Econ Exam4
A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the U.S.?
both the one in Ohio and the one in Italy
The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,
production is less profitable and employment falls
Which of the following is not included in aggregate demand?
purchases of stock and bonds
If interest rates rose more in the U.S. than in France, then other things the same
U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds.
When the U.S. real interest rate falls
U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall
The initial impact of the repeal of an investment tax credit is to shift
aggregate demand left.
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
Other things the same an increase in the interest rate
. increases national saving, this is shown by moving along the supply of loanable funds curve.
Which of the following actions might we logically expect to result from rising stock prices?
Firms spend more on investment
In the open-economy macroeconomic model, the market for loanable funds identity can be written as
S= I + NCO
Most economists believe that in the long run, changes in the money supply
affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory
If the stock market booms, then
aggregate demand increases, which the Fed could offset by selling bonds
If there is capital flight from the United States, then the demand for loanable funds
and the supply of dollars in the foreign-exchange market shift right
Automatic stabilizers
are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession.
Suppose that India has a government budget surplus, and then goes into deficit. This change would
decrease India's national saving and shift its supply of loanable funds left.
The long-run aggregate supply curve shifts right if
either immigration from abroad increases or technology improves
The interest rate would fall and the quantity of money demanded would
increase if there were a surplus in the money market
Suppose households attempt to increase their money holdings. To stabilize output by countering this increase in money demand, the Federal Reserve would
increase the money supply.
The position of the long-run aggregate supply curve
is determined by resource usage and technology.
According to the theory of liquidity preference, money demand
is negatively related to the interest rate, while the money supply is independent of the interest rate
Which of the following rises during recessions?
layoffs but not consumer spending
When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is
less than it desires and increase its production.
When the real exchange rate for the dollar appreciates, U.S. goods become
more expensive relative to foreign goods, which makes exports fall and imports rise.
If U.S. net exports are negative, then net capital outflow is
negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.
The goal of monetary policy and fiscal policy is to
offset shifts in aggregate demand and thereby stabilize the economy
If a country has a negative net capital outflow, then
on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.
Which of the following sequences best explains the negative slope of the aggregate-demand curve?
price level ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↑ +
If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate
rises and the quantity of dollars exchanged does not change.
The imposition of an import quota shifts
the demand for currency right, so the exchange rate rises.
People choose to hold a larger quantity of money if
the interest rate falls, which causes the opportunity cost of holding money to fall.
According to liquidity preference theory, the opportunity cost of holding money is
the interest rate on bonds
The government buys new weapons systems. The manufacturers of weapons pay their employees. The employees spend this money on goods and services. The firms from which the employees buy the goods and services pay their employees. This sequence of events illustrates
the multiplier effect.
According to classical macroeconomic theory, changes in the money supply affect
the price level, but not real GDP
Aggregate demand includes
the quantity of goods and services the government, households, firms, and customers abroad want to buy.
The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for
the slope of the aggregate-demand curve
In an open economy, the demand for loanable funds comes from
those who want to buy either domestic capital goods or foreign assets
The aggregate supply curve is
vertical in the long run and slopes upward in the short run
