ECO121 chap 1

QN=286 (18011) If a government started with a budget deficit and moved to a surplus, domestic investment a. and the real exchange rate would rise. b. and the real exchange rate would fall. c. would rise and the real exchange rate would fall. d. would fall and the real exchange rate would rise.

c

QN=210 (17903) In a system of 100-percent-reserve banking, the purpose of a bank is to a. make loans to households. b. influence the money supply. c. give depositors a safe place to keep their money. d. buy and sell gold.

c

QN=273 (17994) Refer to this diagram to answer the questions below. Refer to Figure 32-3. National saving is represented by the a. demand curve in panel a. b. demand curve in panel c. c. supply curve in panel a. d. supply curve in panel c.

c

QN=285 (18013) Refer to Figure 32-6. Which of the following shifts show the effects of an import quota? a. (i) shifting the middle supply curve in panel c to the one to its left. b. (ii) shifting the demand curve from the right to the left in panel c. c. (iii) shifting the demand curve from the left to the right in panel c. d. None of (i), (ii), and (iii) is correct.

c

QN=225 (17943) Suppose that velocity rises while the money supply stays the same. It follows that a. P*Y must rise. b. P*Y must fall. c. P*Y must be unchanged. d. the effects on P*Y are uncertain.

a

QN=301 (18044) Other things the same, if the price level falls, people a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. b. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. c. decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. d. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

a

QN=307 (18041) From 2001 to 2005 there was a dramatic rise in the price of houses. If this made people feel wealthier, then it would shift a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left.

a

QN=309 (18017) The model of short-run economic fluctuations focuses on the price level and a. (i) real GDP. b. (ii) economic growth. c. (iii) the neutrality of money. d. None of (i), (ii), and (iii) is correct.

a

QN=314 (18025) In which case can we be sure aggregate demand shifts left overall? a. people want to save more for retirement and the government raises taxes b. people want to save more for retirement and the government cuts taxes c. people want to save less for retirement and the government raises taxes d. people want to save less for retirement and the government cuts taxes

a

QN=317 (18042) The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if a. the price level is higher than expected making production more profitable. b. the price level is higher than expected making production less profitable. c. the price level is lower than expected making production more profitable. d. the price level is lower than expected making production less profitable.

a

QN=322 (18039) Which of the following can explain the upward slope of the short-run aggregate supply curve? a. nominal wages are slow to adjust to changing economic conditions b. as the price level falls, the exchange rate falls c. an increase in the money supply lowers the interest rate d. an increase in the interest rate increases investment spending

a

QN=329 (18058) Permanent tax cuts shift the AD curve a. farther to the right than do temporary tax cuts. b. not as far to the right as do temporary tax cuts. c. farther to the left than do temporary tax cuts. d. not as far to the left as do temporary tax cuts.

a

QN=337 (18067) Using the liquidity-preference model, when the Federal Reserve increases the money supply, a. the equilibrium interest rate decreases. b. the aggregate-demand curve shifts to the left. c. the quantity of goods and services demanded is unchanged for a given price level. d. the long-run aggregate-supply curve shifts to the right.

a

QN=339 (18053) In the long run, changes in the money supply affect a. (i) prices. b. (ii) output. c. (iii) unemployment rates. d. All of (i), (ii), and (iii).

a

QN=342 (18051) According to liquidity preference theory, the opportunity cost of holding money is a. the interest rate on bonds. b. the inflation rate. c. the cost of converting bonds to a medium of exchange. d. the difference between the inflation rate and the interest rate on bonds.

a

QN=343 (18046) In the long run, changes in the money supply affect a. (i) prices. b. (ii) output. c. (iii) unemployment rates. d. All of (i), (ii), and (iii).

a

QN=240 (17944) When deciding how much to save, people care most about a. after-tax nominal interest rates. b. after-tax real interest rates. c. before-tax real interest rates. d. before-tax nominal interest rates.

b

QN=258 (17970) 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

QN=271 (18016) If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate a. increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. b. increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. c. decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. d. decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.

b

QN=282 (18015) When Mexico suffered from capital flight in 1994, Mexico's net capital outflow a. and net exports decreased. b. and net exports increased. c. increased while net exports decreased. d. decreased while net exports increased.

b

QN=283 (18008) Other things the same, a lower real interest rate decreases the quantity of a. loanable funds demanded. b. loanable funds supplied. c. domestic investment. d. net capital outflow.

b

QN=291 (18004) If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate a. and the quantity of dollars traded rises. b. rises and the quantity of dollars traded falls. c. falls and the quantity of dollars traded rises. d. and the quantity of dollars traded falls.

b

QN=297 (18000) The real exchange rate measures the a. (i) price of domestic currency relative to foreign currency. b. (ii) price of domestic goods relative to the price of foreign goods. c. (iii) rate of domestic and foreign interest. d. None of (i), (ii), and (iii) is correct.

b

QN=303 (18024) Other things the same, when the price level rises, interest rates a. rise, which means consumers will want to spend more on homebuilding. b. rise, which means consumers will want to spend less on homebuilding. c. fall, which means consumers will want to spend more on homebuilding. d. fall, which means consumers will want to spend less on homebuilding.

b

QN=324 (18018) The aggregate quantity of goods and service demanded changes as the price level falls because a. real wealth rises, interest rates rise, and the dollar appreciates. b. real wealth rises, interest rates fall, and the dollar depreciates. c. real wealth falls, interest rates rise, and the dollar appreciates. d. real wealth falls, interest rates fall, and the dollar depreciates.

b

QN=325 (18021) Recessions in China and India would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise.

b

QN=326 (18031) Which of the following will both make people spend more? a. wealth and interest rates rise. b. wealth rises and interest rates fall. c. wealth falls and interest rates rise. d. wealth falls and interest rates fall.

b

QN=327 (18019) The classical dichotomy and monetary neutrality are represented graphically by a. an upward-sloping long-run aggregate-supply curve. b. a vertical long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.

b

QN=344 (18062) According to the liquidity preference theory, which of the following events would shift money demand to the left? a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate

b

QN=312 (18033) Which of the following shifts both the short-run and long-run aggregate supply right? a. (i) an increase in the actual price level b. (ii) an increase in the expected price level c. (iii) an increase in the capital stock d. None of (i), (ii), and (iii) is correct.

c

QN=313 (18037) As the price level rises, a. the real exchange rate falls, so net exports fall. b. the real exchange rate falls, so net exports rise. c. the real exchange rate rises, so net exports fall. d. the real exchange rate rises, so net exports rise.

c

QN=319 (18043) The effects of a higher than expected price level are shown by a. shifting the short-run aggregate supply curve right. b. shifting the short-run aggregate supply curve left. c. moving to the right along a given aggregate supply curve. d. moving to the left along a given aggregate supply curve.

c

QN=323 (18038) If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds, a. the dollar would appreciate which would cause aggregate demand to shift right. b. the dollar would appreciate which would cause aggregate demand to shift left. c. the dollar would depreciate which would cause aggregate demand to shift right. d. the dollar would depreciate which would cause aggregate demand to shift left.

c

QN=333 (18060) Other things the same, automatic stabilizers tend to a. raise expenditures during expansions and recessions. b. lower expenditures during expansions and recessions. c. raise expenditures during recessions and lower expenditures during expansions. d. raise expenditures during expansions and lower expenditures during recessions.

c

QN=338 (18045) In the long run, fiscal policy primarily affects a. aggregate demand. In the short run, it affects primarily aggregate supply. b. aggregate supply. In the short run, it affects primarily saving, investment, and growth. c. saving, investment, and growth. In the short run, it affects primarily aggregate demand. d. saving, investment, and growth. In the short run, it affects primarily aggregate supply.

c

QN=345 (18066) According to the theory of liquidity preference, a. (i) if the interest rate is below the equilibrium level, then the quantity of money people want to hold is less than the quantity of money the Fed has created. b. (ii) if the interest rate is above the equilibrium level, then the quantity of money people want to hold is greater than the quantity of money the Fed has created. c. (iii) the demand for money is represented by a downward-sloping line on a supply-and-demand graph. d. All of (i), (ii), and (iii) are correct.

c

QN=346 (18061) According to liquidity preference theory, the money-supply curve is a. upward sloping. b. downward sloping. c. vertical. d. horizontal.

c

QN=347 (18047) Assume the MPC is 0.75. Assume there is a multiplier effect and that the total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to the a. left by $24 billion. b. left by $36 billion. c. right by $34 billion. d. right by $36 billion.

c

QN=350 (18063) The term crowding-out effect refers to a. the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease. b. the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease. c. the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase. d. the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.

c

QN=219 (17936) According to the quantity theory of money, a 2 percent increase in the money supply a. causes the price level to fall by 2 percent. b. leaves the price level unchanged. c. causes the price level to rise by less than 2 percent. d. causes the price level to rise by 2 percent.

d

QN=260 (17959) One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports. a. its trade surplus fell. b. its trade surplus rose. c. its trade deficit fell. d. its trade deficit rose

d

QN=261 (17979) The increase in international trade in the United States is partly due to a. (i) improvements in transportation. b. (ii) advances in telecommunications. c. (iii) increased trade of goods with a high value per pound. d. All of (i), (ii), and (iii) are correct.

d

QN=264 (17964) Sonya, a citizen of Denmark, produces boots and shoes that she sells to department stores in the United States. Other things the same, these sales a. increase U.S. net exports and have no effect on Danish net exports. b. decrease U.S. net exports and have no effect on Danish net exports. c. increase U.S. net exports and decrease Danish net exports. d. decrease U.S. net exports and increase Danish net exports.

d

QN=281 (18007) The open-economy macroeconomic model examines the determination of a. the output growth rate and the real interest rate. b. unemployment and the exchange rate. c. the output growth rate and the inflation rate. d. the trade balance and the exchange rate.

d

QN=302 (18029) Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run, a. real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same. b. the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected. c. the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall. d. the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

d

QN=330 (18050) During periods of expansion, automatic stabilizers cause government expenditures a. and taxes to fall. b. and taxes to rise. c. to rise and taxes to fall. d. to fall and taxes to rise.

d

QN=331 (18054) Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve? a. As the money supply increases, the interest rate falls, so spending rises. b. As the money supply increases, the interest rate rises, so spending falls. c. As the price level increases, the interest rate falls, so spending rises. d. As the price level increases, the interest rate rises, so spending falls.

d

QN=332 (18056) The theory of liquidity preference assumes that the nominal supply of money is determined by the a. level of real output only. b. interest rate only. c. level of real output and by the interest rate. d. Federal Reserve.

d

QN=340 (18048) Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could a. buy bonds to increase the money supply. b. buy bonds to decrease the money supply. c. sell bonds to increase the money supply. d. sell bonds to decrease the money supply.

d