FINAL ECO

An adverse supply shock causes inflation to A. rise and the short-run Phillips curve to shift right.

A. rise an the short-run Phillips curve to shift right.

Which of the following events would shift money demand to the right? a. an increase in the interest rate, c.an increase in the price level, but not an increase in the interest rate d. neither an increase

An increase in the price level, but not an increase in the interest rate

Fiscal policy refers to the idea that aggregate demand is affected by changes in A. the money supply B. trade policy C. government spending and taxes d. All of the above are correct

C. government spending and taxes (B)

Which of the following is correct concerning the long run Phillips curve?

D. Its position depends on the natural rate of unemployment.

What actions could be taken to stabilize output in response to a large decrease in U.S. net exports? A.increase government expenditures or decrease the money supply B. decrease government expenditures or decrease the money supply C. decrease government expenditures or increase the money supply D. increase government expenditures or increase the money supply

D. increase government expenditures or increase the money supply

Which of the following is always correct?

NCO = NX

If Germany purchased more abroad than it sold abroad last year, then it had

Negative net exports which is a trade deficit

Which of the following does purchasing power parity imply?

The purchasing power of the dollar is the same in the US as in foreign countries.

An open economy's GDP is always given by

Y = C + I + G + NX

Refer to Figure 33-1. If the economy starts at C, an increase in the money supply moves the economy a) to A in the long run. b) to B in the long run. c) to D in the long run. d) to either A or C in the long run.

a) to A in the long run.

If the exchange rate is 125 yen = $1, a bottle of rice wine that costs 2,500 yen costs a. $20. b. $25. c. $22. d. None of the above is correct

a. $20.

If the exchange rate changes from 135 Kazakh tenge per dollar to 150 Kazakh tenge per dollar, the dollar has a. appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. b. depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. c. appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods. d. depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.

a. appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.

If Congress cuts spending to balance the federal budget, the Fed can act to prevent unemployment and recession by a. buying bonds to increase the money supply b. buying bonds to decrease the money supply. c. selling bonds to increase the money supply. d. selling bonds to decrease the money supply.

a. buying bonds to increase the money supply

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss a. foreign direct investment. b. foreign portfolio investment. c. imports. d. exports.

a. foreign direct investment.

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are a. the price level and real output. b. real output and employment. c. employment and the inflation rate. d. the value of money and the price level.

a. the price level (P) and real output. (Y)

Which of the following is NOT a determinant of the long-run level of real GDP? a.the price level b.the supply of labor c.available natural resources d.available technology

a.the price level

Refer to Figure 34-4. A shift of the money-demand curve from MD2 to MD1 is consistent with which of the following sets of events? a) The government cuts taxes, resulting in a decrease in people's incomes b) The government reduces government spending, resulting in a decrease in people's incomes. c) The government cuts taxes, resulting in an increase in people's incomes. d) The Federal Reserve increases the supply of money, which decreases the interest rate.

b) The government reduces government spending, resulting in a decrease in people's incomes.

The government buys new weapons systems. The manufacturers of weapons pay their employees. The employees spend this money on goods and services, the firm from which the employees ut the g and s pay their employees. this sequence of events illustrates b) multiplier effect c) chain effect

b) the multiplier effect

Refer to Figure 35-4. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

b. D

A decrease in government spending initially and primarily shifts a. aggregate demand to the right. b. aggregate demand to the left. c. aggregate supply to the right. d. aggregate supply to the left.

b. aggregate demand to the left.

According to liquidity preference theory, the money supply curve would shift right a. if the money demand curve shifted right. b. if the Federal Reserve chose to increase it. c. if the interest rate increased. d. if the price level fell or the interest rate decreased.

b. if the Federal Reserve chose to increase it.

When the interest rate increases, the opportunity cost of holding money a. increases, so the quantity of money demanded increases. b. increases, so the quantity of money demanded decreases. c. decreases, so the quantity of money demanded increases. d. decreases, so the quantity of money demanded decreases

b. increases, so the quantity of money demanded decreases.

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. real wealth rises, interest rates fall, and the dollar depreciates.

According to the Phillips curve, unemployment and inflation are inversely related in a. the short run and the long run b. the short run, but not the long run.

b. the short run, but not the long run.

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold? a. 20 florin b. 40 florin c. 80 florin d. 100 florin

c. 80 florin

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then that net capital outflow of that country a. and the net capital outflow of other countries rise. b. rises and the net capital outflow of other countries fall. c. falls and the net capital outflow of other countries rise. d. None of the above are correct.

c. falls and the net capital outflow of other countries rise.

Which part of real GDP fluctuates most over the course of the business cycle? a. consumption expenditures b. government expenditures c. investment expenditures d. net exports

c. investment expenditures

Assume the MPC is 0.75 the multiplier is a.0.75 b.1.25 c.4.00 d.6.25

c.4.00

Aggregate demand shifts left when the government

cuts military expenditures (when G goes down)

The long-run aggregate supply curve shifts right if a. the price level decreases. b. the money supply increases. c. technology improves. d. All of the above are correct.

d. All of the above are correct.

Which of the following explains why production rises in most years? a. increases in the labor force b. increases in the capital stock c. advances in technological knowledge d. all of the above are correct

d. all of the above are correct

If the economy is at A and there is a fall in AD curve, in the short run the economy

d. moves to D.

The aggregate supply curve is upward sloping in

d. the short run, not the long run.

If purchasing power parity holds, the price level in the US is 120, and the price level in Canada is 140, which of the following is true?

the nominal exchange rate is 140/120