Econ 202 Final

a U.S. mutual fund buys stocks issued by a Columbian company. this purchase is an example of

U.S. foreign portfolio investment. It decreases Columbia's net capital outflow

a basis for the slope of the short-run phillips curve is that when unemployment is high there are

downward pressures on prices and wages

people who hold well-diversified portfolios of stocks have greatly reduced or eliminated

firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions

if a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent, this action by itself initially makes the money supply

increase by $500 while wealth does not change

other things the same, the real exchange rate between American and Chinese goods would be higher if

prices of chinese goods were lower, or the number of yuan a dollar purchased were higher

The Federal Deposit Insurance Corporation

protects depositors in the event of bank failures

according to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

either a rise in output or a fall in the rate at which money changes hands

when the price level falls the quantity of

consumption goods demanded and the quantity of net exports demanded both rise

in the short run, an increase in the money supply causes interest rates to

decrease, and aggregate demand to shift right

in recent years, the federal reserve has conducted policy by setting a target for the

federal funds rate

which of the following is correct

index funds typically have a higher rate of return than managed funds. This tends to support the efficient market hypothesis

HydroGrow is considering building a new greenhouse in which to grow tomatoes. The board meets and decides that this is the right thing to do. Before they can put their plans into action, the interest rate increases. The present value of the returns from this investment project

is now lower than it was before, and so Hydro Grow is less likely to build the building

contractionary monetary policy

leads to disinflation and makes the short-run phillips curve shift left

if the real exchange rate is greater than 1, then the

nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas

which tool of monetary policy does the Federal Reserve use most often?

open-market operations

inflation can be measured by the

percentage change in the consumer price index

if a country's purchase of foreign assets exceeds foreign purchases of domestic assets, that country has

positive net exports and positive net capital outflows

the efficient markets hypothesis implies

that all stocks are fairly valued all the time and that no stock is a better buy than any other

which group within the federal reserve system meets to discuss changes in the economy and determine monetary policy?

the FOMC

the discount rate is the interest rate that

the Fed charges banks for loans

when we measure and record economic value, we use money as the

unit of account

according to classical macroeconomic theory, changes in the money supply affect

variables measured in terms of money but not variables measured in terms of quantities or relative prices

Suppose that velocity rises while the money supply stays the same. It follows that

P x Y must rise

which of the following is an example of U.S. foreign direct investment

A U.S. beverage company opens a bottling plant in Russia

according to the phillips curve, policymakers could reduce both inflation and unemployment

NONE

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase??

Spain's

If the Fed decreases reserve requirements, the money supply will increase

TRUE

an increase in the interest rate could have been caused by

a rise in the price level causing the money-demand curve to shift rightward

other things the same, as the price level falls, a country's exchange rate

and interest rates fall

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kaz tenge per dollar, the dollar has

appreciated, other things the same, it now takes fewer dollars to buy kaz goods

when the Fed decreases the discount rate, banks will

borrow more from the Fed and lend more to the public. The money supply increases

if households view a tax cut as temporary, then the tax cut

has less of an affect on aggregate demand than if households view it as permanent

you use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

has no intrinsic value. The exchange is not an example of barter

in the context of the aggregate-demand curve, the interest-rate effect refers to the idea, that when the price level increases

households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods

which of the following is correct?

if the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve

a company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

increases U.S. exports and so increases the U.S. trade balance

when aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

increases and unemployment decreases

one determinant of the natural rate of unemployment is the

minimum wage rate

when you rent a car, you might treat it with less care than you would if it were your own, this is an example of

moral hazard

most economists believe the principle of monetary neutrality is

mostly relevant to the long run

the effect of an increase in the price level on the aggregate-demand curve is represented by a

movement to the left along a given aggregate-demand curve

if banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, the U.S. net exports would

rise and aggregate demand would shift right

to decrease the money supply, the Fed can

sell government bonds or increase the discount rate

when the Federal Reserve increases the Federal Funds target rate, it achieves this target by

selling government bonds. This action will reduce investment and shift aggregate demand to the left

when shopping you notice that a pair of jeans costs $20 and that a t-shirt costs $10. You compute the price of jeans relative to t-shirts

the dollar price of jeans is a nominal variable; the relative price of jeans is a real variable

the discovery of a large amount of previously-undiscovered oil in the U.S. would shift

the long-run aggregate-supply curve to the right