macro final

On May 12, 2011, the US dollar was worth 28 Russian rubles. How many US dollars did it take to buy one Russian ruble?

0.04

Of the graphs in Figure 4, which one shows the effect of an increase in interest rates in Japan?

1

Of the graphs in Figure 3, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

2

Of the graphs in Figure 4, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

2

Of the graphs in Figure 5, where the dotted line shows the actual exchange rate, which one shows a country with an undervalued currency and a balance of trade surplus?

2

Figure 1 shows four movement of the inflation rate and the unemployment rate. Which panel shows the movement associated with a "supply shock" like those of the 1970's

3

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar. If a big mac, fries, and a Coke cost $3.91, in San Francisco, how much should the same order cost in yen in osaka?

325

Which panel in Figure 1 shows the movement associated with the supply-side changes of the 1990s?

4

Everything else being equal, one can expect the euro to appreciate relative to the dollar if

Americans purchase land in Germany and build factories

The supply of euros would come from

European demand for US government bonds

Which of the following statements about the national debt has the most validity?

If only Americans hold the debt, then payments of interest and principal are simply transfers form some Americans to other Americans

If the US exports passenger jet aircraft, what is the effect in the foreign exchange market?

It will increase demand for US dollars

In what way do policy makers have to face a trade-off between inflation and unemployment?

The cost of reducing inflation by restrictive fiscal and monetary policies is a temporary increase in unemployment

Suppose that the Fed decides to increase the growth rate of the money supply in the United States. What is most likely to happen to the U.S. trade deficit and to GDP?

The trade deficit will fall; GDP will rise.

Is it possible for a currency to appreciate relative to one currency, and depreciate relative to another?

Yes, this is possible in a world of floating rates

If you believe that individuals and market agents react quickly, you are likely

a believer in rational expectations

Under a balanced budget policy, a sharp rise in GDP will cause

a tax cut or an increase in expenditures

Until the 1980s, most of the national debt was

acquired either during wars, especially WWII or during recessions

Adverse shocks such as the crop failures of 1972-1973 and the oil price increases of 1974 and 1979 pushed the economy's

aggregate supply curve inward

A country with an overvalued currency

all of the above are correct

Figure 2 (b) illustrates that

all of the above are correct

The Keynesian view of the world is that the

all of the above are correct

The government should not attempt to balance the budget if

all of the above are correct

Under the gold standard,

all of the above are correct

Empirical research suggests that the steepness of the aggregate supply curve depends on the

amount of excess capacity in the economy

If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in the United States?

an increase in US imports

If gold and the dollar are substitutes, a cut in the Japanese discount rate can be expected to

appreciate the dollar and decrease the price of gold

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen, then the dollar had

appreciated

The sequence of events following an increase in the federal deficit would be higher interest rates, a(n)

appreciating dollar, and a larger current account deficit

The anticipated effect of contractionary monetary policy is

appreciation of the currency

Why does the government not have to repay debt, as do private individuals?

because the government does not have a finite life, as do individuals

Which of the following companies would gain from foreign currency depreciation?

companies which borrow in foreign currency

Which elements of GDP were effected by the financial crisis and the lack of available credit?

consumption, business investment, government spending and imports/exports

If the economy is near full employment and congress cuts taxes, the proper monetary policy should be

contractionary to counteract the effects of fiscal policy

To calculate a firms per unit of output profit, it is necessary to subtract

cost per unit from product price

if the government ran a major deficit, and there was no noticeable effect on the level of GDP, this could be taken as evidence of

crowding-out

With no change in fiscal policy, the budget

deficit will rise during a recession and fall during a boom

An economic boom in Australia should increase the

demand for foreign currencies

Following an expansionary monetary policy, we would expect lower interest rates, dollar

depreciation, and a decrease in the current account deficit

Which of the following was not a typical characteristic of subprime mortgages?

fixed interest rates

If figure 2(a) illustrates the elimination of a recessionary gap, then the economy should move to what point on the curves shown in Figure 2 (b)

from r to m

The deficit can be defined in simple terms as

government expenditures+transfers-tax receipts

In 2008-2010, American policy makers decided to risk

higher inflation for the sake of decreasing unemployment

A recession in the United States will tend to cause recessions in other countries because as U.S. GDP falls, U.S.

imports will fall

A recessionary gap causes national debt to increase because

income tax receipts drop markedly

a currency depreciation

increases aggregate demand and reduces aggregate supply

If economic fluctuations originate on the supply side,

inflation and unemployment will be positively related

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

inflation for surplus countries and recessions for deficit countries

The principal way in which an economy self-corrects from an inflationary gap is through

inflation, which reduces purchasing power and thus wages need to adjust

The main input into the production of Starbuck's coffee is imported coffee beans. If the dollar depreciates, how will this affect the U.S. retail coffee market?

input prices will rise and supply will decrease

A currency appreciation is disinflationary and contractionary if the

inward shift of the aggregate demand curve due to the fall in exports exceeds the outward shift of the aggregate supply curve due to lower input prices.

One reason that the Phillips curve "broke down" is that it

is a statistical relationship, and some of the points are not sustainable in the long run

what are the economic effects of a currency appreciation?

it will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output may fall as well

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value. What will be the main economic effects in Mexico of such an exchange rate change?

it will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well.

If a Mexican pension fund decides to purchase US government bonds, what is the effect in the foreign exchange market?

it will increase demand for US dollars

If the US purchases oil from venezuela, what is the effect in the foreign exchange market?

it will increase supply of US dollars

The Bretton Woods system worked fairly well for a number of years, but it finally broke down

its inability to devalue the US dollar

The long-run Phillips curve in Figure 2 (b) would include which of the following points?

j, e, m

In 2008, the Fed utilized expansionary monetary policy which was made

less effective as banks held more excess reserves

debt is to deficit as

money is to income

Assume that the information in Table 1 applies to the cost per ton of coal in 1998. Assume that also over a 10-year period prices rise 100 percent in Great Britain and 200 percent in the United States. According to the purchasing power parity theory, the exchange rate between the dollar and the pound in the year 2008 will be

one pound = three dollars

According to the theory of rational expectations, the government can influence output

only by making unexpected changes in the aggregate demand

A fall in the domestic interest rate leads to capital

outflows and exchange rate depreciation

The intended use of TARP funds was to

purchase unwanted securities

Prices of European goods are rising faster than prices of similar goods in the United States. Consequently Europeans substitute American goods for European goods and the euro depreciates. This phenomenon is the basis of

purchasing power parity

A balance of payments deficit is defined as the amount by which

quantity supplied of a country's currency exceeds quantity demanded

The national debt is the

result of previous budget deficits

The currency value of Agraria is set by government decree. Which of the following happens when the government alters the exchange rate so that its currency can buy more units of foreign currency?

revaluation

Demand-side inflation is normally accompanied by

rising real GDP, while supply-side inflation may be accompanied by falling real GDP

Which of the following are not valid arguments against the effectiveness of the fiscal stimulus bill?

state and local government spending increased

Monetization of the deficit (or debt) means that

the Fed buys newly issued debt and increases the money supply

A vocal minority of economists, believers in the theory of rational expectations insist that

the Phillips curve is vertical even in the short run

Which of the following was not a lesson from the 2007-2009 financial crisis?

the business cycle no longer applies to economic analysis

The U.S. Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japa-nese discount rate. The likely outcome of currency speculation in response to this news is that

the dollar will appreciate

The purchasing power parity theory of exchange rate determination maintains that

the exchange rate between two nations' currencies adjusts to reflect differences in the price levels in the two nations.

A main reason why the US trade deficit grew so large from 1997 to 2000 was that

the international value of the dollar rose in the last half of the 1990s which encouraged US imports and damaged US exports

The argument that the national debt imposes a burden on future generations becomes more compelling as

the percentage of the national debt held by foreigners rises

Theoretically, when a currency depreciates one can predict

the price level will rise, but real GDP change is not predictable

Which of the following observations concerning the Phillips curve is not true?

they are normally upward-sloping