Econ Test 3 Review
The exchange rate is 1.5 Bosnian marks per US dollars. the price of a refrigerator in Bosnian is 1,200 Marks while in the us it is 1,000. the real exchange rate is
5/4
If the exchange rate is 5 units of Peruvian currency per dollar and a hotel room in Lima costs 300 units of Peruvian currency, then how many dollars do you need to get a room?
60 and your purchase will increase Perus net exports
Other things the same if reserve requirements are decreased, the reserve ratio
decreases, the money multiplier increases, and the money supply increases
An increase in real interest rates in the US
encourages both U.S. and foreign residents to buy U.S. assets.
Net capital outflow
is always equal to net exports
According to the quantity theory of money , a 2 percent increase in money supply
causes the price level to rise by 2 percent
If the Federal open market committee decides to increase the money supply then the federal reserve
creates dollars and uses them them to purchase government bonds from the public
If the real exchange rate between the U.S. and Argentina is 1, then
purchasing power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.
Which of the following lists two things that both increases the money supply
the feds buys bonds and lowers the discount rate
the discount rate is the interest rate that
the feds charge banks for loans
According to assumption of the quantity theory of money if the money increases by 5 percent then
the price level would rise by 5 percent and the real GDP would be unchanged
Suppose that the real return from operating factors in GHANA relative to the real rate of return
this will increase U.S net capital outflow and decrease Ghanan net capital outflow
Today, banks runs are
uncommon because of FDIC deposit insurance
Net capital outflow equals
The purchase of foreign assets by domestic residents- the purchase of domestic assets by foreign residence
The inflation tax rate refers to
The revenue a government creates by printing money
The shoe leather cost of inflation refers to
The waste of resources used to. maintain lower money holdings
If saving is greater than domestic investment, then
There is a trade surplus and Y>C+I+G
The claim that increases in the growth rate of the money supply increases nominal interest rate but not real interest rate is known as the
Fisher effect
Which of the following is correct? a. If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. b. If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. c. If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right. d. If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.
If the feds purchase bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve
If a country has a trade surplus
It has a positive net export and positive net capital outflow
In the open-economy macroeconomic model, the market for loanable funds identity can be written as
S=I+NCO
If M= 10,000, P=2, and Y= 20,000, the velocity=
Velocity will rise if money changes hands more frequently
17. Which of the following is correct? a. The classical dichotomy separates real and nominal variables. b. Monetary neutrality is the proposition that changes in the money supply do not change real variables. c. When studying long-run changes in the economy, the neutrality of money offers a good description of how the world works. d. All of the above are correct.
a. The classical dichotomy separates real and nominal variables. b. Monetary neutrality is the proposition that changes in the money supply do not change real variables. c. When studying long-run changes in the economy, the neutrality of money offers a good description of how the world works.
according to the classical dichotomy, which of the following is affected by monetary factors?
a. nominal wages b. the price level c. Nominal GDP
The Federal Reserve:
a. was created in 1913 b. has more than one specific job to perfrom c. is an example of a Central bank
suppose that banks desire to hold no excess reserves, then reserve requirement is 5 percent and banks receive a new deposit of 1000. this bank
a. will increase its required reserves by 50 b. will in initially see its total reserves increase by. 1,000 c. will be able to make a new loan of $950
in a system of 100 percent reserve banking
banks do not influence the supply of money
You put money in the bank. the increase in the dollar value of your savings
is nominal variable, but the change in the number of goods you can buy with your savings is a real variable
Wealth is redistributed from creditors to. debtors when inflation when inflation was expected to be
low and it turns out to be high
If net exports are positive, then
net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
the supply curve of money is vertical because the quantity of money supplied increases
only if the central bank increases the money supplied
If a country has a positive net capital. outflow , then its net exports are
positive, and its saving is larger than its domestic investment
In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public
would reduce the multiplier. If the feds wanted to offset the effect of this on the size of the money supply, it could have bought bonds
