Macroeconomics exam #4 Questions #10, #11 Quiz #4

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

$5 billion

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

125 Egyptian pounds

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

2

Refer to Figure 33-1. The short run effect of an appreciation of the U.S. dollar (the dollar gains value relative to other currencies) can be shown as a movement from ____ to ______

A,D

In the AD/AS framework developed in class, two ways out of a recession, where output is below the natural rate of output, are to use monetary and fiscal policy to shift the ____________ curve or to let eventual labor market clearing shift the ___________.

AD right, AS right

Refer to Figure 33-1. The long run effect of an increase in the money supply can be shown as a movement from point __________ to __________.

C, A

Refer to Figure 33-1. Starting at point C, an adverse supply shock will shift the economy to point __________ in the short run and ____________ in the long run.

D,C

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment?

U.S. interest rates rise, the default risk of U.S. assets fall

Which of the following would cause prices to fall and real GDP to rise in the short run?

an increase in short run aggregate supply

An American brewery sells dollars to obtain euros. It then uses the euros to buy brewing equipment from a German company. These transactions

decrease U.S. net capital outflow because Germans obtain U.S. assets.

Other things the same, if the exchange rate changes from 30 Thai that per dollar to 25 Thai that per dollar, then the dollar has

depreciated and so buys fewer Thai goods.

One reason the aggregate demand curve is downward sloping is that a lower price level

increases the real value of wealth.

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.

A country has a trade deficit. Which of the following must also be true? Hint 1: NCO=NX Hint 2: S=NC0+I

net capital outflow is negative and domestic investment is larger than saving

Which of the following can explain the upward slope of the short-run aggregate supply curve?

nominal wages are slow to adjust to changing economic conditions

If a country has Y > C + I + G, then it has Hint 1: Y = C + I + G+NX If Y > C + I + G, does this mean net exports are positive or negative? Hint 2: NC=NX

positive net capital outflow and positive net exports.

Other things the same, the real exchange rate between American and Chinese goods would be higher if

prices of Chinese goods were lower, or the number of yuan a dollar purchased was higher.

In the AS/AD framework developed in class, the horizontal axis shows _____________.

real gdp

If output is above its natural rate, there will be pressure for wages to __________ because unemployment is ____________.

rise, low

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

saving fell or domestic investment rose.

When the Mexican peso gets "stronger" relative to the dollar,

the U.S. trade deficit with Mexico falls.

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

the nominal exchange rate is 140/120

If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?

the nominal exchange rate is 260/250

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

the price of the basket of goods falls in the U.S. and rises in Taiwan.

Over time both real GDP and the price level have trended upward. Which of these trends could be explained in the AD/AS framework by an upward trend in the money supply?

the upward trend in the price level but not the upward trend in real GDP