Econ 222 Chapters 11-15

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement. a. It has $800 in reserves and $9,200 in loans. b. It has $80 in reserves and $9,920 in loans. c. It has $8,000 in reserves and $2,000 in loans. d. It has $1,250 in reserves and $8,750 in loans.

A

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by a. selling bonds. This selling would reduce reserves. b. buying bonds. This buying would reduce reserves. c. buying bonds. This buying would increase reserves. d. selling bonds. This selling would increase reserves.

A

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

A

If U.S. net exports are negative, then net capital outflow is a. positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. b. negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. c. positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. d. negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

D

If a country raises its budget deficit, then its a. net capital outflow rises and net exports fall. b. net capital outflow falls and net exports rise. c. net capital outflow and net exports rise. d. net capital outflow and net exports fall.

D

Other things the same, a higher real interest rate raises the quantity of a. domestic investment. b. net capital outflow. c. loanable funds demanded. d. loanable funds supplied.

D

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 a. rise which by itself would increase aggregate demand. b. fall which by itself would decrease aggregate demand. c. fall which by itself would increase aggregate demand. d. rise which by itself would decrease aggregate demand.

A

Which of the following is consistent with the idea that high money supply growth leads to high inflation? a. The quantity theory and data from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland. b. Evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland but not the quantity theory. c. Neither the quantity theory nor evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland. d. The quantity theory but not evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.

A

In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the a. nominal interest rate. b. real exchange rate. c. real interest rate. d. nominal exchange rate.

B

Scenario 33-1 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. Refer to Scenario 33-1. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the United States? a. Make it rise which by itself would decrease U.S. aggregate demand. b. Make it fall which by itself would decrease U.S. aggregate demand. c. Make it fall which by itself would increase U.S. aggregate demand. d. Make it rise which by itself would increase U.S. aggregate demand.

B

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of long-run aggregate supply. b. the slope of the aggregate-demand curve. c. shifts in the aggregate-demand curve. d. the slope of short-run aggregate supply.

B

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can, given the reserve requirement. a. It has $32,400 in deposits. b. It has $39,600 in deposits. c. It has $40,000 in deposits. d. It has $3,600 in deposits.

C

According to the classical dichotomy, which of the following increases when the money supply increases? a. The real interest rate b. The real wage c. The nominal wage d. The real GDP

C

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of a. money, since the sneakers in the correct size represent a medium of exchange. b. ​barter, since the sneakers in the correct size represent a medium of exchange. c. ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher. d. ​money, since the sneakers in the correct size do not have any intrinsic value.

C

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is a. 12,500. b. 200,000. c. 32,000. d. 2,000.

C

In countries that have high minimum wages and require a lengthy and costly process to get permission to open a business, a. reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. b. reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve. c. reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. d. reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve.

C

Suppose exchange rates are defined as foreign currency per dollar and foreign goods per U.S. goods. According to purchasing-power parity, if the price of a basket of goods in the United States rose from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of some other country's currency to 1,000 units of that country's currency, then the a. real exchange rate would appreciate. b. nominal exchange rate would depreciate. c. nominal exchange rate would appreciate. d. real exchange rate would depreciate.

C

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits? a. $5,000 billion b. $5,062.5 billion c. $4,937.5 billion d. $4,995 billion

C

The existence of money leads to a. a higher standard of living, but not to greater specialization. b. neither greater specialization nor to a higher standard of living. c. greater specialization and to a higher standard of living. d. greater specialization in production, but not to a higher standard of living.

C

Visitors to a country hosting a world soccer tournament purchase food, souvenirs, and accommodations while attending the tournament. Which of the following should these expenditures raise? a. The host country's net exports but not its net capital outflow. b. Neither the host country's net exports not its net capital outflow. c. The host country's net exports and its n et capital outflow. d. The host country's net capital outflow but nor its net exports.

C

When looking at a graph of aggregate demand, which of the following is correct? a. There are nominal variables on both the vertical and the horizontal axes. b. There are real variables on both the vertical and horizontal axes. c. The variable on the vertical axis is nominal; the variable on the horizontal axis is real. d. The variable on the vertical axis is real; the variable on the horizontal axis is nominal.

C

When the Fed buys bonds the supply of money a. decreases and so aggregate demand shifts right. b. decreases and so aggregate demand shifts left. c. increases and so aggregate demand shifts right. d. increases and so aggregate demand shifts left.

C

If the nominal exchange rate is expressed as foreign currency per dollar , which of the following would both make Americans more willing to buy Italian goods? The nominal exchange rate a. falls, the price of goods in Italy falls. b. rises, the price of goods in Italy rises. c. falls, the price of goods in Italy rises. d. rises, the price of goods in Italy falls.

D

Purchasing-power parity describes the forces that determine a. exchange rates in the short run. b. prices in the long run. c. prices in the short run. d. exchange rates in the long run.

D

The economic boom of the early 1940s resulted mostly from a. falling prices of oil and other natural resources. b. an increase in the growth rate of the money supply. c. rapid developments in transportation, electronics, and communication. d. increased government expenditures.

D

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease? a. The supply of loanable funds shifts left. b. The supply of loanable funds shifts right. c. The demand for loanable funds shifts right. d. The demand for loanable funds shifts left.

D