Macro Final

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 3. It follows that, when income is $101, consumer spending is...

$60.67

During some year a country has exports of $50 billion, imports of $70, and domestic investment of $100 billion. What was its saving during the year?

$80 billion

in the special case of the 100-percent reserve banking the money multiplier is...

1 and banks do not create money

Suppose over some period of time the money supply tripled, velocity was unchanged, and real GDP doubled. According the quantity equation the price level is now...

1.5 times its old value

Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is...

2 and the equilibrium value of money is 0.5

If the nominal interest rate is 7 percent and expected inflation is 4.5 percent, then what is the expected real interest rate?

2.5%

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

2/3 pints of Irish beer per pint of Australian beer

Refer to Table 29-3. The reserve ratio for this bank is...

20%

A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of...

5%

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

Americans to buy more foreign assets, which increases U.S. net capital outflow

what would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Eric gets fewer job offers

what action might we logically expect to result from rising stock prices?

Jim increases his consumption spending

According to the classical dichotomy, which of the following increases when the money supply increases? the real interest rate, the real GDP, the real wage, or none

None of these increases

in the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from...

U.S. net capital outflow and the demand for dollars for U.S. net exports

over time continued budget deficits lead to...

a lower capital stock and lower real wages

hyperinflation

a period of very high inflation

Refer to Figure 33-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience...

a rising price level and a falling level of output

In which of the following situations must national saving rise?

both domestic investment and net capital outflow increase

if the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by...

buying bonds; this buying would increase the money supply

in 2009 Barack Obama responded to recession...

by cutting taxes and by raising government expenditures

other things the same, continued increases in the money supply lead to...

continued increases in the price level but not continued increases in real GDP

if the unemployment rate rises, which policies would both be appropriate to reduce it?

decrease taxes, increase government spending

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate...

decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases

Refer to Figure 32-6. If the economy were initially in equilibrium at r2 and E3 and the government removed import quotas, the exchange rate would...

depreciate to E2

Economists...

disagree about whether the costs of reducing inflation to zero are worth the benefits; the increase in unemployment from reducing inflation will be larger if inflation expectations remain high

Assuming the Fisher effect holds, and given U.S. tax laws, an increase in inflation...

does not change the real interest rate but reduces the after-tax real rate of interest

the national debt...

exists because of past government budget deficits

high and unexpected inflation has a greater cost...

for those who save than for those who borrow

net exports of a country are the value of...

goods and services exported minus the value of goods and services imported

Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus is illustrated as a move from g to...

i.

other things the same, if the price level falls, people...

increase foreign bond purchases, so the dollar depreciates

the interest rate would fall and the quantity of money demanded would...

increase if there were a surplus in the money market

the economic boom of the early 1940s resulted mostly from...

increased government expenditures

A Peruvian firm purchases construction equipment made in the U.S. and pays for it with Peruvian currency. This transaction...

increases U.S. net exports, and decreases Peruvian net capital outflow

the principal lag for monetary policy...

is the time it takes for policy to change spending; the principal lag for fiscal policy is the time it takes to implement it

The reserve requirement is 4%, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 of bonds what happens to the money supply?

it decreases by $250,000

A 2009 article in The Economist noted that some studies have provided evidence indicating that multipliers are...

larger in closed economies than in open economies

the sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have...

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

if the Phillips curve shifts to the left, then for any given rate of money growth and inflation the economy has...

lower unemployment and higher output

Refer to Figure 35-5. If the economy starts at C and the money supply growth rate increases, in the long run the economy...

moves to F

Suppose a Starbucks tall latte cost $4 in the U.S., 5 euros in the euro area, and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing power parity hold?

neither the euro area or Australia

if the inflation rate is zero, then...

neither the nominal interest rate nor the real interest rate can fall below zero

what would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

net exports would fall which by itself would decrease U.S. aggregate demand

real exchange rate =

nominal exchange rate x domestic price/foreign price

Which tool of monetary policy does the Federal Reserve use most often?

open-market operations

what includes only changes that shift aggregate demand to the right?

passing of an investment tax credit, an increase in the money supply

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the...

price level change by less than otherwise and real GDP change by more than otherwise

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which goals?

price stability, maximum employment, and moderate long-term interest rates

if policymakers decrease aggregate demand, then in the long run...

prices will be lower and unemployment will be unchanged

the aggregate quantity of goods and services demanded changes as the price level falls because...

real wealth rises, interest rates fall, and the dollar depreciates

an increase in the budget deficit...

reduces net capital outflow and domestic investment

a favorable supply shock...

reduces unemployment and the inflation rate

Paul Volcker's inflation reduction efforts...

resulted in the highest unemployment rate since the Great Depression

if inflation expectations rise, the short-run Phillips curve shifts...

right, so that at any inflation rate unemployment is higher in the short run than before

when a country experiences capital flight, the interest rate...

rises because the demand for loanable funds shifts right

if the central bank increases the money supply, in the short run, output...

rises so unemployment falls

The Fisher effect...

says there is a one for one adjustment of the nominal interest rate to the inflation rate

to decrease the money supply, the Fed can...

sell government bonds or increase the discount rate

an increase in government spending on goods to build or repair infrastructure...

shifts the aggregate demand curve to the right has a multiplier effect shifts the aggregate supply curve to the right, but this effect is likely more important in the long run

in order to understand how the economy works in the short run, we need to...

study a model in which real and nominal variables interact

Refer to Figure 34-1. At an interest rate of 4 percent, there is an excess...

supply of money equal to the distance between points a and b

other things the same, the aggregate quantity of goods demanded in the U.S. increases if...

the dollar depreciates

Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,...

the equilibrium value of money decreases

what decreases U.S. net capital outflow?

the government budget deficit increases

according to liquidity preference theory, equilibrium in the money market is achieved by adjustments in...

the interest rate

according to liquidity preference theory, an increase in money demand for some reason other than a change in the price level causes...

the interest rate to rise, so aggregate demand shifts left

Refer to Figure 34-2. What is measured along the horizontal axis of the left-hand graph?

the quantity of money

if the demand for loanable funds shifts right, then...

the real interest rate and the equilibrium quantity of loanable funds both rise

a decrease in expected inflation shifts...

the short-run Phillips curve left

if a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then...

the short-run Phillips curve would shift down

part of the lag in monetary policy effects is due to...

the time required for firms and households to alter their spending plans

if the quantity of loanable funds supplied is greater than the quantity demanded, then...

there is a surplus of loanable funds and the interest rate will fall

if saving is greater than domestic investment, then...

there is a trade surplus and Y>C+I+G

What is correct concerning recessions?

they are associated with comparatively large declines in investment spending

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency...

this increases U.S. net capital outflow because the U.S. acquires foreign assets

Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer...

this purchase is foreign portfolio investment; by itself it increases U.S. net capital outflow

for purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as...

those items that can be readily accessed and used to buy goods and services

functions of money

unit of account store of value medium of exchange

if the central bank in some country lowered the reserve requirement, then the money multiplier for that country...

would increase

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes...

your nominal wage increase; if your nominal wage rose by a greater percentage than the price level, then your real wage would also increase