practice exam 4

if a country has a positive net capital outflow, then

on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds

other things the same, if technology increases, then in the long run

output is higher and prices are lower

suppose the economy starts at point R. if aggregate demand increases from AD2 to AD3, then in the short run the economy moves to

point O

other things the same, a higher real interest rate

raises the quantity of loanable funds supplied

a country has domestic investment of $235 billion. Its citizens purchase $610 billion of foreign assets and foreign citizens purchase $300 billion of its assets. What is national saving?

$545 billion

a country has national saving of $60 billion, government expenditures of $40 billion, domestic investment of $10 billion, and net capital outflow of $45 billion. what is its supply of loanable funds?

$60 billion

if the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from

Q to R

if real interest rates rose more in Canada than in the United States, then other things the same

U.S. citizens would buy more Canadian bonds and Canadians would buy fewer U.S. bonds

the natural level of output occurs at

Y2

imagine that in the current year the economy is in long-run equilibrium. then the federal government reduces its purchases of goods by 50%. which curve shifts and in which direction

aggregate demand shifts left

which of the following would cause stagflation?

aggregate supply shifts left

when mexico suffered from capital flight in 1994, mexico's net capital outflow

and net exports increased

economic expansions (boom) in Canada would cause the U.S. price level

and real GDP to rise

other things the same, which of the following would cause the real exchange rate to rise

both an increase in the real interest rate and an increase in foreign demand for U.S. goods and services

people had been expecting the price level to be 120 but it turns out to be 122. in response Robinson Tire Company increases the number of workers it employs. what could explain this?

both sticky price theory and sticky wage theory

the shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

could be caused by a decrease in the expected price level

if a country places tariffs on imported goods, then its

currency appreciates which reduces exports leaving the trade balance unchanged

from 2001 to 2005 there was a dramatic rise in the value of houses. if this rise made homeowners feel wealthier, then it would have shifted aggregate

demand right

In an open economy, national savings equals

domestic investment plus net capital outflow

if the real exchange for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

greater than the quantity demanded and the dollar will depreciate

the economic boom of the early 1940s resulted mostly from

increased government expenditures

in 2008, the United States was in recession. which of the following things would not expect to have happened?

increased real GDP

when the Fed buys bonds the supply of money

increases and so aggregate demand shifts right

suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S. assets. what would happen to the dollar?

it would appreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods

the sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high meny costs will have

lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied

because a government budget deficit represents

negative public saving, it decreases national saving

at the equilibrium real interest rate in the open-economy macroeconomic model

net capital outflow + domestic investment = saving

suppose that foreigners had reduced confidence in U.S. financial institutions and believed that privately issued U.S. bonds were more likely to be defaulted on U.S. net exports would

rise which by itself would increase aggregate demand

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

savings= investment + net capital outflow

if the United States raised its tariff on tires, then at the original exchange rate there would be a

shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate

in the market for foreign-currency exchange, capital flight shifts the

supply curve right

the explanation for the slope of the

supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving

if the quantity of loanable funds supplied is greater than the quantity demanded, then there is a

surplus of loanable funds and the interest rate will fall

which of the following is not a determinant of the long-run level of real GDP?

the price level

the wealth-effect, interest-rate effect, and exchange-rate effect are all explanations for

the slope of the aggregate-demand curve

if the economy starts at O, a decrease in the money supply moves the economy

to Q in the long run