2001 Economics Challenge Play-off
MACROECONOMICS
Round I

1. Using the equation MV=PQ, if nominal GDP is $10,000
and velocity is 2, the money supply is

1. $2,500
2. $5,000
3. $1,0000
4. $2,0000

2. "Supply-side economics" refers in part to a theory that when government policies on taxing, spending and regulating increase the incentives for the private sector to work and invest, the potential output of the economy is likely to grow. Which of the following is least compatible with the "supply-side" approach to stimulating economic growth?

1. Reducing personal and corporate income taxes.
2. Deregulating as much economic activity as possible.
3. Not taxing income received from saving or investing.
4. Providing government jobs for the unemployed.

3. Which of the following relationships is NOT generally expected to be the case (everything else held constant)?

1. Increases in the growth of the money supply lead to decreases in interest rates.
2. Increases in interest rates lead to increases in bond prices.
3. Increases in the price level lead to decreases in the purchasing power (or value) of money.
4. Increases in lending by commercial banks leads to increases in the money supply.

4. Which of the following is not true about bonds?

1. Selling bonds is a way of borrowing money.
2. Bonds may pay annual interest or may be sold initially for less than the face value at maturity.
3. Bonds are sold by businesses as well as governments.
4. The Federal Reserve sells the bonds it holds as assets to fund the federal deficit.

 

5. The typical results of an adverse supply shock are

1. lower prices and an increase in production.
2. government subsidies to export industries.
3. a fall in output and an acceleration of inflation.
4. a stimulus to economic growth and dramatically curbed inflation.

6. To be eligible for unemployment insurance benefits, one must

1. be an experienced worker.
2. not have quit his job.
3. be looking for a job.
4. All of the above.

Income	Consumption	Investment	New Exports
$1,500	1,350	140	20
$1,550	1,395	140	20
$1,600	1,440	140	20
$1,650	1,485	140	20
$1,700	1,530	140	20

7. In the above table, the equilibrium level of GDP is

1. $1,500
2. $1,550
3. $1,600
4. $1,650
5. $1,700
   
   

8. Antitrust laws are intended to prevent the concentration of industry from occurring as a result of

1. the anti-competitive use of market power.
2. the exploitation of technical advantages.
3. the persuasive use of advertising.
4. All of the above are correct.

9. Believers in fixed rules assert that

1. the economy's self-correcting mechanism is slow and not very reliable,
   even when supplemented by automatic stabilizers.
   Therefore, the rules need to be fixed only in the short run.
2. we should forget about discretionary policy and put the economy
   on automatic pilot, relying instead on the automatic stabilizers
   and the economy's natural, self-correcting mechanisms.
3. the length of stabilization lags is not important since most fiscal
   policy actions are taken promptly and the economy feels much
   of the stimulus from expansionary policy in less than a year after slipping into a recession.
4. with good economic forecasts, we can see a recession coming a full year ahead of time.
   
   

10. If the Federal Reserve wishes to increase rates it generally would do what with respect to government securities and the discount rate?

	Government Securities	Discount Rate
a.	Buy	Raise
b.	Buy	Lower
c.	Sell	Raise
d.	Sell	Lower

11. Who is most likely to be harmed by unanticipated inflation?

1. People of businesses which borrow money.
2. Governments which have a progressive personal income tax.
3. Workers with COLA clauses in their employment contracts.
4. Lenders or creditors.
5. Everybody fairly equally.

12. Generally the federal government finances a budget deficit by

1. reducing the national debt.
2. increasing the money supply.
3. issuing common stock.
4. sell bills, notes and bonds.
5. borrowing from other countries.

13. Growth in real GDP in the United States during the first quarter, 2001, is currently estimated by the Bureau of Economic Analysis at

1. -1 percent
2.  0 percent
3.  1 percent
4.  2 percent
5.  3 percent
   
   
   

14. Which of the following is an example of structural employment?

1. a computer programmer who quits her job to search for one in a warmer climate.
2. a construction worker who loses his job in the winter.
3. a mine worker who loses his job during a recession.
4. an economics teacher who decides to retire early.
5. a bank teller who is replaced by an ATM machine.

15. Growth in output per worker (labor productivity) of Western nations has been due to all the following except

1. growth in the quantity of capital.
2. technological advance (growth in the quality of capital).
3. education and training of the labor force.
4. the discovery of new ways to utilize various natural resources.
5. growth in the quantity of the labor force.