Macroeconomics Exam 4

Statement 3: A country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries. 6. (Statement 3) The country has ________ and experiences. a. $7.2 billion of exports; trade surplus b. $7.2 billion of exports; trade deficit c. $4.8 billion of exports; trade surplus d. $4.8 billion of imports; trade deficit

a. $7.2 billion of exports; trade surplus

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then the equilibrium value of money is ___________. a. 0.5 and the equilibrium price level is 2. b. 2 and the equilibrium price level is 0.5. c. 0.5 and the equilibrium price level cannot be determined from the graph. d. 2 and the equilibrium price level cannot be determined from the graph.

a. 0.5 and the equilibrium price level is 2.

12. If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs ______. a. 125 Egyptian pounds b. 50 Egyptian pounds c. 5 Egyptian pounds

a. 125 Egyptian pounds

14. If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate? a. 2 b. 3/2 c. 2/3 d. 1/2

a. 2

17. When the US nominal exchange rate declines, and prices rise faster abroad than in the United States, the US real exchange rate ________. a. Falls b. Rises c. Remains constant

a. Falls

27. Which of the following occurs when price level in the US rises? a. Interest rates rise b. People will save more c. Foreign investor purchase less US bonds d. Real wealth increases

a. Interest rates rise

Statement 1: General Electric pension fund purchase stocks from Harrods of London. 1. (Statement 1) Which of the following explains this transaction? a. Portfolio investment b. Direct investment c. Both portfolio investment and direct investment

a. Portfolio investment

Statement 3: A country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries. 7. (Statement 3) Which of the following is true in this economy? a. S > I and Y > C + I + G. b. S > I and Y < C + I + G. c. S < I and Y > C + I + G. d. S < I and Y < C + I + G.

a. S > I and Y > C + I + G.

Statement 4: American rice sells for $100 per bushel, Brazilian rice sells for 16,000 real per bushel, and the nominal exchange rate is 80 Brazilian real per dollar. 16. (Statement 4) If other people would exploit the same opportunity to make profits, what would happen to the price of rice in the U.S.? a. The price of rice in the U.S. rises. b. The price of rice in the U.S. falls c. There will be no changes in the price of rice in the U.S.

a. The price of rice in the U.S. rises.

10. If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has ____________. a. appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. b. appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods. c. depreciated. Other things the same, it now takes fewer 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.

8. If a country has Y > C + I + G, then it has _______. a. positive net capital outflow and positive net exports. b. positive net capital outflow and negative net exports. c. negative net capital outflow and positive net exports. d. negative net capital outflow and negative net exports.

a. positive net capital outflow and positive net exports.

23. Which of the following is NOT a component in aggregate demand? a. purchases of stock and bonds b. purchases of services such as visits to the doctor c. purchases of capital goods such as equipment in a factory d. purchases by foreigners of consumer goods produced in the United States

a. purchases of stock and bonds

The aggregate demand and aggregate supply graph has the ___________. a. quantity of output on the horizontal axis. Output is best measured by real GDP. b. quantity of output on the horizontal axis. Output is best measured by nominal GDP. c. quantity of output on the vertical axis. Output is best measured by real GDP. d. quantity of output on the vertical axis. Output is best measured by nominal GDP.

a. quantity of output on the horizontal axis. Output is best measured by real GDP.

26. If the price level falls, the real value of a dollar __________, a. rises, so people will want to buy more. This wealth effect helps explain the slope of the aggregate demand curve. b. rises, so people will want to buy more. This exchange-rate effect helps explain the rightward shifts of aggregate demand curve. c. falls, so people will want to buy less. This wealth effect response helps explain the slope of the aggregate demand curve. d. falls, so people will want to buy less. This exchange-rate effect helps explain the rightward shifts of aggregate demand curve.

a. rises, so people will want to buy more. This wealth effect helps explain the slope of the aggregate demand curve.

30. When the federal government increases spending on national defense, __________. a. Aggregate demand curve shifts to the left b. Aggregate demand curve shifts to the right c. There is movement to the left along a given aggregate demand curve d. There is movement to the right along a given aggregate demand curve

b. Aggregate demand curve shifts to the right

Which of the following happens in the US, when a foreign country experiences economic prosperity. a. There is an upward movement along the aggregate demand curve. b. Aggregate demand curve shifts to the right c. There is a downward movement along the aggregate demand curve. d. Aggregate demand curve shifts to the left

b. Aggregate demand curve shifts to the right

29. Which of the following does NOT lead to any changes in investment in the aggregate demand curve? a. Changes in Interest rates b. Stock market crash c. Investment tax credit d. Optimism

b. Stock market crash

Statement 4: American rice sells for $100 per bushel, Brazilian rice sells for 16,000 real per bushel, and the nominal exchange rate is 80 Brazilian real per dollar. 15. (Statement 4) Which of the following explain how you could make a profit from this situation? a. You buy rice in Brazil and sell it in the US. b. You buy rice in the US and sell it in Brazil. c. Engaging in arbitrage does not give you any profits.

b. You buy rice in the US and sell it in Brazil.

13. 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. e(P/P*).

Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by 5 percent. This unexpectedly high inflation rate would ______ tax revenue of the government. a. decrease b. raise

b. raise

. A relatively mild period of falling incomes and rising unemployment is called a(n) _______. a. depression. b. recession. c. expansion. d. business cycle.

b. recession.

28. As the price level in the US rises, the US exchange rate __________. a. falls b. rises c. does not change

b. rises

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 34. Refer to Figure 30-2. What quantity is measured along the vertical and horizontal axis? a. the price level; quantity of money b. the value of money; quantity of money c. the real interest rate; the quantity of money d. quantity of money ; the value of money e. quantity of money; the real interest rate

b. the value of money; quantity of money

11. If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs a. $1.80. b. $4.80. c. $5.

c. $5.

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to _________. a. 2,500. b. 7,500. c. 10,000. d. 20,000. e. 40,000.

c. 10,000.

Statement 5: The inflation rate is 10%, tax rate is 25%, and you deposited money in a bank account that paid 14%. (Statement 5) Which of the following is before-tax real interest rate? a. 10% b. 14% c. 4% d. 10.5% e. 0.5%

c. 4%

4. (Statement 2) Because of this transaction, ___________. a. U.S. NCO increases because the U.S. sells capital goods b. U.S. NCO decreases because the U.S. sells capital goods c. U.S. NCO increases because the U.S. acquires foreign assets d. U.S. NCO decreases because the U.S. acquires foreign assets

c. U.S. NCO increases because the U.S. acquires foreign assets

Statement 1: General Electric pension fund purchase stocks from Harrods of London. (Statement 1) Which of the following explains the influence of this transaction on the U.S. net capital outflow (NCO)? a. U.S. NCO increases because the U.S. sells capital goods b. U.S. NCO decreases because the U.S. sells capital goods c. U.S. NCO increases because the U.S. acquires foreign assets d. U.S. NCO decreases because the U.S. acquires foreign assets

c. U.S. NCO increases because the U.S. acquires foreign assets

. According to the quantity theory of money, ________ is most stable over long periods of time in the quantity equation. a. Price level b. Money c. Velocity d. Output e. Value of money

c. Velocity

24. The effect of an increase in the price level on the aggregate-demand curve is represented by a ______. a. shift to the right of the aggregate-demand curve. b. shift to the left of the aggregate-demand curve. c. movement to the left along a given aggregate-demand curve. d. movement to the right along a given aggregate-demand curve.

c. movement to the left along a given aggregate-demand curve.

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's nominal GDP amounts to _________. a. 2,500. b. 7,500. c. 10,000. d. 20,000. e. 40,000

d. 20,000.

25. Which of the following effects helps to explain the slope of the aggregate-demand curve? a. the exchange-rate effect b. the wealth effect c. the interest-rate effect d. All of the above are correct.

d. All of the above are correct.

Statement 2: A worker at a Volvo plant in Belgium buys some watermelon from an American farmer in Oklahoma. 3. (Statement 2) Which of the following refers to this transaction? a. Direct investment b. Portfolio investment c. Net capital outflow d. Net exports

d. Net exports

. Which of the following explains shoeleather costs? a. People spend more time looking for margins when inflation rates gets higher b. People spend less time looking for bargains when inflation rates gets higher c. People hold more money when inflation rates gets higher d. People hold less money when inflation rates gets higher

d. People hold less money when inflation rates gets higher

The classical principle of monetary neutrality states that changes in the money supply do not influence ______ variable and is thought most applicable in the ________ run. a. Nominal; short b. Nominal; long c. Real; short d. Real; long

d. Real; long

5. If a value of a nation's imports exceeds the value of its exports, which of the following is NOT true? a. Net exports are negative. b. GDP is less than the sum of consumption, investment, and government purchases. c. Domestic investment is greater than national saving. d. The nation is experiencing a net outflow of capital.

d. The nation is experiencing a net outflow of capital.

22. Which of the following DOES NOT occur when stock market crashes? a. Aggregate demand shifts to the left b. Consumers' wealth decreases. c. Consumption decreases. d. There is movement along the aggregate demand curve.

d. There is movement along the aggregate demand curve.

During a recession the economy experiences _________. a. rising employment and income. b. rising employment and falling income. c. rising income and falling employment. d. falling employment and income.

d. falling employment and income.

9. If a country has a trade deficit, _______. a. it has positive net exports and positive net capital outflow. b. it has positive net exports and negative net capital outflow. c. it has negative net exports and positive net capital outflow. d. it has negative net exports and negative net capital outflow.

d. it has negative net exports and negative net capital outflow.

Statement 5: The inflation rate is 10%, tax rate is 25%, and you deposited money in a bank account that paid 14%. (Statement 5) Which of the following is after-tax real interest rate? a. 10% b. 14% c. 4% d. 10.5% e. 0.5%

e. 0.5%