ECON- Micro test 3

Term
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Bill, a U.S. citizen, pays an architect in Spain to design a high-rise office building. Which country's exports increase?
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Terms in this set (53)
Bill, a U.S. citizen, pays an architect in Spain to design a high-rise office building. Which country's exports increase?
spain
The increase in international trade in the United States is partly due to
improvements in transportation
advances in telecommunications
increase trade of goods with a high value per pound
all of these are correct
If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's
exports and net exports rise
Net capital outflow equals
the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners
If the residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is
-$100 billion and the U.S has a trade deficit
In an open economy, gross domestic product equals $3,500 billion, consumption expenditure equals $2100 billion, government expenditure equals $400 billion, investment equals $800 billion, and net exports equals $200 billion. What is national savings?
$1,000 billion
Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners
more willing to purchase U.S bonds, so U.S net capital outflow would fall
T/F
If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's net capital outflow would decrease.
true
The nominal exchange rate is the
rate at which a person can trade the currency of one country for another
If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs
125 Egyptian pounds
You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, thenthe dollar buys more pesos. Your hotel room in Mexico will require fellow dollarsThe real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, timesU.S prices divided by foreign pricesT/F Other things the same, an increase in the foreign price level increases the US's real exchange rate with that country.falseIf purchasing-power parity holds, then the value of thereal exchange rate is equal to oneAccording 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 dollarIn an open economy, national saving equalsdomestic investment plus net capital outflowIn the open-economy macroeconomic model, the supply of loanable funds comes fromnational savingsOther things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?foreigners want to buy fewer U.S bondsWhich of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?a company in Canada buying oranges from the U.SIn the open-economy macroeconomic model, the key determinant of net capital outflow is thereal interest rateWhen the U.S. real interest rate falls, purchasing U.S. assets becomesless attractive and so U.S net capital outflow risesIn the combined open-economy model, the real interest rate is determined in the _____________________ . Once the real interest rate is set, the level of ______________ is determined, which is equal to the supply of dollars in the foreign exchange market. This in turn determines the equilibrium __________________________ and the level of net exports.loanable funds market, NCO, real exchange rateT/F If Americans began saving more for retirement, the open economy model predicts, all else equal, that the real exchange rate would increase.falseWhen a government increases its budget deficit, then that country'ssupply of loanable finds shifts leftIf a country raises its budget deficit, then itsnet capital outflow and net exports fallA tax on imported goods is called a(n)tariffA U.S.-imposed quota on automobiles would shiftonly the demand curve in the market for foreign-currency exchange right.A large and sudden movement of funds out of a country is calledcapital flightMexico suffered from capital flight in 1994. Based on the open economy model, one would predict that Mexico's real interest raterose and the peso depreciatedDuring a recession the economy experiencesfalling employment and incomeWhich of the following is correct? over the business cycle investment typically declines economic fluctuations are easy to predict during a recession employment rises because of government policy the U.S had zero recessions in the last 25 yearsover the business cycle investment typically declinesThe wealth effect, interest-rate effect, and exchange-rate effect are all explanations forthe slope of the aggregate- demand curveSuppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desireincreased consumption, which shifts the aggregate- demand curve rightOf the following theories, which is consistent with an upward sloping short-run aggregate supply curve?both the sticky- wage and misperceptions theoriesWhich of the following shifts short-run aggregate supply right?an increase in immigration from abroadThe long-run aggregate supply curve is vertical is a graphical representation of the classical dichotomy indicates monetary neutrality in the long-runall of these are correctThe position of the long-run aggregate supply curveis determined by resource usage and technologyThe long-run aggregate supply curve shifts right if immigration from abroad increases the capital stock increases technology advancesall of these are correctSuppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shiftaggregate demand leftSuppose that consumers become pessimistic about the health of the economy and reduce their consumption. The result of this would be leftward shift of the _______________ curve, leading to recession (lower real GDP) and an _____________ in the price level.aggregate demand, increaseWhich of the following shifts short-run aggregate supply left?an increase in price expectationsA decrease in the availability of an important major resource such as oil shiftsaggregate supply leftStagflation exists when pricesrise and unemployment risesAccording to liquidity preference theory, equilibrium in the money market is achieved by adjustments inthe interest rateAccording to liquidity preference theory, the money-supply curve would shift rightwardif the Federal Reserve chose to increase the money supplyOther things the same, as the price level rises,the interest rate rises causing a movement along a given aggregate-demand curveMonetary policy is determined bythe Federal Reserve and involves changing the money supplyT/F If the Federal Reserve wishes to conduct expansionary monetary policy, it can do so by selling government bonds in order to increase the money supply.falseFiscal policy refers to the idea that aggregate demand is affected by changes ingovernment spending and taxesWhich of the following correctly explains the crowding-out effectan increase in government expenditures increases the interest rate and so reduces investment spendingT/F The latest research by Robert Barro at Harvard University suggests that the government spending multiplier is only 0.60. The same paper also found that the multiplier exceeds 1.0 only when unemployment is greater than 12%trueWhich of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?increase government expendituresCritics of active stabilization policy argue that there is a lag between the time policy is passed and the time policy has an impact on the economy there are large recognition lags between the time an economy slips into recession and when this is detected by economists the impact of policy may last longer than the problem it was designed to offsetall of these are correct