Macroeconomics Exam 3

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

$4,937.5 billion

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 billion, and net capital outflow equals $225 billion. What is national saving?

$735 billion

When the price level falls, the number of dollars needed to buy a representative basket of goods

. decreases, so the value of money rises.

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

22.5 percent.

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

3/5 or 0.6 pounds per dollar

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

32,000

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

4 percent

This bank's leverage ratio is

50.

Suppose the relevant money-supply curve is the one labeled MS 1 ; also suppose the economy's real GDP is 30,000 for the year. If the market for money is in equilibrium, then the velocity of money is approximately

6.0.

The nominal exchange rate is about 2 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?

80 florin

Which of the following is an example of U.S. foreign direct investment?

A U.S. company opens an auto parts factory in Canada.

Which of the following both increase the money supply?

A decrease in the discount rate and a decrease in the interest rate on reserves

Which of the following functions as both a store of value and a medium of exchange?

Cash but not stocks

Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow?

For a given amount of saving, a decrease in net capital outflow must decrease domestic investment.

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

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

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

M1 increases by $2,500 and M2 stays the same.

Which of the following helps to explain why the "inflation fallacy" is a fallacy?

Nominal incomes tend to rise at the same time that the price level is rising, leaving real income unchanged .

Which of the following is not included in either M1 or M2?

U.S. Treasury bills

Which of the following is correct? Since 1950

U.S. exports and U.S. imports each have increased significantly

When inflation causes relative-price variability consumer decisions,

are distorted and the ability of markets to efficiently allocate factors of production is impaired.

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

both the classical dichotomy and the quantity theory of mone

In the last part of the 1800s

deflation made it harder for farmers to pay off their debt.

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. If the money supply increases, then at the old value of money there is an

excess supply of money that will result in an increase in spending

If the exchange rate is expressed as euros/dollar, t he dollar is said to depreciate against the euro if the exchange rate

falls. Other things the same, it will cost fewer euros to buy U.S. goods.

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

fewer goods in that country and buy fewer dollars.

The purchase of U.S. government bonds by Egyptians is an example of

foreign portfolio investment by Egyptians.

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

more domestic goods and fewer foreign goods.

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

more willing to purchase U.S. bonds, so U.S. net capital outflow would fall

According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then

nominal GDP would rise by 5 percent; real GDP would be unchanged.

If purchasing-power parity holds, then the value of the

real exchange rate is equal to one

A country's trade balance will fall if either

saving falls or investment rises.

If saving is greater than domestic investment, then there is a trade

surplus and Y > C + I + G.

When the money supply curve shifts from MS1 to MS2,

the equilibrium value of money decreases.

The inflation tax refers to

the revenue a government creates by printing money

In the long run, money demand and money supply determine

the value of money but not the real interest rate.