Ch. 2: Plate Tectonics/ECON

anna hasselhoff, an editor at a newspaper, came across an article about the countrys trade in manufactured goods this year which of the following conclusions can most reasonably be drawn from this information

Anna is confusing the balance of trade with/ the current account balance

suppose the economy is in equilibrium in the first period at point a. in the second period the economy reaches point b. we could expect the federal government to pursue what type of policy in order to move ad2 to ad2 policy and reach equilibrium (point c) in the second period? actual real gdp potential real gdp price level unemployment

Expansionary fiscal policy increases does not change increases decreases

The growth rate of real GDP in the country of west pruasia was very low last year. Which of the following questions is most important to answer in order to determine the accuracy of the claim that fiscal policy can sufficiently increase aggregate demand?

How strong is the impact of government spending on the country's net exports?

the latest estimates published by the government of rossland... at the end of the following year it was noted that tax revenue was actually $46.5 million, whie the other estimateswere accurate. which of the following must also be true given that the other four variables were correctly estimated?

The actual level of national savings was equal to what was estimated.

foreign households and foreign firms demand U.S. dollars in exchange for foreign currency for all of the following except U.S. households and U.S. firms supply U.S. dollars in exchange for foreign currency

When U.S. firms and house holds want foreign currencies so that they can buy goods and services produced in those foreign countries If the interest rate and other conditions in the foreign countries are lucrative for U.S firms and households to invest dollars.

Expansionary monetary policy on the part of the central bank of japan will cause:

a decrease in interest rates in japan and a decrease in the value of the yen relative to other currencies

a political commentator argues: congress and the president are more likely to enact an expansionary fiscal policy... briefly explain whether you agree.

agree because expansionary fiscal policy create employment and increase gdp whereas contractionary fiscal policies impose an artificial recession on the economy.

which of the following is not a correct comparison between an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

all of the above are correct statements about the two models

suppose the government of the united states runs a budget deficit. this will result in:

an increase in interest rates in the united states and an increase in the value of the u.s dollar relative to other currencies

Volcanic Arc

arc- shaped chain of volcanoes

changes in taxes and spending that happen without actions by the government are called if the government cuts taxes in order to increase aggregate demand the action is called

automatic stabilizers a discretionary fiscal policy

an article published in a leading trade journal in the country avalon states thaty avalon's current account balance will improve in the coming year which of the following if true, will support franks claim that current account balance may not improve in spite of a budget surplus

avalons inability to meet global environmental standards is causing many trading partners to impose high import barriers on goods manufactured in avalon

Passive Margin

boundary of continent is NOT on plate tectonic

Active Margin

boundary of continent is on plate tectonic boundary

Plate boundaries

breaks between the plates

the figure to the right illustrates the economy using the dynamic aggregate demand and aggregate supply model if actual real gdp in 2006 occurs at point b and potential gdp occurs at LRAS 06, we would expect the federal govt to purchase a ____ If the govt policy is unsuccessful, what is the effect of the policy on the following macroeconomic indicators ? Actual real gdp____ potential real gdp ____ price level _____ unemployment ____

contractionary decreases does not change decreases increases

an attempt to reduce inflation required _____ fiscal policy, which causes real gdp to ____ and the price level to ____

contractionary, fall, fall

Seafloor Spreading

creation of new oceanic crust and movement of existing crust across earth's surface from underwater volcanic mountain chains

complete the following table for a static AD-AS model:

decreases taxes rise decrease govt spending fall

suppose the that currency traders expect that the value of euro will fall in the future. How will this will affect the demand and supply of euro in the foreign exchange market?

demand for euros will decrease and supply of euros will increase

Magnetic Time Scale

detailed history of Earth's magnetic reversals

consider the figures below. determine which combination of fiscal policies shifted ad1 to ad2 in each figure and returned the economy to long run macroeconomic equilibrium

example a: expansionary fiscal policy. example b: contractionary fiscal policy

the multiplier effect is only a consideration for increases in government purchases

false

what is fiscal policy who is responsible for fiscal policy?

fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives the federal government controls fiscal policy

Slab Pull Force

force of subducting plate

Ridge Push Force

higher elevation mid-ocean ridges

if congress and the president decide an expansionary fiscal policy is necesssary, what changes should they make in govt spending or taxes what changes should they make if they decide a contractionary fiscal policy is necessary ?

in this case, congress and the president should enact policies that increase govt spending and decrease taxes in this case, congress and the president should enact policies that decrease govt spending and increase taxes.

suppose the federal government increases spending without also increasing taxes in a closed economy stting this policy will ___ real gdp and ___ the price level in the short run in an open economy setting, the effect of government fiscal policies will be ____. for example in an open economy, expansionary fiscal policies affect interest rates and also exchange rates in the same direction and the changes in the latter create a ___ crowding out effect

increase, raise be dampened, larger

Continental Drift

large-scale movement of continents across earth's surface

Rift Valley

linear belt where continental crust pulls apart

Magnetic Anomaly

long, narrow, parallel bands with alternating high and low magnetic intensity

Magnetic Chron

major period in magnetic time scale

if government purchases were to decrease by 300 billion or taxes were increased by 300 billion, the equilibrium level of real gdp would decrease by therefore the statement above is

more than 300 billion incorrect

what do high interest rates have to do with current account deficits? curent account deficits

must be funded through a financial account surplus which is facilitated by higher interest rates.

Subduction

plate sink into mantle

according to a 2013 article on top forex news: when the articles refers to a "weakening currency", it means that the indian rupee will Higher interest rates strengthen a currency because they

purchase less foreign currency Increase the demand for the currency

the decline in china's current account surplus influences the amount that china is investing in foreign countries relative to the amount that foreign countries are investing in china because it

reduces china's ability to invest in other countries.

Ron was vacationing in France, when his camera was stolen..$275/$0.85

ron will be paying 323.53 euros

which of the following equations below represents the savings and investment equation in an open economy ?

s= I+NFI

fiscal policy has a ____ effect on aggregate demand in an open economy

smaller

for a country such as france which of the following statements is always true?

the balacne of payments is zero

In 2012, domestic investment in a country was 29% of gdp, and the country;s net foreign investment was 3.9% of gdp

the country's national saving was 32.9% of gdp

two years back the republic of terbia a developed economy experienced a massive boom in the information technology industry. which of the following if true will support jaimes view that an expansionary fiscal policy would be ideal in the given situation

the current nominal interest rate is close to zero in the country.

the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is called

the financial account

the growth rate of zerbia, a smaller developing country has fallen close to zero percent in the current year. harry miller and jonathon taylor ... which of the following if true would weaken harrys claim that the government investment in green technology will receive the economy in the near term?

the green technology industry in this country is highly capital-intensive and dependent on imported machinery.

in order to attract foreign investment, the government of alzuria had introduced various economic reforms five years back. which of the following can most reasonably be concluded from the information given above

the value of the domestic currency in the foreign exchange market is likely to become more volatile if the restrictions are removed

why does a $1 increase in government purchases lead to more than a $1 increase in income and spending?

through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to an increase in induced spending

the actual change in real gdp resulting from an increase in government purchases or a cut in taxes will be less than the simple multiplier effect indicates

true

since world war II, the federal government's share of total government expenditures has been between

two thirds and three quarters

Mid- Ocean Ridge

underwater mountain chains

when is it considered good policy for the government to run a budget deficit?

when borrowing is used for long lived capital goods