Macroeconomics Final OSU
Suppose the nominal exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. Further, suppose that a pound of hamburger costs $2 in the United States and 250 yen in Japan. What is the real exchange rate between Japan and the United States? 0.5 pound of Japanese hamburger/pound of American hamburger 0.8 pound of Japanese hamburger/pound of American hamburger 1.25 pounds of Japanese hamburger/pound of American hamburger 2.5 pounds of Japanese hamburger/pound of American hamburger none of the above
.8 pound
If the United States saves $1,000 billion and U.S. net capital outflow is -$200 billion, U.S. domestic investment is -$200 billion. $200 billion. $800 billion. $1,000 billion. $1,200 billion.
1200 Billion
If the nominal exchange rate between British pounds and dollars is 0.5 pound per dollar, how many dollars can you get for a British pound? 2 dollars 1.5 dollars 1 dollar 0.5 of a dollar None of the above is correct.
2 dollars
Suppose a cup of coffee is 1.5 euros in Germany and $0.50 in the United States. If purchasing-power parity holds, what is the nominal exchange rate between euros and dollars? 1/3 euro per dollar 3 euros per dollar 1.5 euros per dollar 0.75 euro per dollar
3 euros per dollar
If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is Answer 0.75. 4. 5. 7.5. none of the above.
4
Which of the following statements about economic fluctuations is true? Answer A recession is when output rises above the natural level of output. A depression is a mild recession. Economic fluctuations have been termed the "business cycle" because the movements in output are regular and predictable. A variety of spending, income, and output measures can be used to measure economic fluctuations because most macroeconomic quantities tend to fluctuate together. None of the above is true.
A variety
Suppose the real exchange rate between Russia and the United States is defined in terms of bottles of Russian vodka per bottle of U.S. vodka. Which of the following will increase the real exchange rate (that is, increase the number of bottles of Russian vodka per bottle of U.S. vodka)? a decrease in the ruble price of Russian vodka an increase in the dollar price of U.S. vodka an increase in the number of rubles for which the dollar can be exchanged All of the above will increase the real exchange rate. None of the above will increase the real exchange rate.
All of the above will increase the real exchange rate
Which of the following groups would be most harmed by a U.S. government budget deficit? Answer U.S. residents who wish to buy foreign-produced autos lenders of loanable funds foreigners who wish to buy assets in the United States Boeing Aircraft Manufacturing which wishes to sell jets to Saudi Arabia
Boeing Aircraft Manufacturing
A country that exports more than it imports is said to have a trade deficit.
F
An increase in price expectations shifts the long-run aggregate-supply curve to the left.
F
An increase in the government's budget deficit shifts the supply of loanable funds to the right.
F
An increase in the government's budget deficit tends to cause the real exchange rate of the dollar to depreciate.
F
An increase in the interest rate increases the quantity demanded of money because it increases the rate of return on money.
F
An increase in the money supply shifts the money supply curve to the right, increases the interest rate, decreases investment, and shifts the aggregate-demand curve to the left.
F
Arbitrage tends to cause prices for the same good to diverge from one another.
F
If Americans increase their saving, the dollar will appreciate in the market for foreign-currency exchange.
F
If Great Britain's money supply grows faster than Mexico's, the value of the British pound should rise relative to the value of the peso.
F
If a case of Pepsi costs $8 in the United States and 720 yen in Japan, then according to the purchasing-power parity theory of exchange rates, the yen/dollar exchange rate should be 5760 yen/dollar.
F
Suppose investors and consumers become pessimistic about the future and cut back on expenditures. If fiscal policymakers engage in activist stabilization policy, the policy response should be to decrease government spending and increase taxes.
F
Suppose investors and consumers become pessimistic about the future and cut back on expenditures. If the Fed engages in activist stabilization policy, the policy response should be to decrease the money supply.
F
Suppose the government increases its expenditure by $10 billion. If the crowding-out effect exceeds the multiplier effect, then the aggregate-demand curve shifts to the right by more than $10 billion.
F
The misperceptions theory explains why the long-run aggregate-supply curve is downward sloping.
F
Valuable, technologically advanced goods are less likely to be traded internationally because shipping costs absorb too much of the potential profit.
F
Net capital outflow is the purchase of domestic assets by foreigners minus the purchase of foreign assets by domestic residents.
F NCO
Net exports are defined as imports minus exports
F NX=X-I
Over the last 50 years, U.S. real GDP has grown at about 5 percent per year.
F 3%
Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow? Answer Saving is the sum of investment and net capital outflow. For a given amount of saving, an increase in net capital outflow must decrease domestic investment. For a given amount of saving, a decrease in net capital outflow must decrease domestic investment. An increase in saving associated with an equal increase in net capital outflow leaves domestic investment unchanged.
For a given amount of saving, a decrease in net capital outflow must decrease domestic investment.
If Japan exports more than it imports, Japan's net exports are negative. Japan's net capital outflow must be negative. Japan's net capital outflow must be positive. Japan is running a trade deficit.
Japan's net capital outflow must be positive.
Which of the following would directly increase U.S. net capital outflow? General Electric sells an aircraft engine to Airbus in Great Britain. Microsoft builds a new distribution facility in Sweden. Honda builds a new plant in Ohio. Toyota buys stock in AT&T.
Microsoft builds a new distribution facility in Sweden.
Each of the following is a reason why the U.S. economy continues to engage in greater amounts of international trade except which one? There are larger cargo ships and airplanes. High-technology goods are more valuable per pound and, thus, more likely to be traded. NAFTA imposes requirements for increased trade between countries in North America. There have been improvements in technology that have improved telecommunications between countries. All of the above are reasons for increased trade by the United States.
NAFTA imposes requirements for increased trade between countries in North America
Which of the following statements is true about a country with a trade deficit? Net capital outflow must be positive. Net exports are negative. Net exports are positive. Exports exceed imports. None of the above is true.
Net exports are negative
Suppose a U.S. resident buys a Jaguar automobile from Great Britain and the British exporter uses the receipts to buy stock in General Electric. Which of the following statements is true from the perspective of the United States? Answer Net exports fall, and net capital outflow falls. Net exports rise, and net capital outflow rises. Net exports fall, and net capital outflow rises. Net exports rise, and net capital outflow falls. None of the above is true.
Net exports fall, and net capital outflow falls.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run? Answer Prices rise; output rises. Prices rise; output falls. Prices fall; output falls. Prices fall; output rises.
Prices fall, outputs falls
Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in military spending. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run? Answer Prices rise; output is unchanged from its initial value. Prices fall; output is unchanged from its initial value. Output rises; prices are unchanged from the initial value. Output falls; prices are unchanged from the initial value. Output and the price level are unchanged from their initial values.
Prices fall; output is unchanged from initial value.
A country experiencing capital flight will experience a reduction in its net capital outflow and its net exports.
T
A country's net capital outflow is always equal to its net exports.
T
A rise in Mexico's net exports (NX) will increase the demand for pesos in the market for foreign-currency exchange, and the peso will appreciate in value.
T
An increase in U.S. net capital outflow increases the supply of dollars in the market for foreign-currency exchange and decreases the real exchange rate of the dollar.
T
An increase in the government budget deficit reduces net exports
T
Arbitrage is the process of taking advantage of differences in prices of the same good by buying where the good is cheap and selling where it is expensive.
T
Because of the multiplier effect, an increase in government spending of $40 billion will shift the aggregate-demand curve to the right by more than $40 billion (assuming there is no crowding out).
T
Crowding out occurs when an increase in government spending increases incomes, shifts money demand to the right, raises the interest rate, and reduces private investment.
T
For a given amount of U.S. national saving, an increase in U.S. net capital outflow decreases U.S. domestic investment
T
If a country's NCO is positive, it is an addition to its demand for loanable funds.
T
In the short run, if the government cuts back spending to balance its budget, it will likely cause a recession.
T
Investment is a particularly volatile component of spending across the business cycle.
T
Keynes's theory of liquidity preference suggests that the interest rate is determined by the supply and demand for money.
T
Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policies
T
One reason aggregate demand slopes downward is the wealth effect: A decrease in the price level increases the value of money holdings and consumer spending rises.
T
Other things being the same, an increase in a country's real interest rate reduces net capital outflow.
T
The interest-rate effect suggests that aggregate demand slopes downward because an increase in the price level shifts money demand to the right, increases the interest rate, and reduces investment.
T
The short-run effect of an increase in aggregate demand is an increase in output and an increase in the price level.
T
The term "twin deficits" refers to a country's trade deficit and its government budget deficit.
T
US. net capital outflow falls when Toyota buys stock in Hilton Hotel, an American corporation.
T
Unemployment benefits are an example of an automatic stabilizer because when incomes fall, unemployment benefits rise.
T
When money demand is drawn on a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level shifts money demand to the right.
T
Suppose, due to political instability, Mexicans suddenly choose to purchase U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding the value of the dollar and U.S. net exports? Answer The dollar appreciates, and U.S. net exports fall. The dollar depreciates, and U.S. net exports fall. The dollar appreciates, and U.S. net exports rise. The dollar depreciates, and U.S. net exports rise.
The dollar appreciates, and US net exports fall
Suppose, due to political instability, Mexicans suddenly choose to invest in U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding U.S. net capital outflow? Answer U.S. net capital outflow rises. U.S. net capital outflow falls. U.S. net capital outflow is unchanged because only U.S. residents can alter U.S. net capital outflow. None of the above is true.
US NCO falls
Which of the following groups would not benefit from a U.S. import quota on Japanese autos? Answer stockholders of Ford Motor Company U.S. farmers who export grain members of the United Auto Workers union U.S. consumers who buy electronics from Japan
US farmers who export grain
The phrase "twin deficits" refers to Answer a country's trade deficit and its government budget deficit. a country's trade deficit and its net capital outflow deficit. the equality of a country's saving deficit and its investment deficit. the fact that if a country has a trade deficit, its trading partners must also have trade deficits.
a country's trade deficit and its government budget deficit
Which of the following statements about trade policy is true? Answer A restrictive import quota increases a country's net exports. A restrictive import quota decreases a country's net exports. A country's trade policy has no impact on the size of its trade balance. None of the above is true.
a country's trade policy has no impact on the size of its trade balance.
Which of the following events shifts the short-run aggregate-supply curve to the right? Answer an increase in government spending on military equipment an increase in price expectations a drop in oil prices a decrease in the money supply none of the above
a drop in oil prices
An export subsidy should have the opposite effect of Answer a tariff. capital flight. a government budget deficit. an increase in private saving.
a tariff
An example of a trade policy is Answer an increase in the government budget deficit because it reduces a country's net exports. capital flight because it increases a country's net exports. a tariff on sugar. All are examples of trade policy.
a tariff on sugar
The initial impact of an increase in government spending is to shift Answer aggregate supply to the right. aggregate supply to the left. aggregate demand to the right. aggregate demand to the left.
ad to the right
Which of the following people or firms would be pleased by a depreciation of the dollar? a U.S. tourist traveling in Europe a U.S. importer of Russian vodka a French exporter of wine to the United States an Italian importer of U.S. steel a Saudi Arabian prince exporting oil to the United States
an Italian importer of US steel
The most accurate measure of the international value of the dollar is the yen/dollar exchange rate. the Brazilian real/dollar exchange rate. the peso/dollar exchange rate. the British pound/dollar exchange rate. an exchange rate index that accounts for many exchange rates.
an exchange rate index that accounts for many exchange rates.
Which of the following statements regarding the market for foreign-currency exchange is true? Answer An increase in U.S. net capital outflow increases the supply of dollars, and the dollar appreciates. An increase in U.S. net capital outflow increases the supply of dollars, and the dollar depreciates. An increase in U.S. net capital outflow increases the demand for dollars, and the dollar appreciates. An increase in U.S. net capital outflow increases the demand for dollars, and the dollar depreciates.
an increase in US NCO increases the supply of dollars, and the dollar deprecaites
Which of the following would not cause a shift in the long-run aggregate-supply curve? Answer an increase in the available labor an increase in the available capital an increase in the available technology an increase in price expectations All of the above shift the long-run aggregate-supply curve.
an increase in price expectations
Which of the following statements regarding the loanable-funds market is true? Answer An increase in private saving shifts the supply of loanable funds to the left. A decrease in the government budget deficit increases the real interest rate. An increase in the government budget deficit shifts the supply of loanable funds to the right. An increase in the government budget deficit shifts the supply of loanable funds to the left.
an increase in the government budget deficit shifts the supply of loanable funds to the left.
An economy that interacts with other economies is known as a balanced trade economy. an export economy. an import economy. a closed economy. an open economy.
an open economy
An increase in Europe's taste for U.S.-produced Fords would cause the dollar to Answer depreciate and would increase U.S. net exports. depreciate and would decrease U.S. net exports. appreciate and would increase U.S. net exports. appreciate and would decrease U.S. net exports. appreciate, but the total value of U.S. net exports stays the same.
appreciate, but the total value of US net exports stays the same.
When people take advantage of differences in prices for the same good by buying it where it is cheap and selling it where it is expensive, it is known as Answer purchasing-power parity. net capital outflow. arbitrage. net exports. currency appreciation.
arbitrage
Which of the following is not a reason why the aggregate-demand curve slopes downward? Answer the wealth effect the interest-rate effect the classical dichotomy/monetary neutrality effects the exchange-rate effect All of the above are reasons why the aggregate-demand curve slopes downward.
classical dichotomy
When an increase in government purchases raises incomes, shifts money demand to the right, raises the interest rate, and lowers investment, we have seen a demonstration of Answer the multiplier effect. the investment accelerator. the crowding-out effect. supply-side economics. the liquidity trap.
crowding out effect
uppose a wave of investor and consumer optimism has increased spending so that the current level of output exceeds the long-run natural rate. If policymakers choose to engage in activist stabilization policy, they should Answer decrease taxes, which shifts aggregate demand to the right. decrease taxes, which shifts aggregate demand to the left. decrease government spending, which shifts aggregate demand to the right. decrease government spending, which shifts aggregate demand to the left.
decrease government spending which shifts the ad to the left
The initial effect of an increase in the money supply is to Answer increase the price level. decrease the price level. increase the interest rate. decrease the interest rate.
decrease the interest rate
An increase in the U.S. government budget deficit Answer increases U.S. net exports and decreases U.S. net capital outflow. decreases U.S. net exports and increases U.S. net capital outflow. decreases U.S. net exports and U.S. net capital outflow the same amount. increases U.S. net exports and U.S. net capital outflow the same amount.
decreases US NCO and NX the same amount.
Other things unchanging, a higher U.S. real interest rate Answer increases U.S. net capital outflow because U.S. residents and foreigners prefer to invest in the United States. decreases U.S. net capital outflow because U.S. residents and foreigners prefer to invest in the United States. decreases U.S. net capital outflow because U.S. residents and foreigners prefer to invest abroad. does none of the above.
decreases US net capital outflow because US residents and foreigners prefer to invest in the US.
When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the interest rate
decreases the quantity demanded for money
Which of the following products would likely be the least accurate if used to calculate purchasing-power parity? gold automobiles diamonds dental services
dental services
Suppose a wave of investor and consumer pessimism causes a reduction in spending. If the Federal Reserve chooses to engage in activist stabilization policy, it should Answer increase government spending and decrease taxes. decrease government spending and increase taxes. increase the money supply and decrease interest rates. decrease the money supply and increase interest rates.
increase money supply and decrease interest rates
the long run effect of an increase in the money supply is to
increase the price
An increase in U.S. private saving Answer increases U.S. net exports and decreases U.S. net capital outflow. decreases U.S. net exports and increases U.S. net capital outflow. decreases U.S. net exports and U.S. net capital outflow the same amount. increases U.S. net exports and U.S. net capital outflow the same amount.
increases US net exports and US NCO the same amount
Capital flight
increases a country's net exports and decreases its long-run growth path.
An increase in the government budget deficit Answer increases the real interest rate and crowds out investment. decreases the real interest rate and crowds out investment. has no impact on the real interest rate and fails to crowd out investment because foreigners buy assets in the deficit country. does none of the above.
increases the real interest rate and crowds out investment
For the United States, the most important source of the downward slope of the aggregate-demand curve is Answer the exchange-rate effect. the wealth effect. the fiscal effect. the interest-rate effect. none of the above.
interest rate effect
When an increase in government purchases causes firms to purchase additional plant and equipment, we have seen a demonstration of Answer the multiplier effect. the investment accelerator. the crowding-out effect. supply-side economics. none of the above.
investment accelerator
According to the interest-rate effect, aggregate demand slopes downward (negatively) because
lower prices
Which of the following statements about stabilization policy is true? Answer In the short run, a decision by the Fed to increase the targeted money supply is essentially the same as a decision to increase the targeted interest rate. Congress has veto power over the monetary policy decisions of the Fed. Long lags enhance the ability of policymakers to "fine-tune" the economy. Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy. All of the above are tru
many econmists prefer automatic stabilizers
Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the Answer sticky-wage theory of the short-run aggregate-supply curve. sticky-price theory of the short-run aggregate-supply curve. misperceptions theory of the short-run aggregate-supply curve. classical dichotomy theory of the short-run aggregate-supply curve.
misperceptions theory
Which of the following statements regarding taxes is correct? Answer Most economists believe that, in the short run, the greatest impact of a change in taxes is on aggregate supply, not aggregate demand. A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes. An increase in taxes shifts the aggregate-demand curve to the right. A decrease in taxes shifts the aggregate-supply curve to the left.
q permanent change
An increase in the marginal propensity to consume (MPC) Answer raises the value of the multiplier. lowers the value of the multiplier. has no impact on the value of the multiplier. rarely occurs because the MPC is set by congressional legislation.
raises the value of the multiplier
If the exchange rate changes from 3 Brazilian reals per dollar to 4 reals per dollar, the dollar has depreciated. the dollar has appreciated. the dollar could have appreciated or depreciated depending on what happened to relative prices in Brazil and the United States. none of the above is true.
the dollar has appreciated
Which of the following best describes how an increase in the money supply shifts aggregate demand? Answer The money supply shifts right, the interest rate rises, investment decreases, and aggregate demand shifts left. The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right. The money supply shifts right, prices rise, spending falls, and aggregate demand shifts left. The money supply shifts right, prices fall, spending increases, and aggregate demand shifts right.
the money supply shifts rifght the interest rate falls and investment increases and AD shifts right
When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of Answer the multiplier effect. the investment accelerator. the crowding-out effect. supply-side economics. none of the above.
the multiplie effect
Suppose the money supply in Mexico grows more quickly than the money supply in the United States. We would expect that Answer the peso should depreciate relative to the dollar. the peso should appreciate relative to the dollar. the peso should maintain a constant exchange rate with the dollar because of purchasing-power parity. none of the above is true.
the peso should depreciate relative to the dollar
Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by Answer the supply and demand for loanable funds. the supply and demand for money. the supply and demand for labor. aggregate supply and aggregate demand.
the supply and demand for money
Suppose the inflation rate over the last 20 years has been 10 percent in Great Britain, 7 percent in Japan, and 3 percent in the United States. If purchasing-power parity holds, which of the following statements is true? Over this period, Answer the value of the dollar should have fallen compared to the value of the pound and the yen. the yen should have risen in value compared to the pound and fallen compared to the dollar. the yen should have fallen in value compared to the pound and risen compared to the dollar. the value of the pound should have risen compared to the value of the yen and the dollar. None of the above is true.
the yen should have risen in value compared to the pound and fallen compared to the dollar.
Which of the following is an automatic stabilizer? Answer military spending spending on public schools unemployment benefits spending on the space shuttle All of the above are automatic stabilizers.
unemployement benefits
The natural level of output is the amount of real GDP produced Answer when there is no unemployment. when the economy is at the natural level of investment. when the economy is at the natural level of aggregate demand. when the economy is at the natural rate of unemployment.
when the economy is at the natural rate of unemployment
If a company based in the US prefers a strong dollar, then the company likely exports more than it imports.
F
If labour unions convince Americans to "buy american", it will improve the US trade balance
F
If policymakers choose to try to move the economy out of a recession, they should use their policy tools to decrease aggregate demand.
F
If the Federal Reserve increases the money supply, the aggregate-demand curve shifts to the left.
F
If the MPC (marginal propensity to consume) is 0.80, then the value of the multiplier is 8.
F
If the United States raises its tariff on imported sugar, it will reduce imports and improve the trade balance.
F
If the economy is in a recession, the economy will adjust to long-run equilibrium on its own as wages and price expectations rise.
F
In the long run, an increase in government spending tends to increase output and prices.
F
In the short run, the interest rate is determined by the loanable-funds market, while in the long run, the interest rate is determined by money demand and money supply.
F
Which of the following is an example of foreign direct investment? McDonald's builds a restaurant in Moscow. Columbia Pictures sells the rights to a movie to a Russian movie studio. General Motors buys stock in Volvo. General Motors buys steel from Japan.
McDonald's builds a restaurant in Moscow.
A rise in price expectations that causes wages to rise causes the short-run aggregate-supply curve to shift left.
T
A rise in the price of oil tends to cause stagflation.
T
For any country, net exports are always equal to net capital outflow because every international transaction involves an exchange of an equal value of some combination of goods and assets.
T
If purchasing-power parity holds, the real exchange rate is always equal to 1.
T
If the United States raises its tariff on imported sugar, domestic sugar growers will benefit, but the dollar will appreciate and domestic producers of export goods will be harmed.
T
If the classical dichotomy and monetary neutrality hold in the long run, then the long-run aggregate-supply curve should be vertical.
T
If the nominal exchange rate is 2 British pounds to the dollar, and if the price of a Big Mac is $2 in the US and 6 pounds in GB, then the real exchange rate is 2/3 British Big Mac per American Big Mac.
T
If the yen/dollar exchange rate rises, the dollar has appreciated.
T
In order to increase domestic investment, a country must either increase its saving or decrease its net foreign investment.
T
In the short run, a decision by the Fed to increase the money supply is essentially the same as a decision to decrease the interest rate target.
T
Which of the following statements regarding the market for foreign-currency exchange is true? Answer An increase in U.S. net exports increases the supply of dollars, and the dollar depreciates. An increase in U.S. net exports decreases the supply of dollars, and the dollar depreciates. An increase in U.S. net exports decreases the demand for dollars, and the dollar appreciates. An increase in U.S. net exports increases the demand for dollars, and the dollar appreciates.
an increase in US NX increases the demand for dollars and the dollar appreciates.
Which of the following statements regarding the loanable-funds market is not true? Answer An increase in a country's net capital outflow raises its real interest rate. An increase in a country's net capital outflow shifts the supply of loanable funds to the left. An increase in domestic investment shifts the demand for loanable funds to the right. A decrease in a country's net capital outflow shifts the demand for loanable funds to the left.
an increase in a country's net capital outflow shifts the supply of loanable funds to the left.
Which of the following statements is true regarding the long-run aggregate-supply curve? The long-run aggregate-supply curve Answer shifts left when the natural rate of unemployment falls. is vertical because an equal change in all prices and wages leaves output unaffected. is positively sloped because price expectations and wages tend to be fixed in the long run. shifts right when the government raises the minimum wage.
is vertical
According to the wealth effect, aggregate demand slopes downward (negatively) because Answer lower prices increase the value of money holdings and consumer spending increases. lower prices decrease the value of money holdings and consumer spending decreases. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases. lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
lower prices increase the value of money holdings and consumer spending increases.
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding U.S. net exports? Answer Net exports will rise. Net exports will fall. Net exports will remain unchanged. None of the above is true.
net exports will remain unchanged
Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. If policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run? Answer Prices rise; output is unchanged from its initial value. Prices fall; output is unchanged from its initial value. Output rises; prices are unchanged from the initial value. Output falls; prices are unchanged from the initial value. Output and the price level are unchanged from their initial values.
output and the price level are unchanged from their initial values
uppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run? Answer Prices rise; output rises. Prices rise; output falls. Prices fall; output falls. Prices fall; output rises.
prices rise; output falls
According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause Answer prices to rise and output to rise. prices to fall and output to fall. prices to rise and output to remain unchanged. prices to fall and output to remain unchanged.
prices to rise and output to remain unchanged
Policymakers are said to "accommodate" an adverse supply shock if they Answer respond to the adverse supply shock by increasing aggregate demand, which further raises prices. respond to the adverse supply shock by decreasing aggregate demand, which lowers prices. respond to the adverse supply shock by decreasing short-run aggregate supply. fail to respond to the adverse supply shock and allow the economy to adjust on its own.
respond by increasing AD
Stagflation occurs when the economy experiences
rising prices and falling output
In the market for real output, the initial effect of an increase in the money supply is to Answer shift aggregate demand to the right. shift aggregate demand to the left. shift aggregate supply to the right. shift aggregate supply to the left.
shift ad to the right
Suppose the economy is operating in a recession such as point B in Exhibit 4. If policymakers wished to move output to its long-run natural level, they should attempt to Answer shift aggregate demand to the right. shift aggregate demand to the left. shift short-run aggregate supply to the right. shift short-run aggregate supply to the left.
shift ad to the right
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to Answer shift short-run aggregate supply to the right. shift short-run aggregate supply to the left. shift aggregate demand to the right. shift aggregate demand to the left. shift long-run aggregate supply to the left.
shift aggregate demand to the right
Suppose the government increases its purchases by $16 billion. If the multiplier effect exceeds the crowding-out effect, then Answer the aggregate-supply curve shifts to the right by more than $16 billion. the aggregate-supply curve shifts to the left by more than $16 billion. the aggregate-demand curve shifts to the right by more than $16 billion. the aggregate-demand curve shifts to the left by more than $16 billion.
shifts AD right more than 16
When the supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level
shifts money demand to the right and increases the interest rate
Suppose the economy is operating in a recession such as point B in Exhibit 4. If policymakers wished to move output to its long-run natural level, they should attempt to Answer shift aggregate demand to the right. shift aggregate demand to the left. shift short-run aggregate supply to the right. shift short-run aggregate supply to the left.
sr as shift right
Suppose the price level falls. Because of fixed nominal wage contracts, firms become less profitable, and they cut back on production. This is a demonstration of the Answer sticky-wage theory of the short-run aggregate-supply curve. sticky-price theory of the short-run aggregate-supply curve. misperceptions theory of the short-run aggregate-supply curve. classical dichotomy theory of the short-run aggregate-supply curve.
sticky wage
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding the market for foreign-currency exchange? Answer The supply of dollars increases, and the dollar depreciates. The supply of dollars decreases, and the dollar appreciates. The demand for dollars increases, and the dollar appreciates. The demand for dollars decreases, and the dollar depreciates.
the demand for dollars increases, and the dollar appreciates.
