Macro
A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?
$70 billion
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 milion
An Egyptian tourist is trying to decide if a watch for sale in the U.S. is a good deal and so wants to convert the price in U.S. dollars to Egyptian pounds. If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs
125
If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?
2
Which of the following is an example of U.S. foreign direct investment?
A U.S. based restaurant chain opens new restaurants in India.
Refer to Figure 33-1. If the economy starts at C, in the short run an increase in the money supply moves the economy to point
B
A German firm purchases a bond issued by United Express, a U.S. delivery company. As a result what happens to U.S. net capital outflow?
It falls
Which of the following shifts short-run aggregate supply right?
a decrease in the price of oil
A country sells more to foreign countries than it buys from them. It has
a trade surplus and positive net exports.
The classical dichotomy and monetary neutrality are represented graphically by
a vertical long-run aggregate-supply curve.
Which of the following shifts the long-run aggregate supply curve to the right?
an increase in capital stock.
Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar
appreciates and buys more Chinese goods.
Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar
appreciates so U.S. goods become more expensive relative to foreign goods.
Which of the following would cause investment spending to increase and aggregate demand to shift right?
both an increase in the money supply and an investment tax credit
The interest rate in a country goes up while the value of its currency falls. This might be due to
capital flight
Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2
could be caused by a decrease in the price of energy.
Aggregate demand shifts left when the government
cuts military expenditures.
Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could
decrease the money supply, which will increase interest rates.
If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment
decreases, and U.S. net capital outflow decreases.
If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate
decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price level(s) in
foreign countries rise.
The purchase of U.S. government bonds by Egyptians is an example of
foreign portfolio investment by Egyptians.
A U.S. firm buys bonds issued by a technology center in India. This purchase is an example of U.S.
foreign portfolio investment. By itself it is an increase in U.S. holdings of foreign bonds and increases U.S. net capital outflow.
Other things the same, an increase in the U.S. real interest rate induces
foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
If a country went from a government budget deficit to a surplus, national saving would
increase, shifting the supply of loanable funds right.
In 2001, the United States was in recession. Which of the following things would you not expect to have happened?
increased investment spending
Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to
k
Suppose that 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.
During recessions, automatic stabilizers tend to make the government's budget
move toward deficit
A country has a trade deficit. Which of the following must also be true?
net capital outflow is negative and domestic investment is larger than saving
A U.S.-imposed quota on automobiles would shift
only the demand curve in the market for foreign-currency exchange right.
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
The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the
real exchange rate is less than 1.
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.
If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?
the nominal exchange rate is 260/250
Which of the following is not a determinant of the long-run level of real GDP?
the price level
Case 1. Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.
the price level is lower and real GDP is the same.
Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?
the price of the basket of goods falls in the U.S. and rises in Taiwan.
Which of the following does purchasing-power parity conclude should equal 1?
the real exchange rate but not the nominal exchange rate
If the demand of loanable funds shifts left, then
the real interest rate and the equilibrium quantity of loanable funds both fall.
If the supply of loanable funds shifts left, then
the real interest rate rises and the equilibrium quantity of loanable funds falls.
If output is above its natural rate, then according to sticky-wage theory
workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left.
Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level
decreases the interest rate.
Refer to Figure 32-5. The initial effect of an increase in the budget deficit in the loanable funds market can be illustrated as a move from
b to a
When the U.S. real interest rate falls, purchasing U.S. assets becomes
less attractive and so U.S. net capital outflow rises.
Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from C to __________ in the short run and __________ in the long run.
D, C
An economic expansion caused by a shift in aggregate demand remedies itself over time as the wage level
rises, shifting aggregate supply left.
In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?
5
A country has national saving of $90 billion, government expenditures of $30 billion, domestic investment of $50 billion, and net capital outflow of $40 billion. What is its demand for loanable funds?
90 billion
Which of the following is always correct in an open economy?
S = I + NCO
If a country has a trade deficit then
S< I and Y < C+I+G S< I and Y < C+I+G
Case 1. Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.Refer to Case 1. What happens to the expected price level and what's the result for wage bargaining?
The expected price level falls. Bargains are struck for lower wages.
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.Refer to Case 1. Which curve shifts and in which direction
aggregate demand shifts left
In an open economy, the source for the demand for loanable funds is
investment + net capital outflow
Refer to Figure 34-9. Suppose the economy is currently at point D. To restore full employment, the appropriate fiscal response
is a reduction in taxes.
In the open-economy macroeconomic model, if a country's supply of loanable funds shifts right, then
net capital outflow rises, so the supply curve in the foreign exchange market shifts right.
In the open-economy macroeconomic model, if investment demand decreases, then
net exports rise and the real exchange rate falls.
If a country has Y > C + I + G, then it has
positive net capital outflow and positive net exports.
Refer to Figure 34-9. Suppose the economy is currently at point A. To restore full employment, the appropriate monetary response
requires the central bank to sell government bonds, which will reduce the money supply.
If a country raises its budget deficit, then in the market for foreign-currency exchange
supply shifts left.
