Macroeconomics Final

Which of the following shifts aggregate demand to the right?

An increase in the money supply

If real interest rates rose less in Australia than in the United States, then other things the same

U.S. citizens would buy fewer Australian bonds and Australians would buy more U.S. bonds.

If real interest rates rose less in New Zealand than in the United States, then other things the same

U.S. citizens would buy fewer New Zealand bonds and New Zealands would buy more U.S. bonds.

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

Your aunt puts more money in her savings account.

If the interest rate is above the Fed's target, the Fed should

buy bonds to increase the money supply.

If a country places tariffs on imported goods, then its

currency appreciates which reduces exports leaving the trade balance unchanged

Other things the same, a decrease in the U.S. real interest rate induces

foreigners to buy fewer U.S. assets, which increases U.S.'s net capital outflow

Other things the same, an increase in the U.S. real interest rate induces

foreigners to buy more U.S. assets, which reduces U.S.'s net capital outflow

If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

greater than the quantity demanded and the dollar will depreciate

Suppose that the real return from operating factories in China rises relative to the real rate of return in the United States. Other things the same, this will

increase U.S. net capital outflow and decrease Chinese net capital outflow

In the short run, open-market purchases

increase investment and real GDP, and decrease interest rates.

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

positive, and its saving is larger than its domestic investment

In which of the following cases would the quantity of money demanded be smallest?

r = 0.06, P = 1.0

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open- economy macroeconomic model predicts that this should have

raised Argentinean real interest rates and caused the Argentinean currency to depreciate

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

real interest rate. When the real interest rate rises, net capital outflow falls.

If the interest rate is below the Fed's target, the Fed should

sell bonds to decrease the money supply

Changes in the interest rate

shift aggregate demand if they are caused by fiscal or monetary policy, but not if they are caused by changes in the price level.

If the quantity of loanable funds supplied is less than the quantity demanded, then there is a

shortage of loanable funds and the interest rate will rise

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

the equilibrium interest rate increases.

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign currency would rise.

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $70, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

140 florin

Which of the following events shifts aggregate demand leftward?

A decrease in government expenditures, but not a change in the price level

Which of the following shifts aggregate demand to the left?

A decrease in the money supply

Which of the following correctly explains the crowding-out effect?

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

The nominal exchange rate is about 3 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

NCO + I < S.

Which of the following accurately describes of the effect of the government budget deficit on the open economy?

Real interest rates rise, which causes crowding out of domestic investment; the currency appreciates pushing the trade balance toward deficit

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 0.80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

The Big Mac but not the tall latte

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 0.80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

The Big Mac but not the tall latte

The price level rises in the short run if

aggregate demand shifts right or aggregate supply shifts left.

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

aggregate demand to the right.

If the U.S. government went from a budget deficit to a budget surplus then the real interest rate

and the real exchange rate would decrease.

Other things the same, if the exchange rate changes from 40 Thai bhat per dollar to 51 Thai bhat per dollar, then the dollar has

appreciated and so buys more Thai goods.

Other things the same, if the exchange rate changes from 50 Thai bhat per dollar to 65 Thai bhat per dollar, then the dollar has

appreciated and so buys more Thai goods.

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

both imports of chips and exports of sodas would fall

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips

both imports of chips and exports of sodas would fall.

Suppose that the real return from operating factories in Spain falls relative to the real rate of return in the United States. Other things the same, this will

decrease U.S. net capital outflow and increase Spanish net capital outflow

If U.S. speculators gained greater confidence in foreign economies so that they wanted to move more of their wealth into foreign countries, the dollar would

depreciate which would cause aggregate demand to shift right

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

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.

If U.S. net exports are negative, then net capital outflow is

negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

At the equilibrium real interest rate in the open-economy macroeconomic model,

net capital outflow + domestic investment = saving