Macro Final Ch 21,3,18

If purchasing-power parity holds, a dollar will buy more goods in foreign countries than in the United States. A. as many goods in foreign countries as it does in the United States. B fewer goods in foreign countries than it does in the United States. C None of the above is implied by purchasing-power parity.

A. as many goods in foreign countries as it does in the United States.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions A. raise both U.S. net exports and U.S. net capital outflows. B. raise U.S. net exports and lower U.S. net capital outflows. C. lower both U.S. net exports and U.S. net capital outflows. D. lower U.S. net exports and raise U.S. net capital outflows

A. raise both U.S. net exports and U.S. net capital outflows.

Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order? A. Cancun, New York B. Munich, Tokyo C. Tokyo, Munich D. New York, Cancun

B. Munich, Tokyo

Which of the following is not correct? A. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. Correct! B. The gains from specialization and trade are based not on comparative advantage but on absolute advantage. C. The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. D. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.

B. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same, A. the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services. B. the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services. C. the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services. D. the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services.

B. the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services.

Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica's opportunity cost of one cooler is A. 2 radios, and Norway's opportunity cost of one cooler is 0.125 radios. B. 2 radios, and Norway's opportunity cost of one cooler is 8 radios. C. 0.5 radios, and Norway's opportunity cost of one cooler is 0.125 radios. D. 0.5 radios, and Norway's opportunity cost of one cooler is 8 radios. Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3

C. 0.5 radios, and Norway's opportunity cost of one cooler is 0.125 radios.

Which of the following is an example of U.S. foreign direct investment? A. A Greek company opens a cheese factory in the U.S. B. A German mutual fund buys stock issued by a U.S. corporation. C. A U.S. beverage company opens a bottling plant in Russia. D. A U.S. bank buys bonds issued by an Argentinean company.

C. A U.S. beverage company opens a bottling plant in Russia.

When Microsoft establishes a distribution center in France, U.S. net capital outflow A.increases because Microsoft makes a portfolio investment in France. B.decreases because Microsoft makes a portfolio investment in France. C. increases because Microsoft makes a direct investment in capital in France. D. decreases because Microsoft makes a direct investment in capital France.

C. increases because Microsoft makes a direct investment in capital in France.

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica has a comparative advantage in the production of A. neither good and Norway has a comparative advantage in the production of both goods. B. both goods and Norway has a comparative advantage in the production of neither good. C radios and Norway has a comparative advantage in the production of coolers. D. coolers and Norway has a comparative advantage in the production of radios.

C. radios and Norway has a comparative advantage in the production of coolers.

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica has an absolute advantage in the production of A. coolers and Norway has an absolute advantage in the production of radios. B. both goods and Norway has an absolute advantage in the production of neither good. C. radios and Norway has an absolute advantage in the production of coolers. D. neither good and Norway has an absolute advantage in the production of both goods.

C. radios and Norway has an absolute advantage in the production of coolers.

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of radios increased by 9. 12. 6. 3.

Correct! 6.

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has A. $48 billion of imports and $40 billion of exports. B. $48 billion of exports and $40 billion of imports. C. $40 billion of imports and $32 billion of exports. D. $40 billion of exports and $32 billion of imports.

D. $40 billion of exports and $32 billion of imports.

If Shawn can produce more donuts in one day than Sue can produce in one day, then A. Sue has a comparative advantage in the production of donuts. B Shawn has a comparative advantage in the production of donuts. C. Sue has an absolute advantage in the production of donuts. D. Shawn has an absolute advantage in the production of donuts.

D. Shawn has an absolute advantage in the production of donuts.

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has A. a trade surplus and positive net exports. B. a trade surplus and negative net exports. C. a trade deficit and positive net exports. D. a trade deficit and negative net exports.

D. a trade deficit and negative net exports.

Net capital outflow equals: A.the value of domestic assets purchased by foreigners. B. the value of foreign assets purchased by domestic residents. C. the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. D. the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

D. the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

1. The misery index is calculated as the a. inflation rate plus the unemployment rate. b. unemployment rate minus the inflation rate. c. actual inflation rate minus the expected inflation rate. d. natural unemployment rate times the inflation rate

a. inflation rate plus the unemployment rate.

18. If there is an adverse supply shock, then a. unemployment rises and the short-run Phillips curve shifts right. b. unemployment rises and the short-run Phillips curve shifts left. c. unemployment falls and the short-run Phillips curve shifts right. d. unemployment falls and the short-run Phillips curve shifts left.

a. unemployment rises and the short-run Phillips curve shifts right.

13. Any policy change that reduced the natural rate of unemployment would a. shift the long-run Phillips curve to the left. b. shift the long-run aggregate-supply curve to the right. c. improve the functioning of the labor market. d. All of the above are correct.

d. All of the above are correct.

4. Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction? a. The inflation rate decreases. b. The level of output decreases. c. The unemployment rate increases. d. All of the above are correct.

d. All of the above are correct.

19. Which of the following is correct if there is an adverse supply shock? a. The short-run aggregate supply curve and the short-run Phillips curve both shift right. b. The short-run aggregate supply curve and the short-run Phillips curve both shift left. c. The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. d. The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

d. The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

7. In the long run, policy that changes aggregate demand changes a. both unemployment and the price level. b. neither unemployment nor the price level. c. only unemployment. d. only the price level.

d. only the price level.

21. A favorable supply shock will cause a. unemployment to rise and the short-run Phillips curve to shift right. b. unemployment to rise and the short-run Phillips curve to shift left. c. unemployment to fall and the short-run Phillips curve to shift right. d. unemployment to fall and the short-run Phillips curve to shift left.

d. unemployment to fall and the short-run Phillips curve to shift left.

ssume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica should specialize in the production of A. both goods and Norway should specialize in the production of neither good. B. neither good and Norway should specialize in the production of both goods. C. radios and Norway should specialize in the production of coolers. D. coolers and Norway should specialize in the production of radios.

radios and Norway should specialize in the production of coolers.

6. When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation a. increases and unemployment increases. b. increases and unemployment decreases. c. decreases and unemployment increases. d. decreases and unemployment decreases.

b. increases and unemployment decreases.

10. According to the long-run Phillips curve, in the long run monetary policy influences a. both the inflation rate and the unemployment rate. b. the inflation rate but not the unemployment rate. c. the unemployment rate but not the inflation rate. d. neither the unemployment rate nor the inflation rate.

b. the inflation rate but not the unemployment rate.

2. When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run? a. Short-run aggregate supply decreases. b. The natural rate of unemployment increases. c. The price level increases more rapidly. d. The money supply increases less rapidly.

c. The price level increases more rapidly.

17. Which of the following is an example of an adverse supply shock? a. a decrease in the money supply b. a tax cut c. a worldwide drought d. decreased government spending

c. a worldwide drought

11. The natural rate of unemployment a. is constant over time. b. varies over time, but can't be changed by the government. c. is the unemployment rate that the economy tends to move to in the long run. d. depends on the rate at which the Fed increases the money supply.

c. is the unemployment rate that the economy tends to move to in the long run.

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate? A.. 2 pounds per dollar B. 1 pound per dollar C. 1/2 pound per dollar D. None of the above is correct

C. 1/2 pound per dollar

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. At which of the following prices would both Jamaica and Norway gain from trade with each other? 1 radio for 1 cooler 1 radio for 4 coolers 1 radio for 10 coolers Jamaica and Norway would both gain from trade at all of the above prices.

1 radio for 4 coolers

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by A. 24. B. 48. C. 12. D. 36.

24.

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate? Correct! A. 2.50 B. 2 C. 1.25 D. .75

A. 2.50

If Shawn can produce donuts at a lower opportunity cost than Sue, then A. Shawn has a comparative advantage in the production of donuts. B. Sue has a comparative advantage in the production of donuts. C. Shawn should not produce donuts. D. Shawn is capable of producing more donuts than Sue in a given amount of time.

A. Shawn has a comparative advantage in the production of donuts.

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

a U.S. import and an Irish export.

5. According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they a. decreased the money supply. b. increased government expenditures. c. decreased taxes. d. None of the above is correct.

a. decreased the money supply.

3. A basis for the slope of the short-run Phillips curve is that when unemployment is high there are a. downward pressures on prices and wages. b. downward pressures on prices and upward pressures on wages. c. upward pressures on prices and downward pressures on wages. d. upward pressures on prices and wages.

a. downward pressures on prices and wages.

12. To say that the natural rate of unemployment changes over time is to say that a. the short-run Phillips curve shifts over time. b. the long-run Phillips curve shifts over time. c. the aggregate demand curve shifts over time. d. the Federal Reserve influences the natural rate of unemployment over time

b. the long-run Phillips curve shifts over time.

20. A favorable supply shock will shift short-run aggregate supply a. left, making output rise. b. left, making output fall. c. right, making output rise. d. right, making output fall.

c. right, making output rise.