Micro chap 26 & 31
Refer to Table 31-1. What are Costa Rica's exports
$55 billion
Oceania buys $40 of wine from Escudia and Escudia buys $100 dollars of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order
$60 and -$60
If a country had a trade surplus of $50 billion and then it's exports rose by $30 billion and it's imports rose by $20 billion, its net exports would now be
$60 billion
If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has
$7.2 billion of exports and $4.8 billion of imports
If the exchange rate is 5 units of Peruvian currency per dollar and a hotel room in Lima cost 300 unites of Peruvian currency, then how many dollars do you need to get a room
60 and your purchase will increase Peru's net exports
Which of the following statements is correct
A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean the people are expecting low corporate profits
According to the laonable funds model, which of the following events would result in higher interest rates and greater savings
Congress passes a reform of the tax laws that enocurages greater investment
Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale
Decreases U.S. net exports and increases Russian net exports
Which of the following both rise net exports?
Exports rise, imports fall
Refer to figure 26-2. Which of the following events would shit the demand cure from D1 to D2
Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories
Lacey, a financial advisor, has told her clients the following things. Which of her statements is not correct
If you purchase a bond, you must hold it until it matures
Which of the following is correct
In a closed economy equilibrium in the market for loanable funds occurs were saving=investment
Refer to figure 26-1. Which of the following events would shift the supply curve from S1 to S2
In response to tax reform, households are encouraged to save more than they previously saved
Which of the following is not correct
Purchases of capital good are excluded from GDP
If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?
The U.S. has a trade surplus of $50 billion
Other things the same, which of the following would make both foreigners more willing to engage in U.S. portfolio investment?
U.S. interest rates rise, the default risk of U.S. assets fall
Which of the following equations represents GDP for a closed economy
Y=C+I+G
Which of the following equations represents GDP for an open economy
Y=C+I+G+NX
Refer to figure 26-3. A shift of the supply curve S1 to S2 is called
a decrease in the supply of loanable funds
Which of the following would be included as investment in the GDP accounts
a firm increases its capital stock
A checking deposit function as
a medium of exchange and as a store of value, its part of M1
Refer to figure 26-3. A shift of the demand curve from D1 to D2 is called
an increase in the demand for loanble funds, and that increase would originate from households and firms who wish to borrow to make investments
Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per dollar to .35 Kuwaiti dinar per dollar, then the dollar has
appreciated and so buys more Kuwaiti good
If the exchange rate changes from 135 Kazakhstan tenge per dollar to 150 Kazakhstan tenge per dollar, the dollar has
appreciated. Other thigns the same, it now takes fewer dollars to buy Kazakhstani goods
Suppose the government ran a budget surplus in 2008 and a larger surplus in 2009. The loanable funds model would predict that, as a result of the increase in the surplus
boththe government debt and interest rates decreased between 2008 and 2009
An increase in the
budget deficit makes investment spending fall
An increase in the
budget deficit would cause a shortage of loanable funds at the original interest rate, which would lead to rising interest
If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by
buying cotton in the United States and selling it to Egypt, which would tend to raise the price of cotton in the United States
If the US has exportss of $1.5 trillion and imports of $2.2 trillion, then the US
buys more from overseas then it sells overseas; it has a trade defecit
Domestic saving equals domestic investment in
closed, but not open economies
Which of the following list correctly indentifies the four expenditure categories of GDP
consumption, govern,ent purchases, investment, net-exports
Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Whish list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?
corporate bond, U.S. government bond, municipal bond
A Swiss company sells chocolates to a retailer in the Untied STates. These sales by themselves
decrease U.S, net exports and increase Swiss net exports
Sonya, a citizen of Denmark, produces boots and shoes that she sells to department stores in the United States. Other things the same, these sales
decrease U.S. net exports and increase Danish net exports
In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equiptment
decrease the demand for existing shares of the shock, causing prices to rise
A larger budget
deficit raises the interest rate and reduces investment
Other things the same, if the exchange rate changes from 125 yen per dollar to 115 yen per dollar, the dollar has
depreciated and so buys fewer Japanese goods
Retained earnings are
earning of a company that are not paid out to stockholders
All saving in the U.S. economy shows up as
either investment in the U.S. economy or U.S. net capital outflow
Is U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's
exports and next exports rise
A country purchases $3 billion of foreign-produced goods and services to foreign countries. It has
exports of $2 billion and a trade deficit of $1 billion
You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy
fewer foods in that country and buy fewer dollars
John, a U.S. citizen opens up a Sports bar in Tokyo. This is an example of U.S.
foreign direct investmentq
Suppose the U.S. goevernment changed tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be
higher interest rates and lower investment
Crowding out occurs when
investment declines because a budget deficit makes interest rates fall
A country's trade balance
is greater than zero only if exports are greater than imports
If a county has a trade deficit
it has negative net exports and negative new capital outflow
If a country has a trade surplus
it has positive net exports and a positive net capital outflow
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
One year a country has positive net exports. The next year it still has positive but larger next exports
its trade surplus rose
When a country's central bank increases the money supply, a unit of money
loses value in both terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy
Municipal bonds pay a relatively
low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax
Which of the following would a macro-economist consider as investment
mariah builds a new coffee shop
A corporation's earnings are the amount of revenue it receives for the sale of its products
minues its cost of production at measured by its accountants. Earnings must be paid out as dividends or retained by the corporation
Compared to short-term bonds, other things the same, long-term bonds generally have
more risk and so the pay higher interest rates
If Germany purchased more abroad than it sold abroad last year, then it had
negative net exports which is a trade deficit
If there is shortage of loanable funds, then
neither curve shifts, but the quantity of loanable funds supplied incrases and the quantitiy demanded decreases as the interest rate rises to equilibrium
Larry buys stock in A to Z express company. Curly Corporation builds a new factory. Mo Inc. ads finished goods that it cannot sell to its inventory. Whose transaction would be an act of investment in the language of macroeconomists
only Curly's Corporation
When a country's central bank decreases the money supply, its
price level falls and its currency appreciates relative to other currencies in the world
When a country's central bank increases the money supply, its
price level rises and its currency depreciates relative to other currencies in the world
Other things the same, a higher real interest rate
raises the quantity of loanable funds supplied
The nominal exchange rate is the
rate at which a person can trade the currency of one country for another
In the loanable fund model, an increase in an investment tax credit would create a
shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate
If Saudi Arabia had positive net exports last year, then it
sold more abroad than it purchased abroad and had a trade surplus
Suppose a government that taxed all interest income changed its tax law tho that the first $5,000 of a taxpayer's interest income was tax free. This would shift the
supply of loanable funds to the right, causing interest rates to fall
Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of ones issued by the United States even though Chilean bonds have a higher risk of default. An economic reason for her decision might be that
the Chilean bonds pay a higher rate of interest
If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct
the U.S. has a trade deficit of $50 billion
A corporation's earnings are
the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants
A change in the tax laws that increases the supply of loanable funds will have a bigger effect on investment when
the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic
Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then
the demand for loanable funds would shift rightwards, initially creating a shortage of funds at the original interest 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
You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,
the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services
Other thinks the same, if the dollar depreciates relative to the British pound, then
the exchange rate falls. It will cost fewer pounds to travel in the US
Refer to figure 26-2. What is measure along the horizontal axis of the graph
the quantity of loanable funds
A policy that induces people to sabe more shifts
the supply of loanable funds and reduces interest rates
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income
the supply of loanable funds would shift rightward and investment would increase
The prices of stock traded on exchanges are determined by
the supply of, and demand for, the stock
If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.
these purchases are called capital investment. If you raise the funds from others to purchase them you are a borrower
Nominal exchange rates
vary substantially over time
If we were to changw the interpretation of the term loanable funds in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then
we would be making only a semantic change in how we analyze the effects of government budget deficits. The interest rate changes would still be the same
