NATIONAL ECONOMICS UNIVERSITY FINAL EXAM

MACROECONOMICS
CLASS: ……………………………..
ROOM: ……… DATE: …….
SCHOOL OF ACCOUNTING AND AUDITING Time: ……………..
Duration: 90 minutes
BA ACCOUNTING INTEGRATED WITH
ICAEW CFAB

SET 1

QUESTION 1

For each of the following statements choose the correct answer and provide an explanation for
your choice in no more than three lines.
a) Aggregate demand shifts to the left if the money supply decreases.
i) True
ii) False
(0.4 mark)
b) Transfer payment is not counted in GDP to avoid double counting.
i) True
ii) False
(0.4 mark)
c) If banks decide to hold a smaller part of their deposits as excess reserves, the money
supply will fall, ceteris paribus.
i) True
ii) False
(0.4 mark)
d) Which of the following events can cause the Long-run aggregate supply curve to shift:
i) Increase in price level
ii) A fall in unemployment rate
iii) Increase in Government spending
(0.4 mark)
e) The only function of money is to be a medium of exchange.
i) True
ii) False
(0.4 mark)

Total: 2 marks

QUESTION 2

a) Suppose that the required reserve ratio is 20% and you deposit $120,000 into ABC bank.
Assume that banks hold no excess reserves and households hold no currency. What is
the money multiplier? What is the total increase in deposits in the banking system? What
is the change in the money supply?
(1 mark)

b) Suppose that the required reserve ratio is 10% and you withdraw $40,000 from ABC Bank.
What is the money multiplier? What is the total decrease in deposits in the banking
system? What is the change in the money supply?
(1 mark)

Total: 2 marks

Note:

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 NATIONAL ECONOMICS UNIVERSITY FINAL EXAM

MACROECONOMICS
CLASS: ……………………………..
ROOM: ……… DATE: …….
SCHOOL OF ACCOUNTING AND AUDITING Time: ……………..
Duration: 90 minutes
BA ACCOUNTING INTEGRATED WITH
ICAEW CFAB

QUESTION 3

If someone argues that a strong dollar is "good for America" because Americans are able to
exchange some of their GDP for a greater amount of foreign GDP, is it true that a strong dollar is
good for every American? Why or why not?
Total: 2 marks

QUESTION 4

The government spends $5 billion to buy police cars.

a) Explain why aggregate demand might increase by more than $5 billion.
(1 mark)

b) Explain why aggregate demand might increase by less than $5 billion

(1 mark)

Total: 2 marks

QUESTION 5

Assume that a country is in its long – run equilibrium.

a) The Government increases spending on national defense. What will happen to output, price
level and unemployment in the short run using an AD – AS diagram?
(1 mark)

b) To stabilize output, should the Government do expansionary policies or contractionary

policies. Describe how the Central bank uses their tools for these policies.
.
(1 mark)

Total: 2 marks

*** END OF PAPER***

Note: