macro final

In the long run, changes in the money supply affect a. prices. b. output. c. unemployment rates. d. All of the above.

a

If purchasing-power parity holds, a dollar will buy a. more goods in foreign countries than in the United States. b. as many goods in foreign countries as it does in the United States. c. fewer goods in foreign countries than it does in the United States. d. None of the above is implied by purchasing-power parity

b

If the stock market crashes, then a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate demand increases, which the Fed could offset by decreasing the money supply. c. aggregate demand decreases, which the Fed could offset by increasing the money supply. d. aggregate demand decreases, which the Fed could offset by decreasing the money supply.

c

In the long run, the level of output a. depends on the money supply. b. depends on the price level. c. is determined by supply-side factors. d. All of the above are correct.

c

Other things the same, in the open-economy macroeconomic model, if the exchange rate rises, a. the demand for dollars shifts left. b. the demand for dollars shifts right. c. the quantity of dollars demanded falls. d. the quantity of dollars demanded rises.

c

People will want to hold more money if the price level a. or if the interest rate increases. b. or if the interest rate decreases. c. increases or if the interest rate decreases. d. decreases or if the interest rate increases.

c

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the a. U.S. supply of loanable funds left. b. U.S. demand for loanable funds left. c. demand for U.S. dollars in the market for foreign-currency exchange right. d. supply of U.S. dollars in the market for foreign-currency exchange left.

c

Which of the following Fed actions would both decrease the money supply? a. buy bonds and raise the reserve requirement b. buy bonds and lower the reserve requirement c. sell bonds and raise the reserve requirement d. sell bonds and lower the reserve requirement

c

A swiss watchmaker opens a factory in the US. This is an example of Swiss a. exports b. imports c. foreign portfolio investment d. foreign direct investment

d

As the price level rises a. people are more willing to lend, so interest rates rise. b. people are more willing to lend, so interest rates fall. c. people are less willing to lend, so interest rates fall. d. people are less willing to lend, so interest rates rise.

d

During a recession the economy experiences a. rising employment and income. b. rising employment and falling income. c. rising income and falling employment. d. falling employment and income

d

If a country raises its budget deficit, then its a. net capital outflow and net exports rise. b. net capital outflow rises and net exports fall. c. net capital outflow falls and net exports rise. d. net capital outflow and net exports fall.

d

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is a. $100 billion and the US has a trade surplus b. $100 billion and the US has a trade deficit c. -$100 billion and the US has a trade surplus d. -$100 billion and the US has a trade deficit

d

Suppose there is a tax increase. To stabilize output, the Federal Reserve will a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply.

b

An example of an automatic stabilizer is a. unemployment benefits. b. a lowering of interest rates by the Fed. c. a decrease in money demand. d. a decrease in tax rates in response to a recession.

a

An increase in the budget deficit a. reduces net capital outflow and domestic investment. b. reduces net capital outflow and raises domestic investment. c. raises net capital outflow and domestic investment d. raises net capital outflow and reduces domestic investment.

a

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate a. decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. b. decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. c. increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. d. increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

a

If money is neutral, then changes in the quantity of money a. do not affect real output. b. affect both nominal and real output c. do not affect nominal output. d. affect neither nominal nor real output.

a

If the demand for loanable funds shifts left, then a. the real interest rate and the equilibrium quantity of loanable funds both fall. b. the real interest rate falls and the equilibrium quantity of loanable funds rises. c. the real interest rate and the equilibrium quantity of loanable funds both rise. d. the real interest rate rises and the equilibrium quantity of loanable funds falls

a

In 1998 the Russian government defaulted on its bonds. According to the open-economy macroeconomic model, this should have a. increased Russian interest rates and net exports. b. reduced Russian interest rates and net exports. c. increased Russian interest rates and reduced Russian net exports. d. reduced Russian interest rates and increased Russian net exports

a

Most economists use the aggregate demand and aggregate supply model primarily to analyze a. short-run fluctuations in the economy. b. the effects of macroeconomic policy on the prices of individual goods. c. the long-run effects of international trade policies. d. productivity and economic growth

a

Other things the same, a decrease in the price level makes the dollars people hold worth a. more, so they can buy more. b. more, so they can buy less. c. less, so they can buy more. d. less, so they can buy less.

a

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase a. more foreign assets, which increases the quantity of loanable funds demanded. b. fewer foreign assets, which decreases the quantity of loanable funds demanded. c. more foreign assets, which increase the quantity of loanable funds supplied. d. fewer foreign assets, which decreases the quantity of loanable funds supplied.

a

Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar a. appreciates and buys more Chinese goods. b. appreciates and buys fewer Chinese goods. c. depreciates and buys more Chinese goods. d. depreciates and buys fewer Chinese goods.

a

Other things the same, if the price level falls, people a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. b. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. c. decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. d. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

a

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this? a. both sticky price theory and sticky wage theory b. sticky price theory but not sticky wage theory c. sticky wage theory but not sticky price theory d. neither sticky wage theory nor sticky price theory

a

Permanent tax cuts shift the AD curve a. farther to the right than do temporary tax cuts. b. not as far to the right as do temporary tax cuts. c. farther to the left than do temporary tax cuts. d. not as far to the left as do temporary tax cuts.

a

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire a. increased consumption, which shifts the aggregate-demand curve right. b. increased consumption, which shifts the aggregate-demand curve left. c. decreased consumption, which shifts the aggregate-demand curve right. d. decreased consumption, which shifts the aggregate-demand curve left.

a

The long-run aggregate supply curve shifts right if a. technology improves. b. the price level decreases. c. the money supply increases. d. All of the above are correct.

a

The model of short-run economic fluctuations focuses on a. the price level and real GDP. b. productivity and economic growth. c. the neutrality of money and inflation. d. None of the above is correct.

a

The price of imported oil rises. If the government wanted to stabilize output, which of the following could it do? a. increase government expenditures or increase the money supply b. increase government expenditures or decrease the money supply c. decrease government expenditures or increase the money supply d. decrease government expenditures or decrease the money supply

a

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand). a. this increases US net capital outflow because the US acquires foreign assets b. this decreases US net capital outflow because the US acquires foreign assets c. this increases US net capital outflow because the US sells capital goods d. this decreases US net capital outflow because the US sells capital goods

a

Using the liquidity-preference model, when the Federal Reserve decreases the money supply, a. the equilibrium interest rate increases. b. the aggregate-demand curve shifts to the right. c. the quantity of goods and services demanded is unchanged for a given price level. d. the short-run aggregate-supply curve shifts to the left.

a

When the dollar depreciates, U.S. a. net exports rise, which increases the aggregate quantity of goods and services demanded. b. net exports rise, which decreases the aggregate quantity of goods and services demanded. c. net exports fall, which increases the aggregate quantity of goods and services demanded. d. net exports fall, which decreases the aggregate quantity of goods and services demanded.

a

Which of the following happens in the market for loanable funds when there is capital flight? a. the demand curve shifts right. b. the demand curve shifts left. c. the supply curve shifts right. d. the supply curve shifts left.

a

a nations domestic investment is greater than its savings. Which of the following is correct a. this nation has a negative net capital outflow b. this nation has a trade surplus c. purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners d. all of the above are correct

a

if a country has Y>C+I+G, then a. S>I and it has a trade surplus b. S>I and it has a trade deficit c. S<I and it has a trade surplus d. S>I and it has a trade deficit

a

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy a. fewer domestic goods and fewer foreign goods. b. more domestic goods and fewer foreign goods. c. fewer domestic goods and more foreign goods. d. more domestic goods and more foreign goods

b

According to classical macroeconomic theory, changes in the money supply affect a. nominal variables and real variables. b. nominal variables, but not real variables. c. real variables, but not nominal variables. d. neither nominal nor real variables.

b

An increase in the money supply will a. increase interest rates, decreasing investment and aggregate demand. b. reduce interest rates, increasing investment and aggregate demand. c. reduce interest rates, decreasing investment and increasing aggregate demand. d. increase interest rates, increasing investment and aggregate demand.

b

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange? a. foreign citizens want to buy more U.S. bonds b. U.S. citizens want to buy more foreign bonds c. foreign citizens want to buy more U.S. goods d. U.S. citizens want to buy more foreign goods

b

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregatedemand curve? a. the wealth effect b. the interest-rate effect c. the exchange-rate effect d. the real-wage effect

b

If a country repeals an investment tax credit, a. net capital outflow and the real exchange rate rise. b. net capital outflow rises and the real exchange rate falls. c. net capital outflow falls and the real exchange rate rises. d. net capital outflow and the real exchange rate fall.

b

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate a. and the quantity of dollars traded rises. b. rises and the quantity of dollars traded falls. c. falls and the quantity of dollars traded rises. d. and the quantity of dollars traded falls.

b

If interest rates rose more in Japan than in the U.S., then other things the same a. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy more U.S. bonds. b. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S. bonds. c. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy more U.S. bonds. d. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy fewer U.S. bonds.

b

If output is above its natural rate, then according to sticky-wage theory a. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. b. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. c. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. d. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.

b

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes a. U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. b. U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. c. foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. d. foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.

b

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars a. supplied for the purpose of selling assets domestically. b. supplied for the purpose of buying foreign assets. c. demanded for the purpose of buying U.S. net exports of goods and services. d. demanded for the purpose of importing foreign goods and services.

b

Most economists believe that classical theory describes the world a. in the short run. b. in the long run. c. in both the short run and the long run. d. in neither the short run nor the long run.

b

Other things the same, an increase in the foreign price level a. reduces the real exchange rate. This reduction could be offset by a decrease in the domestic price level. b. reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level. c. increases the real exchange rate. This increase could be offset by a decrease in the domestic price level. d. increases the real exchange rate. This increase could be offset by an increase in the domestic price level.

b

Recessions in Canada and Mexico would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise.

b

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to a. decrease consumption, which shifts aggregate supply left. b. decrease consumption, which shifts aggregate demand left. c. increase consumption, which shifts aggregate supply right. d. increase consumption, which shifts aggregate demand right.

b

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would a. rise and exports of other industries would increase. b. rise and exports of other industries would decrease. c. not change, exports of other industries would increase. d. not change, exports of other industries would decrease.

b

The goal of monetary policy and fiscal policy is to a. offset the shifts in aggregate demand and thereby eliminate unemployment. b. offset shifts in aggregate demand and thereby stabilize the economy. c. enhance the shifts in aggregate demand and thereby create fluctuations in output and employment. d. enhance the shifts in aggregate demand and thereby increase economic growth

b

The government buys new weapons systems. The manufacturers of weapons pay their employees. The employees spend this money on goods and services. The firms from which the employees buy the goods and services pay their employees. This sequence of events illustrates a. the accelerator effect. b. the multiplier effect. c. the chain effect. d. the bandwagon effect.

b

When the Mexican peso gets "stronger" relative to the dollar, a. the U.S. trade deficit with Mexico rises. b. the U.S. trade deficit with Mexico falls. c. the U.S. trade deficit with Mexico is unchanged. d. None of the above necessarily happens.

b

Which of the following correctly explains the crowding-out effect? a. An increase in government expenditures decreases the interest rate and so increases investment spending. b. An increase in government expenditures increases the interest rate and so reduces investment spending. c. A decrease in government expenditures increases the interest rate and so increases investment spending. d. A decrease in government expenditures decreases the interest rate and so reduces investment spending

b

if you go to the banks and notice that a dollar buys more Japanese yen than it used to, then the dollar has a. appreciated.Other things the same, the appreciation would make Americans less likely to travel to Japan b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan c. depreciated. Other things the same, the depreciation would make americans less likely to travel to Japan d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan

b.

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds? a. $20 billion b. $30 billion c. $50 billion d. $60 billion

c

According to the classical model, which of the following would double if the quantity of money doubled? a. prices but not nominal income b. nominal income but not prices c. both prices and nominal income d. neither prices nor nominal income

c

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity? a. P = e/P* b. 1 = e/P* c. e = P*/P d. None of the above is correct.

c

If output is above its natural rate, then according to sticky-wage theory a. workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. b. workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. c. will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. d. workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level.

c

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds, a. the dollar would appreciate which would cause aggregate demand to shift right. b. the dollar would appreciate which would cause aggregate demand to shift left. c. the dollar would depreciate which would cause aggregate demand to shift right. d. the dollar would depreciate which would cause aggregate demand to shift left.

c

If the Fed conducts open-market purchases, then which of the following quantities increase(s)? a. interest rates and investment spending b. interest rates, but not investment spending c. investment spending, but not interest rates d. neither interest rates nor investment spending

c

If the MPC = 4/5, then the government purchases multiplier is a. 5/4. b. 4/5. c. 5. d. 20.

c

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S. a. sells more overseas than it buys from overseas; it has a trade deficit b. sells more oversees then it buys from overseas; it has a trade surplus c. buys more form overseas then it sells overseas; it has a trade deficit d. buys more from overseas then it sells overseas; it has a trade surplus

c

If the stock market booms, then a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate supply increases, which the Fed could offset by increasing the money supply. c. aggregate demand increases, which the Fed could offset by decreasing the money supply. d. aggregate supply increases, which the Fed could offset by decreasing the money supply.

c

When there is an excess supply of money, a. people will try to get rid of money causing interest rates to rise. Investment increases. b. people will try to get rid of money causing interest rates to fall. Investment decreases. c. people will try to get rid of money causing interest rates to fall. Investment increases. d. people will try to get rid of money causing interest rates to rise. Investment decreases.

c

Which of the following shifts both short-run and long-run aggregate supply left? a. a decrease in the actual price level b. a decrease in the expected price level c. a decrease in the capital stock d. a decrease in the money supply

c

which of the following is an example of a US foreign portfolio investment a. Albert, a German citizen, buys stock in a US computer company b. Larry, a citizen of Ireland, opens a fish and chips restaurant in the US c. Nancy, a U.S. citizen, buys bonds from a Japanese bank d. Dustin, a US citizen, opens a country-western tavern in New Zealand

c

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same a. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. b. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. c. the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. d. the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

d

If the Fed conducts open-market sales, the money supply a. increases and aggregate demand shifts right. b. increases and aggregate demand shifts left. c. decreases and aggregate demand shifts right. d. decreases and aggregate demand shifts left.

d

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases, a. the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports. b. the real value of money decreases; in turn, interest rates increase, which decreases net exports. c. households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods. d. households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.

d

Monetary policy and fiscal policy influence a. output and prices in the short run and the long run. b. output and prices in the short run only. c. output in the short run and the long run. d. output in the short run only.

d

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar a. depreciates so U.S. goods become less expensive relative to foreign goods. b. depreciates so U.S. goods become more expensive relative to foreign goods. c. appreciates so U.S. goods become less expensive relative to foreign goods. d. appreciates so U.S. goods become more expensive relative to foreign goods.

d

People choose to hold a larger quantity of money if a. the interest rate rises, which causes the opportunity cost of holding money to rise. b. the interest rate falls, which causes the opportunity cost of holding money to rise. c. the interest rate rises, which causes the opportunity cost of holding money to fall. d. the interest rate falls, which causes the opportunity cost of holding money to fall.

d

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this? a. both sticky price theory and sticky wage theory b. sticky price theory but not sticky wage theory c. sticky wage theory but not sticky price theory d. neither sticky wage theory nor sticky price theory

d

Suppose there is an increase in government spending. To stabilize output, the Federal Reserve would a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply

d

Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could a. increase the money supply, which will reduce interest rates. b. decrease the money supply, which will reduce interest rates. c. increase the money supply, which will increase interest rates. d. decrease the money supply, which will increase interest rates

d

The classical dichotomy refers to the separation of a. prices and nominal interest rates. b. taxes and government spending. c. decisions made by the public and decisions made by the government. d. real and nominal variables.

d

When taxes decrease, consumption a. decreases as shown by a movement to the left along a given aggregate-demand curve. b. decreases as shown by a shift of the aggregate demand curve to the left. c. increases as shown by a movement to the right along a given aggregate-demand curve. d. increases as shown by a shift of the aggregate demand curve to the right.

d

When the money supply decreases a. interest rates fall and so aggregate demand shifts right. b. interest rates fall and so aggregate demand shifts left. c. interest rates rise and so aggregate demand shifts right. d. interest rates rise and so aggregate demand shifts left.

d

Which of the following effects helps to explain the slope of the aggregate-demand curve? a. the exchange-rate effect b. the wealth effect c. the interest-rate effect d. All of the above are correct.

d

if a country has a trade deficit a. it has positive and negative imports and positive net capital outflow b. it has positive net exports and negative net capital outflow c. it has negative net exports and positive net capital outflow d. it has negative net exports and negative net capital outflow

d

If Germany purchased more goods and services abroad than it sold abroad last year, then it had a. positive net exports which is a trade surplus b. positive net exports which is a trade deficit c. negative net exports which is a trade surplus d. negative net exports which is a trade deficit

d.