Econ Final

According to liquidity preference theory, the money-supply curve would shift if the Fed a. engaged in open-market operations. b. increased money demand. c. increased the real income. d. did any of the above.

A

Figure 33-7. ​ Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to a. V. b. W. c. X. d. Z.

A

The dollar is said to depreciate against the euro if a. the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods. b. the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods. c. the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods. d. the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.

A

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are a. the price level and real output. b. real output and employment. c. employment and the inflation rate. d. the value of money and the price level.

A

Consider the exhibit below for the following questions. ​ Figure 33-4 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 a. A to B. b. C to D. c. B to A. d. D to C.

B

Figure 33-5. ​ Refer to Figure 33-5. In Figure 33-5, a. Point B represents a short-run equilibrium and a long-run equilibrium. b. Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium. c. Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium. d. Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium.

B

If the U.S. government went from a budget deficit to a budget surplus then a. the interest rate and the real exchange rate would increase. b. the interest rate and the real exchange rate would decrease. c. the interest rate would increase and the real exchange rate would decrease. d. the interest rate would decrease and the real exchange rate would increase.

B

Suppose there is a tax increase. To stabilize output, the Federal Reserve will a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply.

B

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption? a. $700 b. $600 c. $500 d. $300

B

Which of the following shifts aggregate demand to the left? a. an increase in the price level. b. households decide to save a larger fraction of their income. c. an increase in net exports. d. Congress passes a new investment tax credit.

B

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same a. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. b. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. c. the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. d. the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

C

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate? a. 15/4 b. 5/3 c. 3/5 d. 4/15

C

The multiplier effect is exemplified by the multiplied impact on a. the money supply of a given increase in government purchases. b. tax revenues of a given increase in government purchases. c. investment of a given increase in interest rates. d. aggregate demand of a given increase in government purchases.

D

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected, a. production is more profitable and employment rises. b. production is more profitable and employment falls. c. production is less profitable and employment rises. d. production is less profitable and employment falls.

D

Figure 32-3 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. ​ 1. Refer to Figure 32-3. Domestic investment plus net capital outflow is represented by the a. demand curve in panel a. b. demand curve in panel c. c. supply curve in panel a. d. None of the above is correct.

A

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be a. $0 b. $10 billion. c. -$10 billion. d. -$20 billion.

A

If a country places tariffs on imported goods, then a. its currency appreciates which reduces exports. b. its currency appreciates which increases exports. c. its currency depreciates which reduces exports. d. its currency depreciates which increases exports.

A

In the open-economy macroeconomic model, if a country's interest rate falls, then its a. net capital outflow and its net exports rise. b. net capital outflow rises and its net exports fall. c. net capital outflow falls and its net exports rise. d. net capital outflow and its net exports fall.

A

In the open-economy macroeconomic model, the supply of loanable funds comes from a. national saving. b. private saving. c. domestic investment. d. the sum of domestic investment and net capital outflow.

A

Other things the same, a decrease in the real interest rate a. increases the quantity of loanable funds demanded. b. shifts the demand for loanable funds curve to the right. c. decreases the quantity of loanable funds demanded. d. shifts the demand for loanable funds curve to the left.

A

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left.

A

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 a. foreign countries rise. b. the United States rises. c. all countries rise. d. all countries fall.

A

In the short run, an increase in the money supply causes interest rates to a. increase, and aggregate demand to shift right. b. increase, and aggregate demand to shift left. c. decrease, and aggregate demand to shift right. d. decrease, and aggregate demand to shift left.

C

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners? a. $70 billion b. $40 billion c. $30 billion d. $10 billion

C

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow a. and the real exchange rate increase. b. and the real exchange rate decrease. c. increases and the real exchange rate decreases. d. decreases and the real exchange rate increases.

C

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds? a. 2.0 b. 1.0 c. .50 d. None of the above is correct.

A

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase? a. Spain's b. the U.S.'s c. Spain's and the U.S.'s d. neither Spain's nor the U.S.'s

A

Figure 32-1 1. Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for a. the real interest rate to fall. b. the demand for loanable funds curve to shift left. c. the supply for loanable funds curve to shift right. d. All of the above are correct.

A

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar a. appreciate but does not change the real interest rate in the United States. b. appreciate and the real interest rate in the United States increase. c. depreciate and the real interest rate in the United States decrease. d. depreciate but does not change the real interest rate in the United States.

A

The aggregate supply curve is a. vertical in the long run and slopes upward in the short run. b. upward sloping in the long run and vertical in the short run. c. vertical in the short run and in the long run. d. upward sloping in the short run and in the long run.

A

The price of imported oil rises. If the government wanted to stabilize output, which of the following could it do? a. increase government expenditures or increase the money supply b. increase government expenditures or decrease the money supply c. decrease government expenditures or increase the money supply d. decrease government expenditures or decrease the money supply

A

To reduce the effects of crowding out caused by an increase in government expenditures, the Federal Reserve could a. increase the money supply by buying bonds. b. increase the money supply by selling bonds. c. decrease the money supply by buying bonds. d. increase the money supply by selling bonds.

A

When a country experiences capital flight, its net capital outflow, a. which is part of the demand for loanable funds, increases. b. which is part of the supply of loanable funds, increases. c. which is part of the demand for loanable funds, decreases. d. which is part of the supply of loanable funds, decreases.

A

When the dollar depreciates, U.S. a. net exports rise, which increases the aggregate quantity of goods and services demanded. b. net exports rise, which decreases the aggregate quantity of goods and services demanded. c. net exports fall, which increases the aggregate quantity of goods and services demanded. d. net exports fall, which decreases the aggregate quantity of goods and services demanded.

A

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions a. increase U.S. net exports, and increase Turkish net capital outflow. b. increase U.S. net exports, and decrease Turkish net capital outflow. c. decrease U.S. net exports, and increase Turkish net capital outflow. d. decrease U.S. net exports, and decrease Turkish net capital outflow.

B

A change in the expected price level is likely to cause which of the following? a. a shift in the short-run aggregate supply curve and long-run aggregate supply curve b. a shift in the short run aggregate supply curve c. a shift in the aggregate demand curve d. a shift in the long-run aggregate supply curve

B

Automatic stabilizers a. increase the problems that lags cause in using fiscal policy as a stabilization tool. b. are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. c. are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. d. All of the above are correct.

B

If saving is less than domestic investment, then a. there is a trade deficit and Y > C + I + G. b. there is a trade deficit and Y < C + I + G. c. there is a trade surplus and Y > C + I + G. d. there is a trade surplus and Y < C + I + G.

B

If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate a. rises and the quantity of dollars exchanged rises. b. rises and the quantity of dollars exchanged does not change. c. falls and the quantity of dollars exchanged falls. d. falls and the quantity of dollars exchanged does not change.

B

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio? a. 40 and your purchase will increase Brazil's net exports. b. 10 and your purchase will increase Brazil's net exports. c. 40 and your purchase will decrease Brazil's net exports. d. 10 and your purchase will decrease Brazil's net exports.

B

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as a. e(P*/P). b. e(P/P*). c. e + P*/P. d. e - P/P*.

B

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has a. appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan. b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan. c. depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan. d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan.

B

In the long run, fiscal policy influences a. saving, investment, and growth; in the short run, fiscal policy primarily influences technology and the production function. b. saving, investment, and growth; in the short run, fiscal policy primarily influences the aggregate demand for goods and services. c. technology and the production function; in the short run, fiscal policy primarily influences saving, investment, and growth. d. the aggregate demand for goods and services; in the short run, fiscal policy primarily influences technology and the production function.

B

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium? a. the real exchange rate depreciates and net exports fall. b. the real exchange rate depreciates and net exports rise. c. the real exchange rate appreciates and net exports fall. d. the real exchange rate appreciates and net exports rise.

B

In which case can we be sure aggregate demand shifts left overall? a. people want to save more for retirement and the Fed increases the money supply. b. people want to save more for retirement and the Fed decreases the money supply. c. people want to save less for retirement and the Fed increases the money supply. d. people want to save less for retirement and the Fed decreases the money supply.

B

Liquidity preference theory is most relevant to the a. short run and supposes that the price level adjusts to bring money supply and money demand into balance. b. short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. c. long run and supposes that the price level adjusts to bring money supply and money demand into balance. d. long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

B

Nominal exchange rates a. vary little over time. b. vary substantially over time. c. appreciate over time for most countries. d. depreciate over time for most countries.

B

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right? a. foreigners want to buy more U.S. bonds b. foreigners want to buy fewer U.S. bonds c. foreigners want to buy more U.S. goods and services. d. foreigners want to buy fewer U.S. goods and services.

B

Suppose the money-demand curve is currently MD1. If the current interest rate is r2, then a. the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied. b. people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts. c. bond issuers and banks will respond by lowering the interest rates they offer. d. in response, the money-demand curve will shift rightward from its current position to establish equilibrium in the money market.

B

The price level rises in the short run if a. aggregate demand or aggregate supply shifts right. b. aggregate demand shifts right or aggregate supply shifts left. c. aggregate demand shifts left or aggregate supply shifts right. d. aggregate demand or aggregate supply shifts right.

B

When the price level falls a. households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. b. households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. c. households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. d. None of the above are correct.

B

Which of the following illustrates how the investment accelerator works? a. An increase in government expenditures increases the interest rate so that the Burgerville chain of restaurants decides to build fewer new restaurants. b. An increase in government expenditures increases aggregate spending so that Burgerville finds it profitable to build more new restaurants. c. An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Burgerville increases. d. An increase in government expenditures decreases the interest rate so that Burgerville decides to build more new restaurants.

B

Which of the following is an example of U.S. foreign portfolio investment? a. Disney builds a new amusement park near Barcelona, Spain. b. A U.S. citizen buys bonds issued by the British government. c. A Dutch hotel chain opens a new hotel in the United States. d. A citizen of Singapore buys a bond issued by a U.S. corporation.

B

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales a. decrease U.S. exports but increase U.S. net exports. b. decrease both U.S. exports and U.S. net exports. c. increase both U.S. exports and U.S. net exports. d. increase U.S. exports but decrease U.S. net exports.

C

According to classical macroeconomic theory, changes in the money supply affect a. unemployment and the price level. b. unemployment but not the price level. c. the price level, but not unemployment. d. neither the price level nor unemployment.

C

According to the theory of liquidity preference, money demand a. and the money supply are positively related to the interest rate. b. and the money supply are negatively related to the interest rate. c. is negatively related to the interest rate, while the money supply is independent of the interest rate. d. is independent of the interest rate, while money supply is negatively related to the interest rate.

C

Assume the money market is initially in equilibrium. If the price level increases, then according to liquidity preference theory there is an excess a. supply of money until the interest rate increases. b. supply of money until the interest rate decreases. c. demand for money until the interest rate increases. d. demand for money until the interest rate decreases.

C

If purchasing-power parity holds, then the value of the a. nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level. c. real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. d. real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level.

C

If taxes a. increase, then consumption increases, and aggregate demand shifts leftward. b. increase, then consumption decreases, and aggregate demand shifts rightward. c. decrease, then consumption increases, and aggregate demand shifts rightward. d. decrease, then consumption decreases, and aggregate demand shifts leftward.

C

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level a. and output are higher than in the original long-run equilibrium. b. and output are lower than in the original long-run equilibrium. c. is lower and output is the same as the original long-run equilibrium. d. is the same and output is lower than in the original long-run equilibrium.

C

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate? a. 1/.70 French MP3 players per U.S. MP3 player b. 1 French MP3 players per U.S. MP3 player c. .70 French MP3 players per U.S. MP3 player. d. None of the above are correct.

C

If the stock market crashes, then a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate demand increases, which the Fed could offset by decreasing the money supply. c. aggregate demand decreases, which the Fed could offset by increasing the money supply. d. aggregate demand decreases, which the Fed could offset by decreasing the money supply.

C

Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a. a falling price level and a falling level of output, as the economy moves to point C. b. a falling price level and a rising level of output, as the economy moves to point A. c. a rising price level and a falling level of output, as the economy moves to point A. d. a rising price level and a rising level of output, as the economy moves to point C.

C

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions a. raise both U.S. net exports and U.S. net capital outflows. b. raise U.S. net exports and lower U.S. net capital outflows. c. lower both U.S. net exports and U.S. net capital outflows. d. lower U.S. net exports and raise U.S. net capital outflows.

C

The effect of an increase in the price level on the aggregate-demand curve is represented by a a. shift to the right of the aggregate-demand curve. b. shift to the left of the aggregate-demand curve. c. movement to the left along a given aggregate-demand curve. d. movement to the right along a given aggregate-demand curve.

C

The idea that expansionary fiscal policy has a positive affect on investment is known as a. monetary policy. b. crowding out. c. the investment accelerator. d. the multiplier.

C

To stabilize interest rates, the Federal Reserve will respond to an increase in money demand by a. buying government bonds, which decreases the supply of money. b. selling government bonds, which increases the supply of money. c. buying government bonds, which increases the supply of money. d. selling government bonds, which decreases the supply of money.

C

When a country imposes an import quota, its exchange rate a. rises because the supply of dollars in the market for foreign-currency exchange falls. b. falls because the supply of dollars in the market for foreign-currency exchange rises. c. rises because the demand for dollars in the market for foreign-currency exchange rises. d. falls because the demand for dollars in the market for foreign-currency exchange falls.

C

When a country's government budget deficit increases, a. the real exchange rate of its currency and its net exports increase. b. the real exchange rate of its currency and its net exports decrease. c. the real exchange rate of its currency increases and its net exports decrease. d. the real exchange rate of its currency decreases and its net exports increase.

C

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds? a. $30 billion b. $40 billion c. $50 billion d. $80 billion

D

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has a. exports of $3 billion and a trade surplus of $1 billion. b. exports of $3 billion and a trade deficit of $1 billion. c. exports of $2 billion and a trade surplus of $1 billion. d. exports of $2 billion and a trade deficit of $1 billion.

D

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has a. a trade surplus and positive net exports. b. a trade surplus and negative net exports. c. a trade deficit and positive net exports. d. a trade deficit and negative net exports.

D

An increase in government spending on goods to build or repair infrastructure a. shifts the aggregate demand curve to the right. b. has a multiplier effect. c. shifts the aggregate supply curve to the right, but this effect is likely more important in the long run. d. All of the above are correct.

D

As the interest rate falls, a. the quantity of money demanded falls, which would reduce a shortage. b. the quantity of money demanded falls, which would reduce a surplus. c. the quantity of money demanded rises, which would reduce a shortage. d. the quantity of money demanded rises, which would reduce a surplus.

D

If a country has a negative net capital outflow, then a. on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. b. on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. c. on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. d. on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.

D

If a country has negative net capital outflows, then its net exports are a. positive and its saving is larger than its domestic investment. b. positive and its saving is smaller than its domestic investment. c. negative and its saving is larger than its domestic investment. d. negative and its saving is smaller than its domestic investment.

D

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is a. $100 billion and the U.S. has a trade surplus. b. $100 billion and the U.S has a trade deficit. c. -$100 billion and the U.S. has a trade surplus. d. -$100 billion and the U.S. has a trade deficit.

D

If the Fed conducts open-market sales, the money supply a. increases and aggregate demand shifts right. b. increases and aggregate demand shifts left. c. decreases and aggregate demand shifts right. d. decreases and aggregate demand shifts left.

D

In 2008, the United States was in recession. Which of the following things would you not expect to have happened? a. increased layoffs and firings. b. a higher rate of bankruptcy. c. increased claims for unemployment insurance. d. increased real GDP.

D

In the open-economy macroeconomic model, the a. exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. b. exchange rate adjusts to equate national saving with the sum of investment and net capital outflow. c. interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. d. interest rate adjusts to equate national saving with the sum of investment and net capital outflow.

D

Other things the same, an increase in the U.S. interest rate causes a. demand in the market for foreign-currency exchange to increase so the exchange rate increases. b. demand in the market for foreign-currency exchange to decrease so the exchange rate decreases. c. supply in the market for foreign-currency exchange to increase so the exchange rate decreases. d. supply in the market for foreign-currency exchange to decrease so the exchange rate increases.

D

Other things the same, if the long-run aggregate supply curve shifts right, prices a. and output both increase. b. and output both decrease. c. increase and output decreases. d. decrease and output increases.

D

People choose to hold a larger quantity of money if a. the interest rate rises, which causes the opportunity cost of holding money to rise. b. the interest rate falls, which causes the opportunity cost of holding money to rise. c. the interest rate rises, which causes the opportunity cost of holding money to fall. d. the interest rate falls, which causes the opportunity cost of holding money to fall.

D

Refer to Figure 34-5. A shift of the money-demand curve from MD1 to MD2 could be a result of a. a decrease in taxes. b. an increase in government spending. c. an increase in the price level. d. All of the above are correct.

D

Refer to Figure 34-7. Which of the following is correct? a. Unemployment rises as the economy moves from point a to point b. b. Either fiscal or monetary policy could be used to move the economy from point b to point a. c. If the economy is left alone, then as the economy moves from point b to long-run equilibrium, the price level will fall farther. d. All of the above are correct.

D

Shifts in the aggregate-demand curve can cause fluctuations in a. neither the level of output nor the level of prices. b. the level of output, but not in the level of prices. c. the level of prices, but not in the level of output. d. the level of output and in the level of prices.

D

Suppose foreigners find U.S. goods and services more desirable for some reason other than a change in the exchange rate. Which policies could be used to offset the resulting change in output? a. an increase in the money supply and an increase in government purchases. b. an increase in the money supply and a decrease in government purchases. c. a decrease in the money supply and an increase in government purchases. d. a decrease in the money supply and a decrease in government purchases.

D

The aggregate quantity of goods and services demanded changes as the price level falls because a. real wealth falls, interest rates rise, and the dollar appreciates. b. real wealth falls, interest rates rise, and the dollar depreciates. c. real wealth rises, interest rates fall, and the dollar appreciates. d. real wealth rises, interest rates fall, and the dollar depreciates.

D

The long-run aggregate supply curve shifts right if a. immigration from abroad increases. b. the capital stock increases. c. technology advances. d. All of the above are correct.

D

The model of aggregate demand and aggregate supply explains the relationship between a. the price and quantity of a particular good. b. unemployment and output. c. wages and employment. d. real GDP and the price level.

D

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports? a. The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets. b. The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. assets. c. The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets. d. The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. asset.

D

When the Fed sells government bonds, the reserves of the banking system a. increase, so the money supply increases. b. increase, so the money supply decreases. c. decrease, so the money supply increases. d. decrease, so the money supply decreases.

D

When the price level falls a. people want to hold less money. b. the interest rate falls. c. investment spending rises. d. All of the above are correct.

D

Which of the following is an example of U.S. foreign direct investment? a. A Chinese company opens a restaurant in the U.S. b. An Australian bank buys stocks issued by a U.S. corporation. c. A U.S. bank buys bonds issued by an Australian corporation. d. A U.S. company opens an auto parts factory in Canada.

D

Which of the following is correct concerning recessions? a. They come at fairly regular and predictable intervals. b. They are associated with comparatively large increases in investment spending. c. They are any period when real GDP growth is less than average. d. They tend to be associated with rising unemployment rates.

D

Which of the following would not be included in aggregate demand? a. an increase in firms' inventories. b. purchases of goods by households. c. firms' purchases of newly produced machinery. d. government's tax collections.

D