Exam 3 Macro Matthews Review :] (4 FINAL)
Which of the following both reduce net exports?
Exports FALL, Imports RISE
Other things the same, an increase in the U.S. interest rate causes U.S. net capital outflow to
FALL, so supply in the market for foreign currency exchange shifts left
If a country's budget deficit decreases, then the exchange rate
FALLS, which raises net exports.
Other things the same, when the price level falls, interest rates
Fall, so firms increase investment
Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities. Most economists would say that Charisse's opinion is
classical in nature, and her view is more valid for the long run than the short run
The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), expresses
how output deviates in the short run from its long run natural rate.
According to liquidity preference theory, an increase in the price level causes the interest rate to
increase, which decreases the quantity of goods and services demanded.
Other things the same, a decrease in the real interest rate
increases the quantity of loanable funds demanded.
If a country exports more than it imports, then it has
positive net exports and positive net capital outflows.
If a country has positive net capital outflows, then its net exports are
positive, and its saving is larger than its domestic investment
If the Federal Reserve increases the money supply, then initially there is a
surplus in the money market, so people will want to buy bonds.
A tax cut shifts the aggregate demand curve the farthest if
the MPC is large and if the tax cut is permanent.
You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then
the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
Other things the same, the aggregate quantity of goods demanded in the U.S. increases if
the dollar depreciates.
Other things the same, which of the following would both make Americans more willing to buy Italian goods?
the nominal exchange rate rises, the price of goods in Italy falls
An decrease in taxes shifts aggregate demand
to the RIGHT, the larger the multiplier is the further it shifts
Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion, then by how far does aggregate demand shift to the right?
$300 billion and $270 billion
From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?
A decrease in the supply of loanable funds
Which of the following correctly explains the crowding out effect?
An increase in government expenditures increases the interest rate and so reduces investment spending
Other things the same, which of the following responses would we expect to result from a decrease in U.S. interest rates?
All of the ABOVE :]
When the interest rate is above the equilibrium level,
All of the above :]
When Microsoft establishes a distribution center in France, US net capital outflow
Increases because Microsoft makes a direct investment in capital in France
Aggregate demand shifts right when the Federal Reserve
Increases the money supply
When the real exchange rate for the dollar depreciates, U.S. goods become
Less expensive relative to foreign goods, which makes exports rise and imports fall.
According to the theory of liquidity preference, if the interest rate rises
People want to hold less money, the response is shown by moving to the left along the money demand curve
Suppose that the US imposed an import quota on beef. Sales of the US beef producers would
RISE & exports of other industries would decrease
An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level
RISES, shifting aggregate supply LEFT
In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange model is the
Real exchange rate
In the mid-1970s the price of oil rose dramatically. This
Shifted aggregate supply left, the price level rose, and real GDP fell
Suppose a Starbucks tall latte costs $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?
The Big Mac but not the Latte
Which of the following would cause the real exchange rate of the US dollar to depreciate?
The US Gov't budget deficit decreases
Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?
The demand for loanable funds shifts left
Using the liquidity-preference model, when the Federal Reserve decreases the money supply,
The equilibrium interest rate increases
According to purchasing-power parity what should the nominal exchange rate between the US and another country be equal to?
The price level in other country divided by the price level in the US
If the actual price level is 165, but people had been expecting it to be 160, then
The qty of output supplied rises, but only in the short run
The long-run aggregate supply curve shifts left if
There is a natural disaster
An increase in the money supply
and an investment tax credit both cause aggregate demand to shift right
If people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's interest rate
and net exports would RISE
if a country went from a gov't budget deficit to a surplus, national saving would
decrease, shifting the demand for loanable funds RIGHT
When taxes increase, consumption
decreases as shown by a shift of the aggregate demand curve to the left
If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?
e=p*/p
The long-run aggregate supply curve shifts RIGHT if
either immigration from abroad increases or technology improves
