Econ Final review, Econ Final Review
A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.
Both workers and employers
Which of the following would you expect to increase both interest rates and exchange rates?
Contractionary monetary policy and expansionary fisical policy
Based on the following information, what is the balance on the current account? Exports of goods and services = $5 billion Imports of goods and services= $3 billion Net income on investments = minus$2 billion Net transfers = minus$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S. holdings of assets in foreign countries = $1 billion
-$2 billion
If the economy is currently producing at point D, what is the opportunity cost of moving to point B?
0 forks
The Danish currency, the krone, is pegged to the euro at a rate of 7.46 kroner (kroner is the plural of krone) to the euro. At the pegged exchange rate, how many euros would be exchanged for one krone?
0.13
You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in Euros. If the camera you're looking at costs 115 Euros, under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase.)
0.92 Euros per dollar
Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. The table above shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. All of the following are terms of trade that could possibly benefit both countries except
1 belt : 2.75 swords.
If the price level in the United States is 110, the price level is 120 in Mexico, and the nominal exchange rate is 140 pesos per dollar, what is the real exchange rate from the U.S. perspective?
128
At which point is the unemployment rate equal to the natural rate of unemployment?
A
Which of the following would cause the change depicted in the figure to the right?
A declining preference for Kentucky bourbon causes Mexican consumers to decrease their preferences for U.S.-produced alcohol relative to Mexican-produced alcohol.
Disinflation refers to
A reduction in the rate of inflation
If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar, how many American dollars are required to buy a product that costs 2.5 Canadian dollars?
$2.81
Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. The table above shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Which country has a comparative advantage in producing swords?
Estonia
Suppose that the economy is currently at point A on the short-run Phillips curve in the figure to the right, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?
Equilibrium GDP at point C must be above potential GDP.
An increase in capital outflows from the United States will
decrease the balance on the financial account
A decrease in the demand for American made goods will
decrease the demand for dollars in the foreign exchange market
Suppose the pegged exchange rate is $0.14/yuan and U.S. consumers increase their demand for Chinese products. Using the figure to the right, this would
decrease the surplus of Chinese yuan.
Under the Bretton Woods exchange rate system, ________ could sell their dollars to the American government in exchange for gold.
foreign central banks
Refer to the diagram to the right. A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by Volker in 1979, would result in a movement ______ .
from C to A
Under the Bretton Woods system, U.S. dollars were redeemable for ________ only if the dollars were presented by a foreign central bank.
gold
The United States abandoned the ________ because the government wanted to rapidly expand the money supply in response to the Great Depression.
gold standard
The balance of trade includes trade in
goods only
Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?
government spending
Under the gold standard, to increase the money supply in the country, the government must
have enough gold to back up the increase in the money supply
International trade
helps consumers but hurts firms that are less efficient than their foreign competitors.
Contractionary monetary policy will result in
higher interest rates.
Before 1980, most U.S. corporations raised funds
in U.S. stock and bond markets or in U.S. banks.
National saving equals
income - consumption - government spending
An increase in the demand for American made goods will
increase the demand for dollars on the foreign exchange market
An increase in capital inflows will
increase the equilibrium exchange rate.
Foreign purchases of U.S. government bonds ________ between 1995 and 2007 and ________ in 2016.
increased dramatically; declined
Which of the following would be the source of a "real" business cycle?
increases in oil prices
Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. This statement describes the ________ argument for protectionism.
infant industry
Assume Dina's Diner only produces sliders and hot wings. A combination of 20 sliders and 60 hot wings would appear
inside Dina's production possibilities frontier.
An open economy is an economy that has
interactions in trade or finance with other economies.
Which of the following is most important in explaining exchange rate fluctuations in the short run?
interest rates
Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Hansen
is incorrect. Free trade raises living standards by increasing economic efficiency
Members of Congress promising to support each other's legislation is known as
logrolling
Members of Congress promising to support each other's legislation is known as
logrolling.
Expansionary monetary policy will result in
lower interest rates
Expansionary monetary policy will result in
lower interest rates.
When the value of a currency is determined mostly by demand and supply, but with occasional government intervention, the exchange rate system is defined as
managed float
When the value of a currency is determined mostly by demand and supply, but with occasional government intervention, the exchange rate system is defined as
managed float.
When the value of a currency is determined ________, the exchange rate system is defined as managed float.
mostly by supply and demand, but with occasional government intervention
Growth in aggregate demand will
move the economy to a higher point on the shortminusrun Phillips curve.
If net exports are equal to net foreign investment,
net capital inflows are equal to imports minus exports, the balance of payments is zero, and the current account balance is equal to the negative of the financial account balance
Net foreign investment minus net foreign portfolio investment is equal
net foreign direct investment
If net exports are positive,
net foreign investment is also positive
In the United States today, how much gold will the Federal Reserve give you in exchange for $1?
none
If expected inflation falls, the long run Phillips curve will
not be affected
If expected inflation falls, the longminusrun Phillips curve will
not be affected.
What can the Federal Reserve do to reduce the natural rate of unemployment?
nothing
When the value of a currency is determined ________, the exchange rate system is defined as a floating exchange rate system.
only by supply and demand
If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.
opportunity
To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers
Face a trade-off, because producing more of one model means producing less of the other
Empirical evidence shows that the short run Phillips curve was vertical during the 1950s and 1960s.
False
Foreign portfolio investment in the United States has continually declined since 1995.
False
The gold in Fort Knox backs all U.S. currency.
False
Expanding, contracting, and managing the money supply is easier for a central bank under the gold standard.
False
All but one of the following statements is used to justify protectionism. Which statement is not used to justify protectionism?
Free trade leads to higher prices for imported goods
Gretchen expects the price level to rise from 104 this year to 108 next year, and she is able to incorporate these expectations into her wage contract. If the price level rises to 106 next year instead of 108, which of the following will occur?
Gretchen's real wage will rise
Which of the following would be the source of a "real" business cycle?
Increases in oil prices
Which of the following is not an appropriate policy for a central bank to follow if the economy is plagued with deflation?
Increasing the target interest rate on overnight loans.
Suppose the economy is at point A. The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A. Which of the following will occur?
Inflation will accelerate in the long run.
What impact might an increase in the budget deficit have on interest rates and exchange rates?
Interest rates and exchange rates increase
What impact might an increase in the budget deficit have on interest rates and exchange rates?
Interest rates and exchange rates increase.
Which of the events below cause the shifts in the supply and demand curves in the market for dollars against the British pound shown in the graph above?
Interest rates rise in England.v
China runs a current account surplus with the United States. Which of the following must be true about China's balance of payments with the U.S.?
It must run a financial account deficit.
Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered, as is what happened in the United States in 1849. If the economy is at full employment, what should this discovery do?
It should raise the money supply and cause inflation.
Investors in which two countries accounted for 20 percent of all foreign purchases of U.S. stocks and bonds in March 2017?
Japan and China
Which of the following is an example of a trade restriction?
Japan places a tax on all Korean automobiles
Mateo and Celeste produce custom saddles and spurs. The table above lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the statement that accurately interprets the data in the table Saddles: Mateo=75 Celeste=100 Spurs: Mateo=225 Celeste= 225
Mateo has a comparative advantage in making spurs
A provision of the Dodd-Frank Act of 2010 revised the Federal Reserve Act to
Restrict the Fed's ability to make loans except to commercial banks
Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table. Berries: Rob=20 Bill=30 Fish: Rob=80 Bill=60
Rob has a comparative advantage in catching fish and Rob has a greater opportunity cost than Bill for picking berries
Berries Fish Rob 20 80 Bill 30 60 Rob Crusoe and Bill Friday spent their weekminuslong vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table.
Rob has a greater opportunity cost than Bill for picking berries.
In the 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade restriction?
The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S. government
Which of the following statements about the importance of trade to the U.S. economy is false?
The U.S. economy is highly dependent on international trade for growth in its gross domestic product
As a percentage of GDP, imports are greater than exports for which of the following countries?
The Unites States
If net exports are equal to net foreign investment, which of the following is not true?
The balance on the financial account is zero.
Suppose the economy is at point A in the figure to the right. Which of the following is true?
The current unemployment rate is equal to the natural rate of unemployment.
How does a decrease in the federal budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?
The demand for dollars falls, and the supply of dollars rises
A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days. This statement suggests that
There is a trade-off between studying and sleep
When inflation is very low, how do workers and firms adjust their expectations of inflation?
They tend to ignore inflation
If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy, which of the following would you expect to see?
The Fed's policies will be inflationary.
Suppose the economy is at point C in the figure to the right. If workers adjust their expectations of inflation, which of the following will be true?
The short-run Phillips curve will shift to the left.
Ceteris paribus, an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.
True
Even if expectations of inflation are rational, sluggish adjustment of wages and prices will still create a short run trade-off between inflation and unemployment.
True
If two countries adhere to a gold standard, the exchange rate for their currencies is fixed.
True
In the United States, domestic investment is greater than national saving.
True
One of the main sources of comparative advantage is natural resources.
True
A decrease in United States net foreign direct investment would occur if
U.S. citizens have decreased their building or purchasing of facilities in foreign countries.
in the long run, the Phillips curve is a ______________ at _______________
Vertical line; the natural rte of employment
The currency adopted by most countries in ________ is referred to as the euro.
Western Europe
If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania
Will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want
Which of the following is not included in the balance of the financial account of the United States?
a purchase of German legal services by Chase Manhattan Bank
Disinflation refers to
a reduction in the rate of inflation.
According to Lucas and Sargent, workers and firms have rational expectations, and therefore if the Fed pursues a contractionary monetary policy:
agents will immediately adjust their expectations of inflation down
According to Lucas and Sargent, workers and firms have rational expectations, and therefore if the Fed pursues a contractionary monetary policy:
agents will immediately adjust their expectations of inflation down.
Which of the following transactions would be included in Japan's current account?
an American citizen purchases a new Toyota made in Japan
If the Fed decided to reverse its policy actions implemented during the heart of the recession, the Fed would be acting to try to prevent
an increase in inflation
Which of the following could increase unemployment and inflation simultaneously?
an increase in oil prices
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to both plastic production and food production?
b only
If a country sets a pegged exchange rate that is above the equilibrium exchange rate, how can the country maintain the peg?
by purchasing surplus domestic currency at the pegged rate
In conducting monetary policy, how has the Federal Reserve enhanced its credibility?
by revealing the Fed's target for the federal funds rate
When net capital flows are negative,
capital inflows are less than capital outflows
Shares of stock and long term debt, including corporate and government bonds and bank loans, are bought and sold on
capital markets
If a country has a fixed exchange rate,
central banks must buy and sell their holdings of currencies to maintain a given exchange rate
Which of the following will not have an effect on the long run Phillips curve?
changes in monetary policy
The ________ in the United States is best described as a managed float exchange rate system.
current exchange rate system
A currency pegged at a value above the market equilibrium exchange rate is
overvalued
As foreign investors began to sell off investments they had made in Thailand, they traded in their baht for dollars. The result of this was
pressure for the value of the baht to decline.
The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. All of the following are reasons for these antiminusglobalization protests except
protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.
In 2017, President Trump ________ the TransminusPacific Partnership (TPP), an agreement designed to reduce trade barriers between the United States and 11 other countries.
pulled the United States out of negotiations on
When individuals use all available information about an economic variable to make a decision, expectations are
rational
The increase in unemployment in the United States that resulted from the China shock
recovered at a much slower pace than it had from import increases in previous decades.
An increase in the value of the U.S. dollar will
reduce Canadian demand for winter homes in Arizona.
Dumping refers to
selling a product for a price below its cost of production
Dumping refers to
selling a product for a price below its cost of production.
A decrease in the expected inflation will
shift the short run Phillips curve to the left
In the United States today, the U.S. dollar is backed by
silver, gold or US treasury securities *none of the above*
Persistent current account deficits for the United States have
slowed economic growth decreased investment in new plant and equipment increased government budget deficits. *none of the above*
Evidence shows that for many people, delaying searching for a job for a year or longer after they are laid off will contribute to a deterioration of their job skills, making it harder for them to find employment. This deterioration in job skills and the subsequent retraining that is necessary to obtain employment relates to which type of unemployment?
structural
________ would be the source of a "real" business cycle.
technology shocks
In the 1930s the United States charged an average tariff rate
that exceeded 50 percent
Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?
the Bretton Woods System
The exchange rate system agreed to in 1944 in which the U.S. government agreed to buy or sell gold at a fixed price of $35 per ounce is referred to as
the Bretton Woods System.
If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy, which of the following would you expect to see?
the Fed will follow inflationary monetary policies
In 1995, the General Agreement on Tariffs and Trade (GATT), which was established in 1948, was replaced by the World Trade Organization (WTO). Why did members of the GATT push for the establishment of the WTO?
the GATT agreement only covered trade in goods. The WTO was created to cover trade in goods, services, and intellectual property
The curve showing the short run relationship between the unemployment rate and the inflation rate is called
the Phillips curve
The curve showing the shortminusrun relationship between the unemployment rate and the inflation rate is called
the Phillips curve.
If actual inflation is greater than expected inflation, what is the relationship between the actual real wage and the expected real wage?
the actual real wage will be lower than the expected real wage
When the United States sends money to the Philippines to help typhoon survivors, the transaction is recorded in
the current account
The balance of payments includes which three accounts?
the current account, the financial account, and the capital account
Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008. Which of the following was one of those actions?
the decision to keep the federal funds rate at 1 percent from June 2003 to June 2004
If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then
the dollar has appreciated.
A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil. If the exchange rate is 2 reals per dollar, purchasing power parity predicts that
the dollar is undervalued.
According to real business cycle
the economy is normally at potential GDP
If the current account is in deficit and the capital account is zero,
the financial account must be in surplus
If the current account is in deficit and the capital account is zero, then
the financial account must be in surplus
In the long run, the Federal Reserve can control which of the following?
the inflation rate
The production possibilities frontier shows
the maximum attainable combinations of two products that may be produced in a particular time period with available resources
If Brazil has a comparative advantage relative to Cuba in the production of sugar cane, then
the opportunity cost of production for sugar cane is lower in Brazil than in Cuba
Assuming the United States is the "domestic" country, if the real exchange rate between the United States and France increases from 1.5 to 1.8
the prices of U.S. goods and services have increased by 20% relative to France.
The terms of trade refers to
the ratio at which a country can trade its exports for imports from other countries
What impact does expansionary monetary policy have on the short run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?
the short run Phillips curve shifts down
If workers and firms raise their inflation expectations,
the short run Phillips curve will shift upward
If national savings decreases,
the sum of domestic investment and net foreign investment must decrease
If the Phillips curve represents a "structural relationship", then
the tradeoff between unemployment and inflation is permanent
It is difficult to determine if foreign companies are selling their products for prices below their costs of production because
the true costs of production are difficult to calculate
Refer to the diagram. The equilibrium exchange rate is at A, $3/pound. Suppose the British government pegs its currency at $4/pound. Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2. After the shift,
there is a surplus of pounds equal to 600 million.
Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. The figure shows the impact of this tariff.
to fall by 9 million pounds.
Examples of comparative advantage show how trade between two countries can make each better off. Compared to their preminustrade positions, trade makes both countries better off because in each country
total consumption of goods is greater.
A quota is a numerical limit on the quantity of a good that can be imported.
true
Dumping refers to countries exporting unwanted and inferior products to other countries.
true
If a country has a comparative advantage in producing a product, it must also have an absolute advantage in producing that product.
true
If net exports are positive for China, it must be true that China is experiencing net outflows of capital.
true
The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.
true
Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)
unable to conduct monetary policy.
If the Indian government pegs its currency to the dollar at a value below $.02/rupee, we would say the currency is
undervalued
If the Indian government pegs its currency to the dollar at a value below $.02/rupee, we would say the currency is
undervalued.
Whenever a buyer and a seller agree to trade, both must believe they will be made better off
whether the buyer and seller live in the same (or different) city or country
Whenever a buyer and a seller agree to trade, both must believe they will be made better off
whether the buyer and seller live in the same (or different) city or country.
All else being equal, if the rate of growth in productivity in countries that use the euro is greater than the rate of growth in productivity in the United States, the euro
will increase in value relative to the U.S. dollar
With which of the following statements would a "real business cycle" theorist most closely agree?
"Wages adjust rapidly to changes in inflation as long as expectations are formed rationally" and "Technological shocks to the economy explain deviations of real GDP from its potential level."
Suppose the Chinese government decides to abandon pegging the yuan to the dollar (such that it undervalued its currency). Using the diagram to the right, the equilibrium exchange rate would be ________ and Chinese exports to the U.S. would __________ in price.
$.13/yuan; increase
Refer to the diagram. The equilibrium exchange rate is originally at A, $3/pound. Suppose the British government pegs its currency at $4/pound. Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2. If the government abandons the peg, the equilibrium exchange rate would be
$2/pound
Matt's real wage in 2018 is $26.80. If the price level is 104, what is Matt's nominal wage?
$27.87
Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. The figure shows the impact of this tariff. If the tariff was replaced by a quota which limited coffee imports to 12 million pounds, the amount of revenue received by coffee importers would equal
$30 million.
The figure to the right shows the U.S. demand and supply for leather footwear. Under autarky, the equilibrium price is
$30.
Expansionary monetary policy will have what effect on the components of aggregate demand?
Consumption, investment, and net exports will rise
Suppose the Fed purchases Treasury securities. Interest rates in the United States will ________ and the U.S. dollar will ________ against foreign currencies
decrease; depreciate
If the U.S. government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________.
fall; rise
In the United States during the Great Depression, tariffs were ________ than they were following World War II, and ________ than they are today.
higher; higher
If the Fed pursues an expansionary monetary policy, investment in the United States will ________ and net exports will ________.
increase; increase
A federal budget deficit ________ interest rates, which ________ exchange rates (foreign currency per domestic currency), and ________ the balance of trade.
raises; raises; reduces
If the U.S. government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________.
rise; fall
China began pegging its currency, the yuan, to the dollar in 1994. Because the yuan was ________ at the pegged exchange rate, the Chinese government increased its reserves of ________ as the government purchased more ________ to maintain the pegged exchange rate.
undervalued; dollars; dollars
Monetary policy has a ________ effect on aggregate demand in a(n) ________ economy, and fiscal policy has a ________ effect on aggregate demand in a(n) ________ economy.
weaker; closed; stronger; closed
Which of the following statements about capital markets is true?
At one time, the U.S. capital market was larger than all other capital markets combined, but that is no longer the case
You're traveling in Japan and are thinking about buying a new kimono. You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen. If the exchange rate is 89 yen per dollar, what is the highest price in yen you'd be willing to pay for a kimono? (Assume no taxes or duties are associated with the purchase.)
15,575 yen
By the end of 2017, ________ members of the European Union were using the euro as their currency.
19
During which of the following time periods did inflation remain above 5 percent every year?
1973 through 1982
The year in which euro coins and paper currency were introduced and participating "euro zone" countries withdrew old domestic currencies from circulation was
2002.
if workers and firms expect that inflation will be 3 percent next year, and real wages are not changing over time, by how much will nominal wages increase?
3 percent
Since 1953 the United States has imposed a quota to limit the imports of peanuts. The figure to the right illustrates the impact of the quota. Without the quota, the domestic price of peanuts equals the world price which is $2.00 per pound. What is the quantity of peanuts demanded by domestic consumers in the absence of a quota?
40 million pounds
According to Lucas and Sargent, workers and firms have rational expectations, and therefore if the Fed pursues an expansionary monetary policy:
Agents will immediately adjust their expectations of inflation
The current account includes records of a country's
All of the above are included in an economy's current account.
How does an increase in a country's exchange rate affect its balance of trade?
An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade
Italians cut back on smoking and cut their demand for American cigarettes in half. Assuming all else remains constant, this would be represented as a movement from
B to A.
Which of the following would you expect to decrease both interest rates and exchange rates? (Assume exchange rates are stated in terms of foreign currency per domestic currency.)
Both B and C will decrease both interest rates and exchange rates.
Mateo and Celeste produce custom saddles and spurs. The table above lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the statement that accurately interprets the data in the table. Saddles: Mateo=75 Celeste=100 Spurs: Mateo=225 Celeste=225
Celeste has an absolute advantage in making saddles
Which of the following will not have an effect on the natural rate of unemployment?
Changes in monetary policy
Which of the following will not have an effect on the long minus run Phillips curve?
Changes in monetary policy.
Which of the following will not have an effect on the natural rate of unemployment?
Changes in monetary policy.
If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy, they will expect inflation to ____________ and will adjust wages so that the real wage ____________.
Decrease; remains unchanged
A falling price level is called ________ and a fall in the rate of inflation is called ________.
Deflation; disinflation
The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as
NAFTA.
Mateo and Celeste produce custom saddles and spurs. The table above lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the statement that accurately interprets the data in the table.
Neither Mateo nor Celeste has an absolute advantage in making spurs.
If the United States has a current account deficit and the capital account is zero, which of the following must be true?
Net foreign investment must be negative as well.
An increase in expected inflation will
None of the above is correct
An increase in expected inflation will
None of the above is correct.
What can the Federal Reserve do to reduce the natural rate of unemployment?
Nothing
________ is (are) technically efficient.
Point B
The first example of comparative advantage appeared in a book that was published in 1817. This example showed that mutually beneficial trade between two countries (England and Portugal) was possible. The example assumed that two goods (wine and cloth) could be produced by both countries. Which of the following describes the conclusion of this example?
Portugal had a comparative advantage in wine and England had a comparative advantage in cloth
Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?
Private investment, consumption, and net exports
If actual inflation is less than expected inflation, which of the following will be true?
Real wages will rise.
Suppose over time workers begin to expect higher inflation in the future. Using the line drawing tool, draw the new short-run Phillips curve on the graph. Label this line 'SRPC2'.
SRPC moves up along LRPC
________ exists because unlimited wants exceed the limited resources available to fulfill those wants.
Scarcity
Which of the following describes the national security argument for protectionism?
Some goods should be insulated from foreign competition to ensure an adequate supply of these goods in the event of an international conflict.
If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden, which of the following would explain this pattern of trade?
Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.
According to Gautam Kalani, currency strategist at Deutsche Bank, the Chinese yuan is the most overvalued currency in the world. Kalani based his rankings on three valuation metrics, including purchasing power parity. Emerging market currencies dominate the most overvalued list, while many emerging market currencies are undervalued as well. For developed markets, the Swiss franc is the most overvalued currency, running a close second to the Chinese yuan, and the Japanese yen ranks as the world's most undervalued currency. The U.S. dollar falls toward the middle of the spectrum, ranking as slightly overvalued. Source: David Scutt, "China has the most overvalued currency in the world, according to Deutsche Bank," businessinsider.com.au, October 10, 2017. If, as the article claims, the Japanese yen is the most undervalued currency in the world, how would you expect demand and supply in the foreign exchange markets to respond?
The demand for the yen will rise, while the supply of other currencies will rise.
How would a decrease in the U.S. budget deficit affect the exchange rate in the market for dollars?
The exchange rate will decrease
How would an increase in the U.S. federal budget deficit affect the exchange rate in the market for dollars?
The exchange rate will increase.
At which point is the unemployment rate equal to the natural rate of unemployment?
The point where the long run Phillips curve and the short run Phillips curve intersect
________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
The production possibilities frontier model
What impact does expansionary monetary policy have on the short - run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?
The short - run Phillips curve shifts up.
If, at the current exchange rate between the dollar and the South African rand of 6.92 rand per dollar, the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?
The supply of the dollar will rise, while the demand for the rand will rise.
You decide to work in Japan for the next 10 years, accumulate some savings, then move back to the United States and convert your savings from yen to dollars. At the time of your move, economists predict that consumers in the United States have reignited their love of Japanese products, especially hybrid cars, and expect that this strong preference for Japanese products will continue for the next decade. How should this influence your decision to work and save in Japan?
You should be encouraged as the growing U.S. preference for Japanese goods should increase the value of the yen to the dollar and raise the value of your savings when converted to dollars
When Tesla, a U.S. company, purchases Italian made Pirelli tires for its automobiles, the purchase is
a U.S. import and an Italian export
If the government finances an increase in government purchases with an increase in taxes, which of the following would you NOT expect to see?
a decrease in the interest rate
Which of the following would decrease the natural rate of unemployment?
a decrease in the number of younger, less skilled workers in the economy
According to the shortminusrun Phillips curve, which of the following would result in low rates of unemployment?
a higher inflation rate
China has developed a comparative advantage in the production of children's toys. The source of this comparative advantage is
a large supply of unskilled workers and relatively little capital
A quota is
a limit placed on the quantity of goods that can be imported into a country
A voluntary export restraint is an agreement negotiated by two countries that places ________ that can be imported by one country from another country.
a numerical limit on the quantity of a good
All of the following have enhanced the Fed's credibility in conducting monetary policy except
discontinuing the policy of announcing whether it considered the economy to be at greater risk of inflation or recession following each FOMC meeting
A reduction in the rate of inflation is referred to as
disinflation
Autarky is a situation in which a country
does not trade with other countries
Twenty eight countries in Europe have formed the European Union (EU). After the EU was formed it
eliminated all tariffs among its member countries
The currency adopted by most countries in Western Europe is referred to as the
euro
If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve
expansionary monetary policy is ineffective
The actual real wage is lower than the expected real wage if
expected inflation is less than actual inflation.
An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment
false
Foreign portfolio investment in the United States has continually declined since 1995
false
In the long run, the Fed may decrease the unemployment rate only if it is willing to increase the rate of inflation.
false
U.S. currency continues to be backed by the gold standard to this day.
false
