econ test 3

if output in an economy is 1000 goods per year, the money supply is $300, and each dollar is spent or circulates an average of 3 times per year, then according to the quantity equation, the average price of goods is

$0.90

if the reserve ratio is 5 percent, $10,000 of additional deposits can create

$200,000 of new money

the U.S. buys $40 of wine from France and France buys $100 of wool from the U.S. Supposing this is the only trade that these countries do. What are the net exports for the U.S. and France in that order?

$60 and -$60

in the nation of sabanland, 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%

you put your money into an account that earns an 8% nominal interest rate. the inflation rate is 3% and your tax rate is 25%. what is your after-tax real rate of interest?

3%

according to the quantity equation, if P=12, Y=6, and M=8, then V=

9

in an open economy, GDP is $7,400 billion, consumption is $4,550 billion, government expenditures is $1,200 billion, and net exports are -$750 billion. what are investment and national savings and NCO?

I=$2,400 billion, S=$1,650 billion, and NCO=-$750 billion

which of the following identities is correct in an open economy?

I=S-NCO

the walt disney company builds a theme park outside of Paris, France. its expenditures are

U.S. foreign direct investment that increases U.S. net capital outflow

according to the Fisher Effect, a 1% increase in the inflation rate

causes a 1% increase in the nominal interest rate

according to the arbitrary redistribution of wealth, when inflation is unexpectedly high,

creditors receive a lower real interest rate (real rate of return) on their loans; thus, the value of their loans decline

if the reserve ratio is 10%, banks do not hold excess reserves, and people hold only deposits and no currency, when the Fed sells $10 million dollars of bonds to the public, bank reserves

decrease by $10 million and the money supply decreases by $100 million

during recessions, banks typically choose to hold more excess reserves relative to their deposits. this action

decreases the money multiplier and decreases the money supply

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

decreases, so the value of money rises

other things being the same, if the reserve requirement is decreased, the reserve ratio

decreases, the money multiplier increases, and the money supply increases

according to the national income identity for an open economy, national savings is equal to

domestic investment plus net capital outflow

a U.S. citizen buys bonds issued by the Chinese computer company lenovo. this purchase is an example of U.S.

foreign portfolio investment that increases net capital outflow

the money supply decreases if

households decide to hold relatively more currency and make relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans

the price of a honda accord

is a nominal variable and the price of a honda accord divided by the price of a honda civic is a real variable

when the Fed conducts open-market purchases,

it buys Treasury bonds, which increases the money supply

the banking system currently has $10 billion of reserves, none of which are excess. people hold only deposits and no currency and the reserve requirement is 10%. if the Fed raises the reserve requirement to 20% and at the same time buys $1 billion of bonds, then by how much does the money supply change?

it falls by $45 billion

if a country has a trade surplus

it has positive net exports and positive net capital outflow

in a 100 percent reserve banking system, a new deposit of $500 in the bank will

leave the size of money supply unchanged

in an open economy macroeconomic model for the U.S. , if the real interest rate falls (caused by the supply of loanable funds shifting right) then owning U.S. assets becomes ________ compared to foreign assets, so NCO will _________.

less attractive; rise

the Federal Reserve does all except which of the following?

make loans to individuals

when the exchange rate for the dollar appreciates (becomes stronger), U.S. goods become

more expensive relative to foreign goods, which makes exports fall and imports rise

if a country has a trade surplus, then its

national saving is greater than domestic investment and Y>C+I+G

if net exports are negative, then

net capital outflow is negative, so American assets bought by foreign countries are greater than foreign assets bought by Americans

which of the following is not correct?

nominal variables are measured in real physical units while real variables are measured in monetary units such as prices

according to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the different

price levels in those countries

which of the following lists two things that both decrease the money supply?

raise the discount rate, open market sales of bonds

which of the following is NOT a variable that influences net exports (NX)?

real interest rates on assets

assume that the reserve requirement is 25% and banks of not hold excess reserves and the public does not hold currency. the fed decides that it wants to decrease the money supply by $50 million, so the fed will

sell $12.5 million worth of bonds

when the money market is drawn with the value of money on the vertical axis, if the federal reserve buys bonds, then the money supply curve

shift rightward, causing the price level to rise and the value of money to fall

according to the open economy model, if the U.S. government levies a quota against Chinese imports, then the demand curve in the foreign exchange market will __________ and the supply curve in the foreign exchange market will ________.

shift to the right; not shift at all

people go to the bank more frequently to reduce money holdings when inflation is high, the cost of their time to do this would be counted as

shoe leather costs

in the open-economy macroeconomic model, a government budget deficit decreases the _____________ loanable funds and, as a result, net capital outflow __________ and the real exchange rate ___________.

supply of; decreases; increases

menu cost refers to

the cost of more frequent price changes induced by higher inflation

in the identity NX=NCO in the market for foreign currency exchange, NX represents

the demand for dollars for foreign exchange

which of the following is correct?

the federal reserve has 12 regional banks. the board of governors has 7 members. the open market committee has 12 members composed of the 7 board of governors and 5 regional banks presidents one of whom is always the president of the New York regional bank

which of the following is correct?

the inflation tax is like a tax on everyone who holds money arising from the federal government printing more money to raise revenue, which in turn raises prices and reduces the value of the money you hold.

in the open economy macroeconomic model, the key determinant of net capital outflow is

the real interest rate so when the real interest rate rises, net capital outflow falls

in an open economy macroeconomic model, if net capital outflow increases then

the supply of dollars for foreign currency exchange shifts right and the exchange rate falls

which of the following would be foreign direct investment in the U.S.?

volkswagen builds assembly plant in chattanooga, tennessee

which of the following is not implied by the quantity equation?

with constant money supply and velocity, an increase in real GDP creates a proportional increase in the price level

which of the following best illustrates the unit of account function of money?

you list prices for candy sold on your website, www.sweettooth.com, in dollars.