Econ final chapter 14-16 p2

A country has national saving of $60 billion, government expenditures of $40 billion, domestic investment of $10 billion, and net capital outflow of $45 billion. What is its supply of loanable funds?

$60 billion

Economists who are skeptical about the relevance of "liquidity traps" argue that

a central bank continues to have tools to stimulate the economy, even after its interest rate target hits its lower bound of zero.

The price level rises in the short run if

aggregate demand shifts right or aggregate supply shifts left

Suppose that the U.K. imposes an import quota on aluminum. The quota makes the real exchange rate of the British pound

appreciate but does not change the real interest rate in the U.K.

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs will have

lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, production is

more profitable and employment and output rises

If a country has a positive net capital outflow, then

on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds

In the open-economy macroeconomic model, the source of the supply of loanable funds is

public saving + personal saving.

A significant example of a temporary tax cut was the one announced in 1992 by President George H. W. Bush. The effect of that tax cut on consumer spending and aggregate demand was

likely smaller than if the cut had been permanent.

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

would fall and its net exports would rise.

Suppose there are both multiplier and crowding out effects but without any accelerator effects. An increase in government expenditures would

shift aggregate demand right by a larger, equal, or smaller amount than the increase in government expenditures

If the United States raised its tariff on tires, then at the original exchange rate there would be a

shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate.

If the MPC = 4/5, then the government purchases multiplier is

5

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

Real exchange rate

An increase in the money supply will

Reduce interest rates and increase aggregate demand.

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

S = I + NCO

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

the equilibrium interest rate increases.

As the interest rate falls to equilibrium in the market for money,

the quantity of money demanded rises, which would reduce a surplus of money.

An increase in the expected price level shifts

the short-run aggregate supply curve to the left but does not affect the long-run aggregate supply curve

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

the slope of the aggregate-demand curve.