Macro Final
Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?
$25 million
A country has national saving of $60 billion, government expenditures of $30 billion, domestic investment of $40 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?
$60 billion
The long-run aggregate supply curve
-indicates monetary neutrality in the long run -is a graphical representation of the classical dichotomy. -is vertical
Which of the following is included in the aggregate demand for goods and services?
-investment demand -consumption demand -net exports
According to purchasing power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?
1/2 pound per dollar
If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $2 in the U.S. and 6 pesos in Argentina what is the real exchange rate?
4/3
According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?
8 pesos per dollar
imports
Foreign-produced goods and services that are purchased domestically are called
Which of the following is correct?
The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables
Which of the following is correct concerning the open-economy macroeconomic model?
The net-capital-outflow curve slopes downward
Which of the following does purchasing-power parity imply?
The nominal exchange rate is the ratio of foreign prices to U.S. prices.
Which of the following does purchasing-power parity imply?
The purchasing power of the dollar is the same in the U.S. as in foreign countries.
Which of the following is correct?
When real GDP falls, the rate of unemployment rises.
In the open-economy macroeconomic model, which of the following increases net capital outflow?
a fall in the real interest rate, but not a fall in the real exchange rate
A country sells more to foreign countries than it buys from them. It has
a trade surplus and positive net exports
Which of the following would cause prices and real GDP to rise in the short run?
aggregate demand shifts right
During a recession the economy experiences
alling employment and income.
Which of the following shifts long-run aggregate supply right?
an increase in either the physical or human capital stock
The open-economy macroeconomic model includes
both the market for loanable funds and the market for foreign-currency exchange.
When the price level falls the quantity of
consumption goods demanded and the quantity of net exports demanded both rise.
Changes in the price level affect which components of aggregate demand?
consumption, investment, and net exports
If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?
desired net exports but not desired net capital outflow
In an open economy, national saving equals
domestic investment plus net capital outflow
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
e(P/P*)
If purchasing-power parity holds, a dollar will buy
enough foreign currency to buy as many goods as it does in the United States.
An economic contraction caused by a shift in aggregate demand causes prices to
fall in the short run, and fall even more in the long run.
If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate
falls and the quantity of dollars traded rises.
In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow
falls and the real exchange rate rises.
As recessions begin, production
falls and unemployment rises
An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level
falls, shifting aggregate supply right.
If aggregate demand shifts right then in the short run
firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.
In which case can we be sure that real GDP rises in the short run?
foreign economies expand and the money supply increases
Which of the following both reduce net exports?
imports rise, exports fall
The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
in the price level, but not output.
If a country went from a government budget deficit to a surplus, national saving would
increase, shifting the supply of loanable funds right.
The long-run aggregate supply curve would shift right if immigration from abroad
increased or Congress abolished the minimum wage.
A country's trade balance
is greater than zero only if exports are greater than imports.
If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level
is lower and output is the same as the original long-run equilibrium.
One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports
its trade deficit rose
When the U.S. real interest rate falls, owning U.S. assets becomes
less attractive to both U.S. residents and foreign residents.
It costs $80 for a dental appointment in the U.S. It costs 600 Egyptian pounds for the same appointment in Egypt. The nominal exchange rate is 7 pounds per dollar. The real exchange rate is
less than one. Dental appointments in Egypt are more expensive than in the U.S.
The classical model is appropriate for analysis of the economy in the
long run, since real and nominal variables are essentially determined separately in the long run.
In the open-economy macroeconomic model, the supply of loanable funds comes from
national saving
Because a government budget deficit represents
negative public saving, it decreases national saving.
If a country raises its budget deficit, then its
net capital outflow and net exports fall
Other things the same, a higher real interest rate raises the quantity of
oanable funds supplied.
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.
If a country has a negative net capital outflow, then
on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.
The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times
prices in the United States divided by foreign prices.
The aggregate demand and aggregate supply graph has the
quantity of output on the horizontal axis. Output is best measured by real GDP
International trade
raises the standard of living in all trading countries
In the open-economy macroeconomic model, the key determinant of net capital outflow is the
real interest rate
When we say that economic fluctuations are "irregular and unpredictable," we mean that
recessions do not occur at regular intervals.
If a country's budget deficit rises, then its exchange rate
rises, so its imports rise.
Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.
rose. The increased saving would increase the quantity of loanable funds supplied.
U.S. net capital outflow
s a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market
A rise in the budget deficit
shifts both the supply of loanable funds in the market for loanable funds and the supply of dollars in the market for foreign-currency exchange left.
Which of the following would cause prices to fall and output to rise in the short run?
short-run aggregate supply shifts right
The aggregate-demand curve
shows an inverse relation between the price level and the quantity of all goods and services demanded
When a government increases its budget deficit, then that country's
supply of loanable funds shifts left
If a country raises its budget deficit, then in the market for foreign-currency exchange
supply shifts left.
Recessions in China and India would cause
the U.S. price level and real GDP to fall
The theory of purchasing-power parity primarily explains
the determination of the real exchange rate
You are planning a graduation trip to Nepal. Other things the same, if the dollar appreciates relative to the Nepalese rupee, then
the dollar buys more rupees. Your purchases in Nepal will require fewer dollars.
Other things the same, if the dollar depreciates relative to the Japanese yen, then
the exchange rate falls. It will cost fewer yen to travel in the U.S
In the open-economy macroeconomic model, if the supply of loanable funds shifts right
the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right.
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.
If purchasing power parity holds, the price level in the U.S. is 120, and the price level in Canada is 140, which of the following is true?
the nominal exchange rate is 140/120
According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?
the nominal exchange rate, but not the real exchange rate
If aggregate demand shifts left, then in the short run
the price and real GDP both 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
In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then
the supply of dollars in the market for foreign-currency exchange shifts 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
The open-economy macroeconomic model examines the determination of
the trade balance and the exchange rate
The long-run aggregate supply curve shifts left if
there is a natural disaster.
In an open economy, the demand for loanable funds comes from
those who want to borrow funds to buy either domestic capital goods or foreign assets
A decrease in the budget deficit causes domestic interest rates
to fall and investment to rise.
