econ317

Which of the following is included in the aggregate demand for goods and services?

All of the above are correct. (Consumption/Investment demand and NE)

Assume the nominal dollar-per-euro ($/€) exchange rate appreciates by 2%, U.S. prices rise by 5% and Euro-Area prices rise by 3%. By approximately how much does the real exchange rate change?

There is no change.

Most economists believe that classical macroeconomic theory is a good description of the world

in the long run, but not in the short run.

Keynes believed that economies experiencing high unemployment should adopt policies to

increase aggregate demand.

What would the Bank of England (England's Central Bank) do to raise the value of the British pound in terms of the euro?

It would buy British pounds and supply euros in the foreign exchange market.

The value of a nation's currency is a good reflection of

None of the above

Suppose we were analyzing the Turkish lira per euro foreign exchange market. If The Euro-Area's central bank intervenes to reduce the value of the euro, then:

The supply of euros in the foreign exchange market rises, and the euro-Area's monetary base rises.

Suppose we were analyzing the Turkish lira per euro foreign exchange market. If there is the expectation that the euro will fall in value in the near future. As a result of speculators' actions

Supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing a depreciation of the euro.

What effect does foreign exchange market intervention by the U.S. Federal Reserve to increase the value of the U.S. dollar have on the U.S. monetary base?

The U.S. monetary base decreases.

Suppose we were analyzing the Turkish lira per euro foreign exchange market. If Turkey's real GDP falls relative to the Euro-Area and nothing else changes, then the:

The demand for euros in the foreign exchange market falls, and the euro depreciates.

Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

The expected price level rises. Bargains are struck for higher wages.

Suppose we were analyzing the pound per Swiss franc foreign exchange market. If Switzerland's price level rise relative to England and nothing else changes, then the:

The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc.

Refer to Stock Market Boom 2015 Which curve shifts and in which direction?

aggregate demand shifts right

Which of the following would cause stagflation?

aggregate supply shifts left

Which of the following will cause stagflation?

an increase in oil prices

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit. Consider the effects of these policies on the Libertinian economy. The money supply increase

and the investment tax credit each cause aggregate demand to shift right.

As recessions begin, production

falls and unemployment rises.

Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

both the price level and real GDP rise.

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

lower than desired prices which increases their sales.

The classical dichotomy refers to the separation of

real and nominal variables.

Stagflation exists when prices

rise and output falls

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

short-run aggregate supply left.

In the short run Recessions in Europe and China will cause

the U.S. price level and real GDP to fall

Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

the price level is higher and real GDP is the same.

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

the price level, but not real GDP is lower in country B.