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Free CFA-Level-I Exam Braindumps (page: 353)

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PDF with 3963 Questions

If the amount of money in circulation is $200 million and the nominal GDP is $950 million, then the money velocity is ________.

  1. 1.90
  2. 4.75
  3. 0.21
  4. 19.0

Answer(s): B

Explanation:

Velocity of money is defined as GDP divided by the stock of money. It is simply the average number of times a dollar is used to purchase a final product or service during a year. Thus, $950 million divided by $200 million equals 4.75.



Each month, the Bureau of Labor Statistics calculates unemployment by

  1. making projections based on census data.
  2. surveying large business and government employers.
  3. surveying all workers in the economy.
  4. surveying a random sample of households.

Answer(s): D

Explanation:

The BLS does not contact each person in the U.S. to determine his or her employment status. Instead, it randomly samples 59,500 households drawn from 729 locations in the U.S. The survey is designed to reflect geographic and demographic groups in proportion to their representation in the nation as a whole.



If the Fed conducts a demand stimulus policy, the rational expectations theory implies that

  1. the slope of the Phillips curve will increase.
  2. unemployment will temporarily fall below the natural rate.
  3. the Phillips curve immediately shifts upward.
  4. the natural unemployment will rise.

Answer(s): C

Explanation:

Under rational expectations people quickly anticipate the effect of policy changes and adjust their actions accordingly. Thus, under a demand stimulus policy the Phillips curve immediately shifts upward because individuals anticipate an acceleration in the inflation rate due to the more expansionary macropolicy.



If the resources of an economy were fully employed and the marginal propensity to consume were 0.75, a $10 billion increase in investment would cause

  1. real income to rise $40 billion.
  2. real income to rise $80 billion.
  3. real income to rise $20 billion.
  4. inflation to increase.

Answer(s): D

Explanation:

When the economy is operating at full employment capacity, increases in aggregate demand cannot be accommodated by increases in output. Instead, increases in aggregate demand are met simply by price increases due to the heightened competition for output.






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