Econ 203 final
which of the following effects helps to explain the downward slope of the aggregate-demand curve?
(all of the above) the exchange rate, the wealth, and interest-rate effects
In the US, a cup of hot chocolate costs $5. In Australia, the same hot chocolate costs $6.5 Australian dollars. If the exchange rate is $1.3 Australian dollars per US Dollar, what is the real exchange rate?
1 cup of Australian hot chocolate per cup of US hot chocolate
If P= domestic prices, P*=foreign prices and e is the nominal exchange rate, which of the following is implied by purchasing power parity?
1/P=e/P*
If MPC=3/5, the the government purchases multi. is
5/2
Which of the following lists includes only changes that shift aggregate demand to the right?
Passing of an investment tax credit, an increase in the money supply
An open economy's GDP is always given by
Y=C+I+G+NX
The aggregate-demand curve could shift from AD1 to AD2 as a result of
a decrease in stock prices
The law of one price states that
a good must sell at the same price at all locations
A country sells more to foreign countries than it buys from them. It has
a trade surplus and positive net exports
Consumers are optimistic. Which curve shifts and in which direction?
aggregate demand shifts right
Which of the following would cause stagflation?
aggregate supply shifts left
If the economy is at point b, a policy to restore full employment would be
an increase in the money supply
In the open-economy macroeconomics model, if the supply of loanable funds increases, then the interest rate
and real exchange rate decrease
If the exchange rate changes from 135 Kazakhstan tenge per dollar to 150 Kazakhstan tenge per dollar, the dollar has
appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods
In the short run, what happens to the price level and real GDP? (with optimism)
both the price level and real GDP rise
A Swiss Company sells chocolates to a retailer in the United States. These sales by themselves
decrease U.S. Net Exports and increase Swiss Net Exports
When taxes increase, consumption
decreases, so aggregate demand shifts left
If the economy were initially in equilibrium at r2 and e3 and the government removed import quotas, the exchange rate would
depreciate to e2
If the nominal exchange rate "e" is foreign currency per dollar, the domestic price is "P" and the foreign price is "P*" then the real exchange rate is defined as
e(P/P*)
Purchasing Power Parity describes the forces that determine
exchange rates in the long run
When interest rates fall
firms want to borrow more for new plants and equipment and households want to borrow more for home building
In the market for foreign currency exchange, the effects of an increase in the budget surplus is illustrated as a move along g to
i
Most economists believe that classical macroeconomics theory is a good description of the economy
in the long run, not in the short run
According to liquidity preference theory, if the quantity of money demanded is greater than the quantity supplied, then the interest rate will
increase and the quantity of money demanded will decrease
Sticky wages can result in
lower profits for firms when the price level is lower than expected
If the economy is at A and there is a fall in aggregate demand, in the short run the economy
moves to D
The curve in panel b shows that the interest rate rises,
net capital outflow declines
When a country's central bank decreases the money supply, its
price level falls and its currency appreciates relative to other currencies in the world
Starting from r2 and E3, an increase in the budget deficit can be illustrated as a move to
r3 and E4
In the open-economy macroeconomics model, the key determinant of net capital outflow is the
real interest rate
If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate
rises and the quantity of dollars exchanged falls
The Long-Run aggregate supply curve shifts right if
the capital stock increases
Other things the same, if the dollar depreciates relative to the British pound then
the exchange rate falls. It will cost fewer pounds to travel in the U.S.
If purchasing power parity holds, the price level in the US is 120, and the price level in Canada is 140, which of the following is true?
the nominal exchange rate is 140/120
Net Capital outflow equals
the purchase of foreign assets by domestic residents-the purchase of domestic assets by foreign residents
the term "crowding out" refers to:
the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase
The aggregate supply curve is upward sloping in
the short run, but not the long run
National saving is represented by
the supply curve (in the first graph)
If the economy starts at A and there is a fall in aggregate demand, the economy moves
to C in the long run
