Final for Macro
If real output in an economy is 1,000 goods per year, the money supply is $300 and each dollar is spent an average of 3 times per year, then according to the quantity equation, the price level is:
$0.90 300 x 3 = P = 1,000
If domestic residents purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of our domestic assets, the our net capital outflow is:
-.3 trillion so it must be a trade deficit
The nominal interest rate is 4%, the inflation rate is 1%, and the tax rate is 20%. Given U.S. tax laws, how is after-tax real return computed?
.04(1-.20) - 0.01
The nominal interest rate is 3% and the inflation rate is 2%. What is the real interest rate?
1% Real interest rate = nominal - inflation
a bank has 10,000 in deposits and 8,000 in loans. it has loaned out all it can given the reserve requirement. It follows that the reserve requirement is:
20%
In the nation of Wiknam, the money supply is $80,000 and the reserves are$18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess, the the reserve requirement is:
22.5% (80,000 = Money Multiplier x 18,000)
Money supply:
= Money Multiplier (1/p) x Bankreserve
Future Value Formula:
= PV(1+R)
The open-economy macroeconomic model includes:
Both the market for loanable funds and the market for foreign-currency exchange.
People who buy newly issued stock in a corporation such as Crate and Barrel provide:
Equity finance and become part owners of Crate and Barrel
When you rent a car, you might treat it with less care than you would if it was your own. This is an example of:
Moral Hazard
Decrease in the quantity supplied:
Movement along the supply curve
The Labor force:
Number of people employed + the number of people unemployed
Decrease in supply:
Shift of supply curve to the left
The supply of the money increases when:
The FED makes open-market purchases
Menu costs:
The cost of changing price tags and price listings
What would happen in the market for loanable funds if the government were to increase the tax on interest income?
The demand for loanable funds would shift left
Utility is measured along the:
Vertical Axis
A shifting of the supply curve to the left is:
a decrease in the supply of loanable funds
A shifting of the demand curve to the right means:
an increase in the demand for loanable funds, and that an increase would originate from households to firms who wish to borrow to make more investments.
Diversification of a portfolio:
can eliminate firm-specific risk, but it cannot eliminate market risk
A decrease in the money supply market creates an excess:
demand for money that is eliminated by falling prices
Which of the following is a liability of a bank and an asset of it's customers:
deposits of its customers but not loans to its customers
If the FED increases the money supply, then 1/p:
falls so the value of money falls
Other things the same, if the interest rate falls, then:
firms will borrow more, which increases the quantity of loanable funds demanded
An open-market purchase:
increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public
When the U.S. exchange rate appreciates, U.S. goods become:
less attractive to customers in the U.S. and abroad
Suppose the real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners:
more willing to purchase U.S. bonds, so U.S. net capital outflow would fall
In the open-economy macroeconomic model, if the U.S. interest rate rises, then its:
net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts to the left.
According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then:
nominal GDP would rise by 5%; real GDP would be unchanged
Classical dichotomy:
only effects nominal values
If a country has Y > C + 1 + G, the it has:
positive net capital outflow and positive net export
Other things the same, a government budget deficit:
reduces both public and national savings
The value of money falls when price level:
rises, because the number of dollars needed to buy a representative basket of goods rises
Liquidity
the ease with which an asset is converted to medium exchange
Other things the same, if the dollar depreciates relative to the Japanese yen, then:
the exchange rate falls. It will cost fewer yen to travel to the U.S.
Net Capital Outflow measures:
the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
If the supply of loanable funds shifts right, then:
the real interest rate falls and the equilibrium quantity loanable of loanable funds rises