practice exam 4
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
other things the same, if technology increases, then in the long run
output is higher and prices are lower
suppose the economy starts at point R. if aggregate demand increases from AD2 to AD3, then in the short run the economy moves to
point O
other things the same, a higher real interest rate
raises the quantity of loanable funds supplied
a country has domestic investment of $235 billion. Its citizens purchase $610 billion of foreign assets and foreign citizens purchase $300 billion of its assets. What is national saving?
$545 billion
a country has national saving of $60 billion, government expenditures of $40 billion, domestic investment of $10 billion, and net capital outflow of $45 billion. what is its supply of loanable funds?
$60 billion
if the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from
Q to R
if real interest rates rose more in Canada than in the United States, then other things the same
U.S. citizens would buy more Canadian bonds and Canadians would buy fewer U.S. bonds
the natural level of output occurs at
Y2
imagine that in the current year the economy is in long-run equilibrium. then the federal government reduces its purchases of goods by 50%. which curve shifts and in which direction
aggregate demand shifts left
which of the following would cause stagflation?
aggregate supply shifts left
when mexico suffered from capital flight in 1994, mexico's net capital outflow
and net exports increased
economic expansions (boom) in Canada would cause the U.S. price level
and real GDP to rise
other things the same, which of the following would cause the real exchange rate to rise
both an increase in the real interest rate and an increase in foreign demand for U.S. goods and services
people had been expecting the price level to be 120 but it turns out to be 122. in response Robinson Tire Company increases the number of workers it employs. what could explain this?
both sticky price theory and sticky wage theory
the shift of the short-run aggregate-supply curve from SRAS1 to SRAS2
could be caused by a decrease in the expected price level
if a country places tariffs on imported goods, then its
currency appreciates which reduces exports leaving the trade balance unchanged
from 2001 to 2005 there was a dramatic rise in the value of houses. if this rise made homeowners feel wealthier, then it would have shifted aggregate
demand right
In an open economy, national savings equals
domestic investment plus net capital outflow
if the real exchange for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is
greater than the quantity demanded and the dollar will depreciate
the economic boom of the early 1940s resulted mostly from
increased government expenditures
in 2008, the United States was in recession. which of the following things would not expect to have happened?
increased real GDP
when the Fed buys bonds the supply of money
increases and so aggregate demand shifts right
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. what would happen to the dollar?
it would appreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods
the sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high meny costs will have
lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied
because a government budget deficit represents
negative public saving, it decreases national saving
at the equilibrium real interest rate in the open-economy macroeconomic model
net capital outflow + domestic investment = saving
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
rise which by itself would increase aggregate demand
In the open-economy macroeconomic model, the market for loanable funds identity can be written as
savings= investment + net capital outflow
if the United States raised its tariff on tires, then at the original exchange rate there would be a
shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate
in the market for foreign-currency exchange, capital flight shifts the
supply curve 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
if the quantity of loanable funds supplied is greater than the quantity demanded, then there is a
surplus of loanable funds and the interest rate will 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
if the economy starts at O, a decrease in the money supply moves the economy
to Q in the long run
