retained earnings out at 10%.
c. loan the retained earnings out at 15%.
d. invest the $100,000 of retained earnings in the project and borrow the remaining $100,000 at the interest rate of 10%.
5. Changes in net exports caused by changes in the domestic price level Select one:
a. shift the aggregate demand curve in the same direction as the price change.
b. shift the aggregate demand curve in the opposite direction of the price change.
c. do not shift the aggregate demand curve.
d. will not affect aggregate demand.
6. Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run? Select one:
a. If the money supply grows at a faster rate than growth in YP, there will be inflation.
b. If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate.
c. If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation.
d. If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP.
7. In this Lorenz Curve, the formula for the GINI coefficient is: (Yellow Area) / (Yellow Area + Green Area). If the Yellow Area is 0.1 and the Green Area is 0.4, what is the GINI coefficient? Select one:
a. 0.1
b. 0.2
c. 0.4
d. 0.5
e. 1.0