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An economy has no imports and no taxes. The marginal propensity to save is .8. A​ ______ increase in autonomous expenditure increases equilibrium expenditure by​ $60 billion. The multiplier is​ ______.

$48 ​billion; 1.25

The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to​ _______.

$5 trillion

Choose the correct statements. 1. In a growing economy comma the exchange rate is always rising.In a growing economy, the exchange rate is always rising. nothing 2. Upper A rise in the exchange rate is called an appreciation of the dollar.A rise in the exchange rate is called an appreciation of the dollar. nothing 3. The foreign exchange market is the market in which the currencyThe foreign exchange market is the market in which the currency of one country is exchanged for the currency another.of one country is exchanged for the currency another. 4. The foreign exchange market is a place.The foreign exchange market is a place.

Statements 2 and 3 are correct.

Which of the following statements about the Keynesian view of the macroeconomy is ​incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______.

net lender; creditor nation

If the U.S. exchange rate changes from​ $1.00 Canadian to​ $1.05 Canadian, then the U.S. dollar has​ _______ and the Canadian dollar has​ _______.

appreciated; depreciated

China fixes its exchange rate​ ______.

as a way of achieving a low inflation rate

The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______.

autonomous; the change in equilibrium expenditure and real GDP

If the government increases its expenditure on goods and services and as a​ result, the money wage rate​ increases, the economy has experienced​ _______.

a​ demand-pull rise in the price level

A business cycle can be described by the following​ sequence: ​______ equilibrium,​ ______ equilibrium,​ ______ equilibrium.

below​ full-employment; full-employment; above​ full-employment

In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

new classical; new Keynesian

The private sector balance and the government sector balance tend to move in​ ______. Net exports respond​ ______.

opposite directions; to the sum of the government sector and private sector balances

Economic growth is the persistent increase in​ ______. Economic growth is accompanied by inflation when the​ ______.

potential​ GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

According to mainstream business cycle​ theory, ______ grows at a steady rate and​ ______ grows at a fluctuating rate.

potential​ GDP; aggregate demand

The quantity of real GDP supplied depends on all of the following except the​ _______.

quantity of real GDP demanded

In real business cycle​ theory, _______ are the main source of economic fluctuations.

random fluctuations in productivity

Between 2012 and​ 2014, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest rate differential was expected to​ _______.

rose; increase

Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves.

sell; decrease

An increase in investment shifts the AE curve upward by an amount equal to the​ ______, and shifts the AD curve rightward by an amount equal to the​ ______.

change in​ investment; change in investment times the multiplier

In real business cycle​ theory, all of the following events can be sources of fluctuation in productivity except​ _______.

changes in the growth of money

A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

Aggregate demand decreasesdecreases if expected future​ income, inflation, or profits​ ______. And aggregate demand decreasesdecreases if fiscal policy​ ______ government expenditure.

decrease; decreases

The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

decreased; increased

Aggregate demand decreasesdecreases if monetary policy​ ______ the quantity of money and​ ______ interest rates.

decreases; increases

A rise in the money wage rate​ ______.

does not change the LAS curve because along the LAS curve a rise in the money wage rate is accompanied by an equal percentage change in the price level

Interest rate parity means​ ______.

equal rates of return

An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls below; rise

Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen.

fell; decreased and because currency traders expected the dollar to depreciate

The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

Unanticipated deflation does all of the following except​ _______.

increases the velocity of circulation

Aggregate demand decreasesdecreases if fiscal policy​ ______ taxes or​ ______ transfer payments.

increases; decreases

In an​ expansion, an increase in the rate of technological change​ _______ investment demand. The real interest rate​ _______.

increases; rises

When costs increase and the Fed wants to return the economy to full​ employment, the Fed responds by​ ______ the quantity of money. If the Fed continually responds to successive increases in​ costs, a​ ______ inflation evolves.

increasing; cost-push

Potential GDP increases for all of the following reasons except​ ______.

inflation increases

If aggregate planned expenditure exceeds real​ GDP, then​ _______.

inventories​ decrease, and as real GDP increases a movement up along the AE curve occurs

If aggregate planned expenditure is less than real​ GDP, then​ _______.

inventories​ increase, and as real GDP decreases a movement down along the AE curve occurs

One consequence of China operating a crawling peg is that China​ ______.

is accumulating U.S. dollars

For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ ______ is the increase in the price level and the​ ______ is the multiplier effect on real GDP in the short run.

larger; smaller

A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

more induced expenditure

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a​ ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a​ ______.

net borrower; debtor nation

Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars increases​, the Fed​ ______.

sells dollars to lower the exchange rate

A fall in the price level​ _______.

shifts the AE curve upwardupward and brings a movement downdown along the AD curve

The business cycle is actually a continuous series of different​ ______.

short-run macroeconomic equilibriums

In RBC​ theory, the lower the real interest​ rate, other things remaining the​ same, the​ ______ today.

smaller is the supply of labor

An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS​ curve; increases

To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium expenditure; the change in autonomous expenditure

The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real​ GDP, other things remaining the same

The demand for U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

The supply of U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate falls; greater

The impulse in RBC theory is​ _______.

the growth rate of productivity that results from technological change

According to mainstream business cycle​ theory, _______.

the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, an inflationary gap emerges

A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

the supply of U.S. dollars in the foreign exchange market

Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

If most prices have increased in the United States and not increased in Japan and other​ countries, ______.

then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will fall

If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward

If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

​China, Japan, and Saudi Arabia are net lenders. The United States is a net borrower.

true

A rational expectation​ _______.

will often turn out to be​ wrong, but no other forecast that could have been made with the information available could do better

The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except​ ______.

world demand for U.S.f exports

Which of the following equations is incorrect​?

MPC ​ + MPS​ = Upper DeltaΔYD

Choose the statement that is incorrect.

Over the business​ cycle, aggregate supply fluctuates around potential GDP.

Choose the statement that is incorrect.

Against the Chinese​ yuan, the dollar appreciated between 2005 and 2014.

If the trend rate of change of velocity is 1 percent a​ year, potential GDP grows by 4 percent a​ year, and the money growth rate is 2 percent a​ year, what is the trend inflation​ rate?

-1 percent a year

An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

Choose the statement about a crawling peg that is incorrect.

A crawling peg makes the exchange rate fluctuate wildly.

Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

Choose the statement that is incorrect.

Along the SAS​ curve, the real wage rate and the price level change by the same percentage.

Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

Choose the statement about real business cycle theory that is incorrect.

Economists have not been able to isolate the RBC theory impulse.

Choose the statement about fixed exchange rates that is incorrect.

If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese​ yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value.

Choose the statement about the business cycle that is incorrect.

In a business​ cycle, real GDP shows steady growth and steady inflation.

Choose the statement that is incorrect.

In the long​ run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

If in the long​ run, the U.S. dollar appreciates against the Japanese​ yen, then​ ______.

Japan has created money at a faster pace than has the United​ States, and the price level in Japan has risen more rapidly than the U.S. price level

Deflation in Japan arose because​ _______.

Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

In​ ______ cycle​ theory, animal spirits are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand.

Keynesian; monetarist

Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left​ alone, the economy rarely operates at full employment.

Choose the correct statement.

The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees° line is equilibrium expenditure.

Choose the statement that is incorrect.

The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.

Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

Choose the statement about flexible exchange rates that is incorrect.

The world economy has operated a flexible exchange rate regime since the end of World War II.

Choose the correct statement.

The​ long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when the natural unemployment rate falls.

You observe that unplanned inventories are decreasing. You predict that there will be​ _______.

an expansion

Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

Choose the correct statement about the U.S.​ short-run Phillips curve.

We can interpret U.S. inflation and unemployment data in terms of a shifting​ short-run Phillips​ curve, which sometimes shifts upward and sometimes shifts downward.

Examples of monetary policy that decrease aggregate demand include​ ______.

a decrease in the quantity of money and an increase in interest rates

The best forecast​ available, which is based on all the relevant information is called​ _______.

a rational expectation

You observe that unplanned inventories are increasing. You predict that there will be​ _______.

a recession

The business cycle occurs because​ ______.

aggregate demand and​ short-run aggregate supply​ fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______.

aggregate planned expenditure equals real GDP


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