Macro Final

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1.

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? A country sells more to foreign countries than it buys from them. It has A country's trade balance

$60 billion

13.

Changes in the price level affect which components of aggregate demand? During a recession the economy experiences If a country has a negative net capital outflow, then

consumption, investment, and net exports alling employment and income. on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds. on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. supply shifts left.

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15.

2.

a trade surplus and positive net exports is greater than zero only if exports are greater than imports. to fall and investment to rise. 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. 1/2 pound per dollar
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3.

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If a country has a positive net capital outflow, then

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A decrease in the budget deficit causes domestic interest rates A rise in the budget deficit

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If a country raises its budget deficit, then in the market for foreign-currency exchange If a country raises its budget deficit, then its If a country went from a government budget deficit to a surplus, national saving would If a country's budget deficit rises, then its exchange rate 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? If aggregate demand shifts left, then in the short run If aggregate demand shifts right then in the short run

18.

net capital outflow and net exports fall increase, shifting the supply of loanable funds right. rises, so its imports rise. 4/3

19.

6.

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? 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? According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level? An economic contraction caused by a shift in aggregate demand causes prices to An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level As recessions begin, production Because a government budget deficit represents

20.

7.

8 pesos per dollar

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22.

8.

the nominal exchange rate, but not the real exchange rate

the price and real GDP both fall. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left. the nominal exchange rate is 140/120

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fall in the short run, and fall even more in the long run. falls, shifting aggregate supply right.

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10.

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? If purchasing-power parity holds, a dollar will buy

11.

falls and unemployment rises negative public saving, it decreases national saving.

25.

enough foreign currency to buy as many goods as it does in the United States.

12.

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If the economy is initially at longrun equilibrium and aggregate demand declines, then in the long run the price level If the exchange rate rises, which of the following falls in the openeconomy macroeconomic model? 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 If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate imports

is lower and output is the same as the original long-run equilibrium. desired net exports but not desired net capital outflow e(P/P*)

39.

In which case can we be sure that real GDP rises in the short run?

foreign economies expand and the money supply increases raises the standard of living in all trading countries less than one. Dental appointments in Egypt are more expensive than in the U.S. its trade deficit rose

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40.

International trade

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41.

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falls and the quantity of dollars traded rises. Foreign-produced goods and services that are purchased domestically are called domestic investment plus net capital outflow those who want to borrow funds to buy either domestic capital goods or foreign assets falls and the real exchange rate rises.

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 One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports Other things the same, a higher real interest rate raises the quantity of Other things the same, if the dollar depreciates relative to the Japanese yen, then Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

42.

30.

43.

oanable funds supplied. the exchange rate falls. It will cost fewer yen to travel in the U.S rose. The increased saving would increase the quantity of loanable funds supplied. the U.S. price level and real GDP to fall $25 million

44.

31.

In an open economy, national saving equals In an open economy, the demand for loanable funds comes from

32.

45.

33.

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow In the open-economy macroeconomic model, if the supply of loanable funds shifts right In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then In the open-economy macroeconomic model, the key determinant of net capital outflow is the In the open-economy macroeconomic model, the supply of loanable funds comes from In the open-economy macroeconomic model, which of the following increases net capital outflow?

46.

Recessions in China and India would cause 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? The aggregate demand and aggregate supply graph has the

34.

the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right. the supply of dollars in the market for foreign-currency exchange shifts right real interest rate

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35.

48.

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quantity of output on the horizontal axis. Output is best measured by real GDP shows an inverse relation between the price level and the quantity of all goods and services demanded

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The aggregate-demand curve

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national saving

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a fall in the real interest rate, but not a fall in the real exchange rate

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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. the long-run aggregatesupply curve to the right.

63.

When a government increases its budget deficit, then that country's When the price level falls the quantity of When the U.S. real interest rate falls, owning U.S. assets becomes When we say that economic fluctuations are "irregular and unpredictable," we mean that Which of the following both reduce net exports? Which of the following does purchasingpower parity imply? Which of the following does purchasingpower parity imply? Which of the following is correct concerning the open-economy macroeconomic model? Which of the following is correct?

supply of loanable funds shifts left

64.

51.

The discovery of a large amount of previouslyundiscovered oil in the U.S. would shift The explanation for the slope of

consumption goods demanded and the quantity of net exports demanded both rise. less attractive to both U.S. residents and foreign residents.

65.

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the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving -indicates monetary neutrality in the long run -is a graphical representation of the classical dichotomy. -is vertical there is a natural disaster. in the price level, but not output.

66.

recessions do not occur at regular intervals.

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The long-run aggregate supply curve

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imports rise, exports fall

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The long-run aggregate supply curve shifts left if The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a longrun change The long-run aggregate supply curve would shift right if immigration from abroad The open-economy macroeconomic model examines the determination of The open-economy macroeconomic model includes The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times The theory of purchasingpower parity primarily explains The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for U.S. net capital outflow

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The nominal exchange rate is the ratio of foreign prices to U.S. prices. The purchasing power of the dollar is the same in the U.S. as in foreign countries. The net-capital-outflow curve slopes downward

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69.

70.

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increased or Congress abolished the minimum wage. the trade balance and the exchange rate both the market for loanable funds and the market for foreigncurrency exchange. prices in the United States divided by foreign prices. the determination of the real exchange rate the slope of the aggregate-demand curve s a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market
71.

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The long-run, but not the shortrun, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables When real GDP falls, the rate of unemployment rises. -investment demand -consumption demand -net exports the price level

72.

Which of the following is correct? Which of the following is included in the aggregate demand for goods and services? Which of the following is not a determinant of the long-run level of real GDP? Which of the following shifts long-run aggregate supply right? Which of the following would cause prices and real GDP to rise in the short run?

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73.

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an increase in either the physical or human capital stock aggregate demand shifts right

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Which of the following would cause prices to fall and output to rise in the short run? You are planning a graduation trip to Nepal. Other things the same, if the dollar appreciates relative to the Nepalese rupee, then

short-run aggregate supply shifts right the dollar buys more rupees. Your purchases in Nepal will require fewer dollars.

78.