Econ test 3

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.

$1.6 trillion

Which of the following institutions is a central bank?

- the Bank of Japan -the Bank of England -the Federal Reserve System

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

-$10 million

If national saving in a closed economy is greater than zero, which of the following must be true?

-Either public saving or private saving must be greater than zero. -Y-C-G>0 - Investment is positive.

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

10 billion euros

If the price level increased from 120 to 130, then what was the inflation rate?

8.3 percent

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

Her real and nominal salary have risen.

Which of the following is not correct?

Minimum wages are the predominant reason for unemployment in the U.S. economy

Which of the following is not correct??

Purchases of capital goods are excluded from GDP

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Spain's

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

TRUE

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus

TRUE

In an economy that relies on barter, trade requires a double-coincidence of wants.

TRUE

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

TRUE

Some degree of unemployment is inevitable in a complex economy.

TRUE

The amount of unemployment that a country typically experiences is a determinant of its standard of living.

TRUE

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

TRUE

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

a U.S. import and a Chinese export

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

a central bank.

In a system of 100-percent-reserve banking,

banks do not make loans.

When the Federal Reserve conducts open-market operations to increase the money supply, it

buys government bonds from the public.

Minimum-wage laws

create unemployment.

When the price level falls, the number of dollars needed to buy a representative basket of goods

decreases, so the value of money rises

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

desired net exports but not desired net capital outflow

Shoeleather costs arise when higher inflation rates induce people to

hold less money.

When a country imposes an import quota, its

imports fall and its net exports are unchanged

Sectoral shifts in demand for output

increase unemployment due to job search

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment.

The primary economic function of the financial system is to

match one person's saving with another person's investment.

Inflation can be measured by the

percentage change in the consumer price index

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

positive net exports and positive net capital outflows.

An increase in the budget deficit

reduces net exports and domestic investment.

Given that Monika's income exceeds her expenditures, Monika is best described as a

saver or as a supplier of funds.

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

$2,250.

A country with negative net exports has a trade surplus

FALSE

Banks and mutual funds are examples of financial markets.

FALSE

When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of its workers were idle.

TRUE

Which answer is correct?

The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

Paying efficiency wages means that wages are

above equilibrium, and profits are higher than otherwise.

Which of the following lists is included in what economists call "money"?

cash

Which of the following can the Fed do to change the money supply?

change reserves or change the reserve ratio

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

either U.S. imports decrease or U.S. exports increase

Purchasing-power parity describes the forces that determine

exchange rates in the long run

If a country had capital flight, then the real exchange rate would

fall. To offset this fall the government could increase the budget deficit

Institutions that help to match one person's saving with another person's investment are collectively called the

financial system.

If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there would be no

frictional unemployment.

The theory of efficiency wages explains why

it may be in the best interest of firms to offer wages that are above the equilibrium level.

The amount of unemployment that an economy normally experiences is called the

natural rate of unemployment.

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment.

In the open-economy macroeconomic model, the supply of dollars in the market for foreign- currency exchange comes from

net capital outflow

Which type(s) of economies interact with other economies?

only open economies

Other things the same, when the interest rate rises,

people would want to lend more, making the quantity of loanable funds supplied increase.

The slope of the supply of loanable funds curve represents the

positive relation between the real interest rate and saving.

International trade

raises the standard of living in all trading countries

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers.

When a large, well-known corporation wishes to borrow directly from the public, it can

sell bonds.

Minimum wages create unemployment in markets where they create a

surplus of labor. Unemployment of this type is called structural.

To maintain their standard of living, most people rely on

their labor earnings.

Economists use the term "money" to refer to

those types of wealth that are regularly accepted by sellers in exchange for goods and services.

In order to maintain stable prices, a central bank must

tightly control the money supply