Question

statements, but only one of them meets the subject requirement, please choose the right choice and fill its code in the table given in the Answer Sheet. The wrong choice, multiple choices or no choice will obtain zero point for each problem. 1. Gross domestic product is the market value of A. all transact B. all goods and services exchanged in an economy during a one- year period C. all final goods and services exchanged in an economy during a one-year period D. all final goods and services produced in an economy during a one-year period tions in an economy during a one-year period 2. Which of the following statements is true? A. A peak occurs at the start of an economic recovery B. A trough occurs at the start of an economic decline. c.A peak occurs when economic activity starts decreasing. D. A trough occurs when economic activity starts decreasing. 3. Inflation is a situation in which A. there is a decrease in purchasing power of the monetary unit. there is a decrease in the price level. c a given quantity of money purchases a larger quantity of goods. o. increases in the price level exceed increases in the nominal wage 4. Which of the following statements is false? A. A country's exports increase when the economic activity of its major trading partners increases, ceteris paribus B A country's exports increase when its currency depreciates, ceteris paribus c. A country's exports increase when t imports less, ceteris paribus D. A country's exports increase when the price level of its major trading partners rises, ceteris paribus 5. A decrease in the Federal Reserve's discount rate lowers the cost of borrowing A for banks from the Federal Reserve. B for individuals from the Federal Reserve. c for individuals from banks. . for banks in the fed funds market. II. Terms and concepts (5 problems x 2 points 10 points).

Answer 1

1. Gross domestic product is the market value of all final goods and services produced in an economy during a one year period.

Option D.

2. A peak in the economy occurs when the economy is operating at its highest level. Peak also Mark the start of economic decline.

A trough is the stage of economy cycle that marks the end of period of decline and transition to expansion. After trough the economy goes into the recovery phase.

Option C.

3. Inflation is a situation in which

a. There is a decrease in purchasing power of the monetary unit.

4. The export is dependent on the exchange rate. When the domestic currency depreciates then the export becomes cheaper to trading partner. Thus, export increases.

B.

5. A decrease in the Federal Reserve discount rate lowers the cost of borrowing for individuals from banks.

Since the banks have to pay less interest to the Federal Reserve due to lower discount rate. The banks will be having excess reserve with them that is the money supply will increase. Hence, this money supply can be distributed in the form of loan to customers.

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