final econ exam

A decrease in the value of a currency relative to other currencies is called a(n):

depreciation

The principal demanders of U.S. dollars in the foreign exchange market are:

foreigners wishing to purchase U.S. goods or assets.

Higher nominal interest rates ______ the amount of money demanded and higher real income ______ the amount of money demanded.

decrease; increases

European firms wishing to purchase American goods and services are ______ the foreign exchange market.

demanders of U.S. dollars in

The AD curve ______ because, holding all else constant, an increase in ______ causes C, IP and NX to fall.

slopes downward; the inflation rate

The decision about the forms in which to hold one's wealth is called the ______ decision.

portfolio allocation

A sudden increase in household wealth is an example of a ______ demand shock, which shifts the AD curve to the ______.

positive; right

Because an increase in the nominal interest rate raises the opportunity costs of holding money, the money demand curve:

slopes downward

Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last month are shown in this table: Based on last month's data, Joe's opportunity cost of selling a truck is selling:

1 car Joe has to give up selling 9 cars to sell 9 trucks, so his opportunity of selling 1 truck is selling 1 car.

Refer to the table below. Martha's opportunity cost of making of a pie is:

3/4 of a cake In the time it takes Martha to make a pie, she could have made 3/4 (= 60/80) of a cake.

Refer to the table below. Martha's opportunity cost of making a cake is:

4/3 of a pie. In the time it takes Martha to make a cake, she could have made 4/3 (= 80/60) of a pie.

Refer to the figure below. Based on the diagram, the nominal interest rate equals ______ and the money supply equals ____.

5%; 500 pic also

Which of the following statements is true? -Comparative advantage requires absolute advantage. -Absolute advantage implies comparative advantage. -Absolute advantage requires comparative advantage. -Comparative advantage does not require absolute advantage.

Comparative advantage does not require absolute advantage.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan has the comparative and absolute advantage in sandwiches.

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

Lewis should specialize in pies, and Cathy should specialize in cakes.

Refer to the table above. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes.

Martha; Julia Martha's opportunity cost of making a pie (3/4 of a cake) is less than Julia's (5/6 of a cake), and Julia's opportunity cost of making a cake (6/5 of a pie) is less than Martha's (4/3 of a pie).

For a given inflation rate, if a resolution of international disputes leads to a cutback in government military spending, then the ______ shifts _____.

aggregate demand curve; left

For a given inflation rate, if a stock market crash makes consumers less willing to spend, then the ______ shifts _____.

aggregate demand curve; left

For a given inflation rate, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the ______ shifts _____.

aggregate demand curve; left

When the nominal exchange rate changes from 4 francs per dollar to 6 francs per dollar, the dollar has:

appreciated

An increase in the value of a currency relative to other currencies is called a(n):

appreciation

Refer to the table below. According to the table, Julia has the absolute advantage in:

both pies and cakes It takes Julia less time to make both pies and cakes than Martha.

If the quantity supplied of money exceeds the quantity demanded of money, people will ______ bonds which will cause bond prices to ______ and the nominal interest rate to ______ until the quantity demanded and quantity supplied of money are equal.

buy; rise; fall

If a nation has the lowest opportunity cost of producing a good, that nation has a(n) ______ in the production of that good.

comparative advantage

If the nominal interest rate is below the equilibrium value, then the quantity demanded of money is ______ than the quantity supplied of money, bond prices will ____, and the nominal interest rate will ____.

greater; fall; increase

Larry has a comparative advantage over his classmates in writing term papers if he:

has a lower opportunity cost of writing term papers than his classmates.

Holding all else constant, an increase in the preferences of Americans for Mexican goods will ______ the supply of dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

increase; decrease

Lower nominal interest rates ______ the amount of money demanded and a lower price level ______ the amount of money demanded.

increase; decreases

Holding all else constant, an increase in preferences by Mexicans for U.S. goods will ______ the demand for dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

increase; increase

The aggregate demand curve shows the relationship between planned spending and the:

inflation rate

The benefit of holding money is _______, while the opportunity cost of holding money is _______.

its usefullness in carrying out transactions; the nominal interest rate

If the nominal interest rate is above the equilibrium value, then the quantity demanded of money is ______ than the quantity supplied of money, bond prices will ____, and the nominal interest rate will ____.

less; rise; decrease

Refer to the table below. According to the table, Corey has the absolute advantage in:

making pizza Corey can make more pizzas in an hour than Pat.

Because the Fed determines the money supply, the:

money supply curve is vertical

Refer to the table below. According to the table, Martha has the absolute advantage in:

neither pies nor cakes It takes Martha longer to make both pies and cakes than Julia.

A demand shock is a change in planned spending that is:

not caused by changes in output or changes in the inflation rate.

Refer to the table below. Based on their comparative advantage, Martha should specialize in _______ while Julia should specialize in _______.

pies; cakes Martha has the comparative advantage in pies, and Julia has the comparative advantage in cakes. To see this note that Martha's opportunity cost of making a pie (3/4 of a cake) is less than Julia's (5/6 of a cake), and Julia's opportunity cost of making a cake (6/5 of a pie) is less than Martha's (4/3 of a pie).

The aggregate demand curve shifts when there are changes in:

planned spending that are not caused by changes in output or the inflation rate.

If the Fed wishes to reduce nominal interest rates, it must engage in an open market ______ of bonds that ______ the money supply.

purchases; increase

The nominal exchange rate is the:

rate at which two currencies can be traded for each other.

The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will appreciate when:

real GDP in Japan increases.

The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will depreciate when:

real GDP in the U.S. increases.

The money demand curve will shift to the left if:

real income decreases

U.S. households wishing to purchase shares of stock in a European company are ______ the foreign exchange market.

suppliers of U.S. dollars in

U.S. firms wishing to purchase European goods and services are ______ the foreign exchange market.

suppliers of US dollars in

The AD curve slopes downward because an increase in ______ causes ______ to fall, which in turn causes real GDP to fall.

the inflation rate; planned spending

Three macroeconomic factors that affect the demand for money are:

the nominal interest rate, real income, and the price level.

The money demand curve will shift to the right if:

the price level increases.

If you have a comparative advantage in a particular task, then:

you give up less to accomplish that task than do others.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. What is the opportunity cost to Dan of making a sandwich?

1/3 of a smoothie

Refer to the table below. Corey's opportunity cost of delivering of a pizza is making:

2 pizzas Corey has to give up making 12 pizzas to make 6 deliveries, so his opportunity cost of 1 delivery is making 2 pizzas.

Refer to the table below. Julia's opportunity cost of making a pie is:

5/6 of a cake In the time it takes Julia to make a pie, she could have made 5/6 (= 50/60) of a cake.

Refer to the table below. Julia's opportunity cost of making a cake is:

6/5 of a pie In the time it takes Julia to make a cake, she could have made 6/5 (= 60/50) of a pie.

A positive demand shock will shift the ______ curve to the ______.

AD; right

If the exchange rate moves from 10 Mexican pesos per U.S. dollar to 8 Mexican pesos per U.S. dollar, then the Mexican peso has ______ and the U.S. dollar has _____.

appreciated; depreciated

Refer to the figure below. If the Federal Reserve wants to raise the interest rate to 7%, it must ______ the money supply to _____.

decrease; 300 pic also

Refer to the table below. Based on their comparative advantages, Pat should specialize in _______, and Corey should specialize in _______.

delivering pizza; making pizza

When the nominal exchange changes from 120 yen per dollar to 110 yen per dollar, the dollar has:

depreciated.