Econ 2035

Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run, everything else held constant.

increase; decrease

According to aggregate demand and supply analysis, America's involvement in the Vietnam War had the effect of

increasing aggregate output, lowering unemployment, and raising inflation

Everything else held constant, when a country's currency depreciates. its goods abroad become ___ expensive while foreign goods in that country become _____ expensive.

less; more

Everything else held constant when a country's currency appreciates, the country's goods abroad become ______ expensive and foreign goods in the country become ______.

more; less

The advantage of the "buy and hold strategy" is that:

net profits will tend to be higher because there will be fewer broker commissions.

Everything else held constant, when the current value of the domestic currency increases, the ________ domestic assets ________.

quantity demanded of; decreases

Increased uncertainty resulting from the global financial crisis ______ the required return on investment in equity.

raised

If the Brazilian demand for American exports rises at the same time that U.S. productivity rises relative to Brazilian productivity, then, in the long run, ________, everything else held constant.

In the long run the brazilian real will depreciate relative to the us dollar.

In the Gordon Growth model, a decrease in the required rate of return of equity:

Increases the current stock price.

By looking at aggregate demand via its component parts, we can conclude that the aggregate demand curve is downward sloping because

a lower inflation rate causes the real interest rate to fall, and stimulates planned investment spending.

When the effects of the global financial crisis started to spread more quickly throughout the rest of the world, the U.S. dollar ________ because demand for U.S. assets ________.

appreciated; increased.

For small investors, the best way to pursue a "buy and hold" strategy is to:

buy no load mutual funds with low management fees

During the beginning on the global financial crisis in the United States when the effects of the crisis were mostly confined within the United States, the U. S. dollar ________ because demand for U.S. assets ________.

decreased; depreciated

Anything that increases the demand for foreign goods relative to domestic goods tends to ________ the domestic currency because domestic goods will only continue to sell well if the value of the domestic currency is ________, everything else held constant.

depreciate; lower

Suppose a report was released today that showed the Euro-Zone inflation rate is running above the European Central Bank's inflation rate target. This leads people to expect that the European Central Bank will enact contractionary policy in the near future. Everything else held constant, the release of this report would immediately cause the demand for U.S. assets to ________ and the U.S. dollar will ________.

increase; appreciate