Macroeconomics Exam 2

$110 billion and a trade surplus of $10 billion.

A country purchases $110 billion of foreign-produced goods and services and sells $120 billion of domestically produced goods and services to foreign countries. It has imports of

The nominal exchange rate, but not the real exchange rate.

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

the resources that owners have put into the bank.

Bank capital is

money growth must have been greater than the growth of real income.

During the 1970s, U.S. prices rose by 7.8 percent per year and real GDP increased. Holding velocity constant and using the quantity equation, we conclude that

2 percent

The nominal interest rate is 6 percent and the real interest rate is 4 percent. What is the inflation rate?

It has $800 in reserves and $9,200 in loans.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement.

$160

A bank's reserve ratio is 8 percent and the bank has $2,000 in deposits. Its reserves amount to

nominal GDP would rise by 7 percent; real GDP would be unchanged.

According to the assumptions of the quantity theory of money, if the money supply increases by 7 percent, then

decreases the number of dollars and increases the number of bonds in the hands of the public.

An open-market sale

-2%

Assuming the growth rate in the velocity of money is 5 percent, if real GDP grows by 10 percent , and the money supply grows by 3 percent this year, how much does the price level change by?

$1.53

Cody purchased one share of Microsoft for $100 in January 2000 and sold that share in January 2022 for $200. Suppose the CPI was 94.5 in January 2000 and 140.3 in January 2022 . If the capital gains tax is imposed at a rate of 50 percent, what is Cody's after-tax real capital gain?

does not change U.S. net capital outflow.

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

2 gallons of Argentinean milk/1 gallon of U.S. milk

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?

positive net capital outflow and positive net exports.

If a country has Y > C + I + G, then it has

deficit and negative net exports.

If a country sells fewer goods and services abroad than it buys from other countries, it is said to have a trade

$25 and your purchase will increase the United Kingdom's net exports.

If the exchange rate is 9 Pound sterlings per U.S. dollar and a meal in London costs 225 Pound sterlings, then how many U.S. dollars does it take to buy a meal in London?

depreciates and so U.S. net exports rises.

If the price levels in the United States and in the United Kingdom are unchanged, but the nominal exchange rate (Pound sterling per U.S. dollar) falls, then the U.S. dollar

25

If the reserve ratio is 4 percent, then the money multiplier is

decrease by $20 million and the money supply eventually decreases by $400 million.

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed sells $20 million worth of government bonds, bank reserves

$10,000 of money

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate

$935 billion

In an open economy, gross domestic product equals $2,460 billion, consumption expenditure equals $1,435 billion, government expenditure equals $325 billion, investment equals $560 billion, and net capital outflow equals $375 billion. What is national saving?

higher than he had expected, and the real value of the loan is higher than he had expected.

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

Jane's nominal income and real income increased this year.

Last year, Jane spent all of her income to purchase 250 units of corn at $5 per unit. This year, she spent all of her income to purchase 325 units of corn at $4 per unit.

how much wealth people want to hold in liquid form.

Money demand refers to

the most liquid asset but an imperfect store of value.

Money is

12 meals. If the price of a meal rises, to maintain the real value of her money holdings she needs to hold more dollars.

Suppose a Chicken Sandwich Packaged Meal at chick-fil-a costs $10. Iff Clara holds $120, what is the real value of the money that she holds?

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?

nominal exchange rate would appreciate.

Suppose exchange rates are defined as foreign currency per dollar and foreign goods per U.S. goods. According to purchasing-power parity, if the price of a basket of goods in the United States rose from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of some other country's currency to 1,000 units of that country's currency, then the

raise both U.S. net exports and U.S. net capital outflows

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy stock in foreign corporations. Other things the same, these actions

demand for money that is eliminated by falling prices.

Suppose the market for money, drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, is in equilibrium. A decrease in the money supply creates an excess

a good must sell at the same price at all locations

The "law of one price" states that

interest rate at which banks lend reserves to each other overnight.

The federal funds rate is the

sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

The money supply decreases when the Fed

rate at which a person can trade the currency of one country for another.

The nominal exchange rate is the

the price level, but not real GDP.

The principle of monetary neutrality implies that an increase in the money supply will increase

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

Which of the following is an example of barter?

more pesos. Your hotel room in Mexico will require fewer dollars

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then the dollar buys

3.5 percent

You put money into an account and earn a real interest rate of 6 percent. Inflation is 4 percent, and your marginal tax rate is 25 percent. What is your after-tax real rate of interest?

store of value, unit of account, medium of exchange

You saved $2,000 in currency in your piggy bank to purchase a new laptop. The $2,000 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $1,800. The $1,800 price illustrates money's function as a _____. You use the $1,800 of your savings to purchase the laptop. This transaction illustrates money's function as a ______.