ECON 202 101 Final

Other things the same, a decrease in the U.S. real interest rate induces A. Americans to buy more foreign assets, which increases U.S. net capital outflow. B. Americans to buy more foreign assets, which reduces U.S. net capital outflow. C. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow. D. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.

A.) Americans to buy more foreign assets, which increases U.S. net capital outflow.

Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to a. B and 2. b. B and 3. c. B and 3. d. None of the above is correct.

A.) B and 2.

Most economists believe that in the long run, changes in the money supply a. affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. b. affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. c. affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. d. affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.

A.) affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory.

(Optimism: Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.) Refer to Optimism. Which curve shifts and in which direction? a. aggregate demand shifts right b. aggregate demand shifts left c. aggregate supply shifts right. d. aggregate supply shifts left.

A.) aggregate demand shifts right

Which of the following shifts long-run aggregate supply right? a. an increase in either technology or the human capital stock. b. an increase in human capital but not technology. c. an increase in technology, but not the human capital stock. d. neither an increase in technology nor the human capital stock.

A.) an increase in either technology or the human capital stock.

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.) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

Which of the following decreases during recessions?​ a. ​real GDP b. ​unemployment c. ​layoffs and consumer spending d. ​layoffs but not consumer spending

A.) real GDP

If the central bank increases the money supply, then in the short run prices a. rise and unemployment falls. b. fall and unemployment rises. c. and unemployment rise. d. and unemployment fall.

A.) rise and unemployment falls.

There is a a. short-run tradeoff between inflation and unemployment. b. short-run tradeoff between the actual unemployment rate and the natural rate of unemployment. c. long-run tradeoff between inflation and unemployment. d. long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

A.) short-run tradeoff between inflation and unemployment.

A tax cut shifts the aggregate demand curve the farthest if a. the MPC is large and if the tax cut is permanent. b. the MPC is large and if the tax cut is temporary. c. the MPC is small and if the tax cut is permanent. d. the MPC is small and if the tax cut is temporary.

A.) the MPC is large and if the tax cut is permanent.

In the long run, an economy's production of goods and services depends on its supply of​ a. ​labor, natural resources, capital, and available technology. b. ​labor, natural resources, and capital only. c. ​labor, and natural resources only. d. ​labor only.

A.) ​labor, natural resources, capital, and available technology.

In which case(s) does(do) a country's supply of loanable funds shift left? a. both an increase in the budget deficit and capital flight b. an increase in the budget deficit, but not capital flight c. capital flight, but not an increase in the budget deficit d. neither an increase in the budget deficit nor capital flight

B.) an increase in the budget deficit, but not capital flight

If the U.S. imposed an import quota on corn, then in the U.S. a. exports and imports would rise. b. exports and imports would fall. c. exports would rise and imports would fall. d. exports would fall and imports would rise.

B.) exports and imports would fall.

In the long run, a. the natural rate of unemployment depends primarily on the level of aggregate demand. b. inflation depends primarily upon the money supply growth rate. c. there is a tradeoff between the inflation rate and the natural rate of unemployment. d. All of the above are correct.

B.) inflation depends primarily upon the money supply growth rate.

A decrease in the expected price level shifts a. only the long-run aggregate supply curve right. b. only the short-run aggregate supply curve right. c. both the short-run and the long-run aggregate supply curve right. d. Neither the short-run nor the long-run aggregate supply curve right.

B.) only the short-run aggregate supply curve right

Stagflation exists when prices a. rise and unemployment falls. b. rise and unemployment rises. c. fall and unemployment rises. d. fall and unemployment falls.

B.) rise and unemployment rises.

Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with a. a decrease in consumption expenditures. b. stagflation. c. sticky-wages. d. an increase in net exports.

B.) stagflation.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect a. the price level to rise and real GDP to fall. b. the price level to fall and real GDP to rise. c. the price level and real GDP both to stay the same. d. All of the above are possible.

B.) the price level to fall and real GDP to rise.

If the MPC is 0.8 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $120 billion will eventually shift the aggregate demand curve to the right by a. $216 billion. b. $150 billion. c. $600 billion. d. $480 billion.

C.) $600 billion.

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting a. aggregate supply right. b. aggregate supply left. c. aggregate demand right. d. aggregate demand left.

C.) aggregate demand right.

Supply-side economists believe that changes in government purchases affect a. only aggregate demand. b. only aggregate supply. c. both aggregate demand and aggregate supply. d. neither aggregate demand nor aggregate supply.

C.) both aggregate demand and aggregate supply.

Shifts in aggregate demand affect the price level in a. the short run but not in the long run. b. the long run but not in the short run. c. both the short and long run. d. neither the short nor long run.

C.) both the short and long run.

If a country's budget deficit decreases, then the exchange rate a. rises, which raises net exports. b. rises, which reduces net exports. c. falls, which raises net exports. d. falls, which reduces net exports.

C.) falls, which raises net exports.

The imposition of an import quota shifts a. the supply of currency right, so the exchange rate falls. b. the supply of currency left, so the exchange rate rises. c. the demand for currency right, so the exchange rate rises. d. the demand for currency left, so the exchange rate falls.

C.) the demand for currency right, so the exchange rate rises.

Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then in the short-run a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same.

C.) the price level will rise, and real GDP might rise, fall, or stay the same.

Refer to Figure 34-2. If the money-supply curve MS on the left-hand graph were to shift to the left, this would a. represent an action taken by the Federal Reserve. b. shift the AD curve to the left. c. create, until the interest rate adjusted, an excess demand for money at the interest rate that equilibrated the money market before the shift. d. All of the above are correct.

D.) All of the above are correct.

According to the Phillips curve, policymakers could reduce both inflation and unemployment by a. increasing the money supply. b. increasing government expenditures. c. raising taxes. d. None of the above is correct.

D.) None of the above is correct.

Other things the same, if the long-run aggregate supply curve shifts right, prices a. and output both increase. b. and output both decrease. c. increase and output decreases. d. decrease and output increases.

D.) decrease and output increases.

If households view a tax cut as temporary, then the tax cut a. has no effect on aggregate demand. b. has more of an effect on aggregate demand than if households view it as permanent. c. has the same effect as when households view the cut as permanent. d. has less of an effect on aggregate demand than if households view it as permanent.

D.) has less of an effect on aggregate demand than if households view it as permanent.

When taxes decrease, autonomous 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.) increases as shown by a shift of the aggregate demand curve to the right.

If U.S. net exports are negative, then net capital outflow is a. positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. b. positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. c. negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. d. negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

D.) negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

In the long run, policy that changes aggregate demand changes a. both unemployment and the price level. b. neither unemployment nor the price level. c. only unemployment. d. only the price level.

D.) only the price level.