Exam 3 Macro Matthews Review :] (4 FINAL)

Which of the following both reduce net exports?

Exports FALL, Imports RISE

Other things the same, an increase in the U.S. interest rate causes U.S. net capital outflow to

FALL, so supply in the market for foreign currency exchange shifts left

If a country's budget deficit decreases, then the exchange rate

FALLS, which raises net exports.

Other things the same, when the price level falls, interest rates

Fall, so firms increase investment

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities. Most economists would say that Charisse's opinion is

classical in nature, and her view is more valid for the long run than the short run

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), expresses

how output deviates in the short run from its long run natural rate.

According to liquidity preference theory, an increase in the price level causes the interest rate to

increase, which decreases the quantity of goods and services demanded.

Other things the same, a decrease in the real interest rate

increases the quantity of loanable funds demanded.

If a country exports more than it imports, then it has

positive net exports and positive net capital outflows.

If a country has positive net capital outflows, then its net exports are

positive, and its saving is larger than its domestic investment

If the Federal Reserve increases the money supply, then initially there is a

surplus in the money market, so people will want to buy bonds.

A tax cut shifts the aggregate demand curve the farthest if

the MPC is large and if the tax cut is permanent.

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

the dollar depreciates.

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

the nominal exchange rate rises, the price of goods in Italy falls

An decrease in taxes shifts aggregate demand

to the RIGHT, the larger the multiplier is the further it shifts

Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion, then by how far does aggregate demand shift to the right?

$300 billion and $270 billion

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

A decrease in the supply of loanable funds

Which of the following correctly explains the crowding out effect?

An increase in government expenditures increases the interest rate and so reduces investment spending

Other things the same, which of the following responses would we expect to result from a decrease in U.S. interest rates?

All of the ABOVE :]

When the interest rate is above the equilibrium level,

All of the above :]

When Microsoft establishes a distribution center in France, US net capital outflow

Increases because Microsoft makes a direct investment in capital in France

Aggregate demand shifts right when the Federal Reserve

Increases the money supply

When the real exchange rate for the dollar depreciates, U.S. goods become

Less expensive relative to foreign goods, which makes exports rise and imports fall.

According to the theory of liquidity preference, if the interest rate rises

People want to hold less money, the response is shown by moving to the left along the money demand curve

Suppose that the US imposed an import quota on beef. Sales of the US beef producers would

RISE & exports of other industries would decrease

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

RISES, shifting aggregate supply LEFT

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange model is the

Real exchange rate

In the mid-1970s the price of oil rose dramatically. This

Shifted aggregate supply left, the price level rose, and real GDP fell

Suppose a Starbucks tall latte costs $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

The Big Mac but not the Latte

Which of the following would cause the real exchange rate of the US dollar to depreciate?

The US Gov't budget deficit decreases

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

The demand for loanable funds shifts left

Using the liquidity-preference model, when the Federal Reserve decreases the money supply,

The equilibrium interest rate increases

According to purchasing-power parity what should the nominal exchange rate between the US and another country be equal to?

The price level in other country divided by the price level in the US

If the actual price level is 165, but people had been expecting it to be 160, then

The qty of output supplied rises, but only in the short run

The long-run aggregate supply curve shifts left if

There is a natural disaster

An increase in the money supply

and an investment tax credit both cause aggregate demand to shift right

If people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's interest rate

and net exports would RISE

if a country went from a gov't budget deficit to a surplus, national saving would

decrease, shifting the demand for loanable funds RIGHT

When taxes increase, consumption

decreases as shown by a shift of the aggregate demand curve to the left

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

e=p*/p

The long-run aggregate supply curve shifts RIGHT if

either immigration from abroad increases or technology improves