Econ 2200 Exam 3

STUDY GUIDE 2 EC 2200-6 TR 3.
30pm Covering chapters 31, 32, 33, and 34]

Multiple Choice
Identifv the choice that best completes the statement or answers the question.
1. International trade
a. raises the standard oI living in all trading countries.
b. lowers the standard oI living in all trading countries.
c. leaves the standard oI living unchanged.
d. raises the standard oI living Ior importing countries and lowers it Ior exporting countries.
2. Oceania buys $40 oI wine Irom Escudia and Escudia buys $100 oI wool Irom Oceania. Supposing this is the
only trade that these countries do. What are the net exports oI Oceania and Escudia in that order?
a. $140 and $140
b. $100 and $40
c. $60 and -$60
d. None oI the above is correct.
Table 31-1
Argentinean Trade Flows
Goods Services
Purchased
Abroad
$40 billion Purchased
Abroad
$20 billion
Sold Abroad $10 billion Sold Abroad $25 billion
3. Refer to Table 31-1. What are Argentina`s net exports?
a. $30 billion
b. $5 billion
c. -$5 billion
d. -$25 billion
4. A Iirm in China sells toys to a U.S. department store chain. Other things the same, these sales
a. increase U.S. net exports and decrease Chinese net exports.
b. decrease U.S. net exports and increase Chinese net exports.
c. increase U.S. and Chinese net exports.
d. decrease U.S. and Chinese net exports.
5. A Swiss company sells chocolates to a retailer in the United States. These sales by themselves
a. decrease U.S. net export and Swiss net exports.
b. decrease U.S. net exports and increase Swiss net exports.
c. increase U.S. and Swiss net exports.
d. increase U.S. net exports and decrease Swiss net exports.
6. A Iirm in India hires a U.S. Iirm to provide economic Iorecasts. By itselI this transaction
a. increases U.S. exports and so increases the U.S. trade balance.
b. increases U.S. exports and so decreases the U.S. trade balance.
c. increases U.S. imports and so increases the U.S. trade balance.
d. increases U.S. imports and so decreases the U.S. trade balance.
7. II U.S. consumers increase their demand Ior apples Irom New Zealand, then other things the same New
Zealand`s
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a. imports and net exports rise.
b. imports rise and net exports Iall.
c. exports and net exports rise.
d. exports rise and net exports Iall.
8. Which oI the Iollowing is correct?
a. U.S. exports as a percentage oI GDP have more than doubled since 1950. The U.S.
currently has a trade surplus.
b. U.S. exports as a percentage oI GDP have more than doubled since 1950. The U.S.
currently has a trade deIicit.
c. U.S. exports as a percentage oI GDP have increased, but have not nearly doubled since
1950. The U.S. currently has a trade surplus.
d. U.S. exports as a percentage oI GDP have increased, but have not nearly doubled since
1950. The U.S. currently has a trade deIicit.
9. Which oI the Iollowing is correct? Over about the last IiIty years
a. U.S. exports and U.S. imports each about doubled.
b. U.S. exports and U.S. imports each about tripled.
c. U.S. exports about doubled and U.S. imports about tripled.
d. U.S. exports about tripled and U.S. imports about doubled.
10. Which oI the Iollowing is an example oI U.S. Ioreign direct investment?
a. A U.S. based mutual Iund buys stock in Eastern European companies.
b. A U.S. citizen builds and operates a coIIee shop in the Netherlands.
c. A Swiss bank buys a U.S. government bond.
d. A German tractor Iactory opens a plant in Waterloo, Iowa.
11. Suppose that the real return Irom operating Iactories in Ghana rises relative to the real rate oI return in the
United States. Other things the same,
a. this will increases U.S. net capital outIlow and decrease Ghanan net capital outIlow.
b. this will decreases U.S. net capital outIlow and increase Ghanan net capital outIlow.
c. this will only increase U.S. net capital outIlow.
d. this will only increase Ghanan net capital outIlow.
12. A U.S. Iirm buys bonds issued by a technology center in India. This purchase is an example oI U.S.
a. Ioreign portIolio investment. By itselI it is an increase in U.S. holdings oI Ioreign bonds
and increases U.S. net capital outIlow.
b. Ioreign portIolio investment. By itselI it is an increase in U.S. holdings oI Ioreign bonds
and decreases U.S. net capital outIlow.
c. Ioreign direct investment. By itselI it is an increase in U.S. holdings oI Ioreign bonds and
increases U.S. net capital outIlow.
d. Ioreign direct investment. By itselI it is an increase in U.S. holdings oI Ioreign bonds and
decreases U.S. net capital outIlow.
13. An Italian company builds and operates a pasta Iactory in the United States. This is an example oI Italian
a. Ioreign direct investment that increases Italian net capital outIlow.
b. Ioreign direct investment that decreases Italian net capital outIlow.
c. Ioreign portIolio investment that increases Italian net capital outIlow.
d. Ioreign portIolio investment that decreases Italian net capital outIlow.
14. Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures
a. increase U.S. net capital outIlow and have no aIIect on Greek net capital outIlow.
b. increase U.S. net capital outIlow and increase Greek net capital outIlow.
"
c. increase U.S. net capital outIlow, but decrease Greek net capital outIlow.
d. decrease U.S. net capital outIlow, but increase Greek net capital outIlow.
15. When making investment decisions, investors
a. compare the real interest rates oIIered on diIIerent bonds.
b. compare the nominal, but not the real, interest rates oIIered on diIIerent bonds.
c. purchase the highest-priced bond available.
d. All oI the above are correct.
16. When the Sykes Corporation (an American company) buys shares oI Audi stock (a German company) Ior its
pension Iund, U.S. net capital outIlow
a. increases because an American company makes a portIolio investment in Germany.
b. declines because an American company makes a portIolio investment in Germany.
c. increases because an American company makes a direct investment in Germany.
d. declines because an American company makes a direct investment in Germany.
17. A U.S. Iirm opens a Iactory that produces camping equipment in Estonia
a. This increases U.S. net capital outIlow and decreases Estonian net capital outIlow.
b. This decreases U.S. net capital outIlow and increases Estonian net capital outIlow.
c. This increases only U.S. net capital outIlow.
d. This increases only Estonian net capital outIlow.
18. Which oI the Iollowing is always correct?
a. Y - I NCO
b. NCO NX
c. NX I
19. When Ghana sells chocolate to the United States, U.S. net exports
a. increase, and U.S. net capital outIlow increases.
b. increase, and U.S. net capital outIlow decreases.
c. decrease, and U.S. net capital outIlow increases.
d. decrease, and U.S. net capital outIlow decreases.
20. A citizen oI Saudi Arabia uses previously obtained U.S. dollars to purchase apples Irom the United States.
This transaction
a. increases Saudi net capital outIlow, and increases U.S. net exports.
b. increases Saudi net capital outIlow, and decreases U.S. net exports.
c. decreases Saudi net capital outIlow, and increases U.S. net exports.
d. decreases Saudi net capital outIlow, and decreases U.S. net exports.
21. A U.S. based company sells semiconductors to an Italian Iirm. The U.S. company uses all oI the revenues
Irom this sale to purchase automobiles Irom Italian Iirms. These transactions
a. increase both U.S. net exports and U.S. net capital outIlow.
b. decrease both U.S. net exports and U.S. net capital outIlow.
c. increase U.S. net exports and do not aIIect U.S. net capital outIlow.
22. Suppose that purchases oI Irish assets by Ioreigners exceed Irish purchase oI Ioreign assets. Ireland has
a. positive net capital outIlow and a trade surplus.
b. positive net capital outIlow and a trade deIicit.
c. negative net capital outIlow and a trade surplus.
d. negative net capital outIlow and a trade deIicit.
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23. Other things the same, iI a country saves less, then
a. net capital outIlow rises, so net exports rise.
b. net capital outIlow rises, so net exports Iall.
c. net capital outIlow Ialls, so net exports rise.
d. net capital outIlow Ialls, so net exports Iall.
24. Other things the same, iI a country`s domestic investment decreases, then
a. net capital outIlow rises, so net exports rise.
b. net capital outIlow rises, so net exports Iall.
c. net capital outIlow Ialls, so net exports rise.
d. net capital outIlow Ialls, so net exports Iall.
25. From 1980-1987, U.S. net capital outIlow as a percent oI GDP became a
a. larger positive number.
b. smaller positive number.
c. larger negative number.
d. smaller negative number.
26. From 1980 to 1987
a. Ioreigners were buying more capital assets Irom the United States than Americans were
buying abroad. The United States was going into debt.
b. Americans were buying more capital assets abroad than Ioreigners were buying Irom the
United States. The United States was going into debt.
c. Ioreigners were buying more capital assets Irom the United States than Americans were
buying abroad. The United States was moving into surplus.
d. Americans were buying more capital assets abroad than Ioreigners were buying Irom the
United States. The United States was moving into surplus.
27. Most oI the change Irom 1991 to 2000 in U.S. net capital outIlow as a percent oI GDP was due to a(n)
a. decrease in U.S. investment.
b. decrease in U.S. national saving.
c. increase in U.S. investment.
d. increase in U.S. national saving.
28. From 2000-2006 net capital outIlow as a percent oI GDP became a
a. larger positive number.
b. smaller positive number.
c. larger negative number.
d. smaller negative number
29. Most oI the change Irom 2000 to 2006 in U.S. net capital outIlow as a percent oI GDP was due to a(n)
a. decrease in U.S. investment.
b. decrease in U.S. national saving.
c. increase in U.S. investment.
d. increase in U.S. national saving.
30. II citizens oI a country are not saving much, it is better to
a. Iorce citizens to save.
b. reduce investment.
c. have Ioreigners invest in the domestic economy than no one at all.
d. to prevent opportunities Ior citizens to buy capital assets abroad.
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31. You are the CEO oI a U.S. Iirm considering building a Iactory in Chile. II the dollar appreciates relative to the
Chilean peso, then other things the same
a. it takes Iewer dollars to build the Iactory. By itselI building the Iactory increases U.S. net
capital outIlow.
b. it takes Iewer dollars to build the Iactory. By itselI building the Iactory decreases U.S. net
capital outIlow.
c. it takes more dollars to build the Iactory. By itselI building the Iactory increases U.S. net
capital outIlow.
d. it takes more dollars to build the Iactory. By itselI building the Iactory decreases U.S. net
capital outIlow.
32. II the nominal exchange rate e is Ioreign currency per dollar, the domestic price is P, and the Ioreign price is
P*, then the real exchange rate is deIined as
a. e(P*/P).
b. e(P/P*).
c. e P/P.
d. e - P/P*.
33. Other things the same, the real exchange rate between American and British goods would be higher iI
a. prices oI British goods were higher, or the number oI pounds a dollar purchased was
higher.
b. prices oI British goods were higher, or the number oI pounds a dollar purchased was
lower.
c. prices oI British goods were lower, or the number oI pounds a dollar purchased was
higher.
d. prices oI British goods were lower, or the number oI pounds a dollar purchased was lower.
34. Exchange rates are 120 yen per dollar, 0.8 euro per dollar, and 10 pesos per dollar. A bottle oI beer in New
York costs 6 dollars, 1,200 yen in Tokyo, 7.2 euro in Munich, and 50 pesos in Cancun. Where is the most
expensive and the cheapest beer in that order?
a. Cancun, New York
b. New York, Tokyo
c. Tokyo, Cancun
d. Munich, New York
35. II a bushel oI wheat costs $6.40 in the United States and costs 40 pesos in Mexico and the nominal exchange
rate is 10 pesos per dollar, then the real exchange rate is
a. 1.60
b. 1.25
c. .625
36. The nominal exchange rate is 2 Thai bhat Ior one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6
dollars in the U.S. and 8 bhat in Thailand. The real exchange rate is
a. 3/8
b. 2/3
c. 3/2
d. 8/3
37. Suppose the real exchange rate is 1/2 gallon oI Canadian gasoline per gallon oI U.S. gasoline, a gallon oI U.S.
gasoline costs $5.00 U.S., and a gallon oI Canadian gas costs 8 Canadian dollars. What is the nominal
exchange rate?
%
a. .80 Canadian dollars per U.S. dollar
b. 1.25 Canadian dollars per U.S. dollar
c. 1.60 Canadian dollars per U.S. dollar
38. II it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same
goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?
a. one
b. the number oI dollars needed to buy U.S. goods divided by the number oI rupees needed
to buy Indian goods
c. the number oI rupees needed to buy Indian goods divided by the number oI dollars needed
to buy U.S. goods
39. An appreciation oI the U.S. real exchange rate induces U.S. consumers to buy
a. Iewer domestic goods and Iewer Ioreign goods.
b. more domestic goods and Iewer Ioreign goods.
c. Iewer domestic goods and more Ioreign goods.
d. more domestic goods and more Ioreign goods.
40. Suppose that the nominal exchange rate is 120 yen per dollar, that the price oI a basket oI goods in the U.S. is
$500 and the price oI a basket oI goods in Japan is 50,000 yen. Suppose that these values change to 100 yen
per dollar, $600, and 70,000 yen. Then the real exchange rate would
a. appreciate which by itselI would make U.S. net exports Iall.
b. appreciate which by itselI would make U.S. net exports rise.
c. depreciate which by itselI would make U.S. net exports Iall.
d. depreciate which by itselI would make U.S. net exports rise.
41. Nominal exchange rates
a. vary little over time.
b. vary substantially over time.
c. appreciate over time Ior most countries.
d. depreciate over time Ior most countries.
42. II purchasing-power parity holds, a dollar will buy
a. more goods in Ioreign countries than in the United States.
b. as many goods in Ioreign countries as it does in the United States.
c. Iewer goods in Ioreign countries than it does in the United States.
d. None oI the above is implied by purchasing-power parity.
43. According to purchasing-power parity, which oI the Iollowing necessarily equals the ratio oI the Ioreign price
level divided by the domestic price level?
a. the real exchange rate, but not the nominal exchange rate
b. the nominal exchange rate, but not the real exchange rate
c. the real exchange rate and the nominal exchange rate
d. neither the real exchange rate nor the nominal exchange rate
44. According to purchasing power parity, iI two countries have the same price level because they have the same
prices Ior all goods and services, then which oI the Iollowing would equal 1?
a. the real exchange rate, but not the nominal exchange rate
b. the nominal exchange rate, but not the real exchange rate
c. the real exchange rate and the nominal exchange rate
d. neither the real exchange rate nor the nominal exchange rate
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45. The nominal exchange rate is about 2 Aruban Ilorin per dollar. II a basket oI goods in the United States costs
$40, how many Ilorins must a basket oI goods in Aruba cost Ior purchasing power parity to hold?
a. 20 Ilorin
b. 40 Ilorin
c. 60 Ilorin
d. 80 Ilorin
46. II the dollar buys less cotton in Egypt than in the United States, then traders could make a proIit by
a. buying cotton in the United States and selling it in Egypt, which would tend to raise the
price oI cotton in the United States.
b. buying cotton in the United States and selling it in Egypt, which would tend to raise the
price oI cotton in Egypt.
c. buying cotton in Egypt and selling it in the United States, which would tend to raise the
price oI cotton in Egypt.
d. buying cotton in Egypt and selling it in the United States, which would tend to raise the
price oI cotton in the United States.
47. II the exchange rate is 50 Bangladesh taka per dollar and a bushel oI rice costs 180 taka in Bangladesh and $3
in the United States, then the real exchange rate is
a. greater than one and arbitrageurs could proIit by buying rice in the United States and
selling it in Bangladesh.
b. greater than one and arbitrageurs could proIit by buying rice in Bangladesh and selling it
in the United States.
c. less than one and arbitrageurs could proIit by buying rice in the United States and selling it
in Bangladesh.
d. less than one and arbitrageurs could proIit by buying rice in Bangladesh and selling it in
the United States.
48. According to purchasing power parity, iI it took 1,000 Korean Won to buy a dollar this year, but it took 1,100
to buy it last year, then the dollar has
a. appreciated, indicating inIlation was higher in the U.S. than in Korea.
b. appreciated indicating inIlation was lower in the U.S. than in Korea.
c. depreciated indicating inIlation was higher in the U.S. than in Korea.
d. depreciated indicating inIlation was lower in the U.S. than in Korea.
49. II the Mexican nominal exchange rate does not change, but prices rise Iaster abroad than in Mexico, then the
Mexican real exchange rate
a. does not change.
b. rises.
c. declines.
d. None oI the above is necessarily correct.
50. Suppose that the inIlation rate is higher in Turkey than in the U.S. Ior the next six months. Then according to
purchasing power parity, iI exchange rates are given in terms oI how many Turkish lira or how many Turkish
goods a U.S. dollar buys,
a. the nominal exchange rate rises but the real exchange rate does not.
b. the nominal exchange rate does not rise, but the real exchange rate does.
c. both the nominal and real exchange rates rise.
d. neither the nominal nor the real exchange rate rises.
51. The open-economy macroeconomic model takes
a. GDP, but not the price level as given.
'
b. the price level, but not GDP as given.
c. both the price level and GDP as given.
d. the price level and GDP as variables to be determined by the model.
52. Other things the same, a higher real interest rate raises the quantity oI
a. domestic investment.
b. net capital outIlow.
c. loanable Iunds demanded.
d. loanable Iunds supplied.
53. In the open-economy macroeconomic model, the supply oI loanable Iunds equals
a. national saving. The demand Ior loanable Iunds comes Irom domestic investment net
capital outIlow.
b. national saving. The demand Ior loanable Iunds comes only Irom domestic investment.
c. private saving. The demand Ior loanable Iunds comes Irom domestic investment net
capital outIlow.
d. private saving. The demand Ior loanable Iunds comes only Irom domestic investment.
54. A country has national saving oI $80 billion, government expenditures oI $40 billion, domestic investment oI
$60 billion, and net capital outIlow oI $20 billion. What is its demand Ior loanable Iunds?
a. $40 billion
b. $60 billion
c. $80 billion
d. $120 billion
55. Other things the same, as the real interest rate rises
a. domestic investment and net capital outIlow both rise.
b. domestic investment and net capital outIlow both Iall.
c. domestic investment rises and net capital outIlow Ialls.
d. domestic investment Ialls and net capital outIlow rises.
56. An increase in real interest rates in the United States
a. discourages both U.S. and Ioreign residents Irom buying U.S. assets.
b. encourages both U.S. and Ioreign residents to buy U.S. assets.
c. encourages U.S. residents to buy U.S. assets, but discourages Ioreign residents Irom
buying U.S. assets.
d. encourages Ioreign residents to buy U.S. assets, but discourages U.S. residents Irom
buying U.S. assets.
57. II interest rates rose more in the U.S. than in Canada, then other things the same
a. U.S. citizens would buy more Canadian bonds and Canadian citizens would buy more
U.S. bonds.
b. U.S. citizens would buy more Canadian bonds and Canadian citizens would buy Iewer
U.S. bonds.
c. U.S. citizens would buy Iewer Canadian bonds and Canadian citizens would buy more
U.S. bonds.
d. U.S. citizens would buy Iewer Canadian bonds and Canadian citizens would buy Iewer
U.S. bonds.
58. At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that people want
to save equals the desired quantity oI
a. net capital outIlow.
b. domestic investment.
(
c. net capital outIlow plus domestic investment.
d. Ioreign currency supplied.
59. II the supply oI loanable Iunds shiIts leIt, then
a. the real interest rate and the equilibrium quantity oI loanable Iunds both Iall.
b. the real interest rate Ialls and the equilibrium quantity oI loanable Iunds rises.
c. the real interest rate and the equilibrium quantity oI loanable Iunds both rise.
d. the real interest rate rises and the equilibrium quantity oI loanable Iunds Ialls.
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percent
$billions
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#
$
%
&
'
(
)
60. Refer to Figure 32-1. In the Figure shown, iI the real interest rate is 6 percent, the quantity oI loanable Iunds
demanded is
a. $20 billion, and the quantity supplied is $40 billion.
b. $20 billion, and the quantity supplied is $60 billion.
c. $60 billion, and the quantity supplied is $20 billion.
d. $60 billion, and the quantity supplied is $40 billion.
61. The value oI net exports equals the value oI
a. national saving.
b. public saving.
c. national saving - net capital outIlow.
d. national saving - domestic investment.
62. Which oI the Iollowing would shiIt the supply oI dollars in the market Ior Ioreign-currency exchange oI the
open-economy macroeconomic model to the leIt?
a. The exchange rate rises.
b. The exchange rate Ialls.
c. The expected rate oI return on U.S. assets rises.
d. The expected rate oI return on U.S. assets Ialls.
63. In the open-economy macroeconomic model, the demand Ior dollars shiIts right iI at any given exchange rate
a. Ioreign residents want to buy more U.S. goods and services.
b. U.S. residents want to buy Iewer Ioreign goods and services.
c. Both A and B are correct.
64. In the open economy macroeconomic model, the amount oI dollars demanded in the market Ior Ioreign-
currency exchange at a given real exchange rate increases iI
a. either U.S. imports or exports increase.
b. either U.S. imports or exports decrease.
)
c. either U.S. imports increase or U.S. exports decrease.
d. either U.S. imports decrease or U.S. exports increase.
65. In the open-economy macroeconomic model, the quantity oI dollars demanded in the market Ior Ioreign-
currency exchange
a. depends on the real exchange rate. The quantity oI dollars supplied in the Ioreign-
exchange market depends on the real interest rate.
b. depends on the real interest rate. The quantity oI dollars supplied in the Ioreign-exchange
market depends on the real exchange rate.
c. and the quantity oI dollars supplied in the market Ior Ioreign-currency exchange depend
on the real exchange rate.
d. and the quantity oI dollars supplied in the market Ior Ioreign-currency exchange depend
on the real interest rate.
66. In the open economy macroeconomic model, the price that balances supply and demand in the market Ior
Ioreign-currency exchange model is the
a. nominal exchange rate.
b. nominal interest rate.
c. real exchange rate.
d. real interest rate.
67. Suppose the real exchange rate is such that the market Ior Ioreign-currency exchange has a surplus. This
surplus will lead to
a. an appreciation oI the dollar, an increase in U.S. net exports, and so an increase in the
quantity oI dollars demanded in the Ioreign exchange market.
b. an appreciation oI the dollar, a decrease in U.S. net exports, and so a decrease in the
c. a depreciation oI the dollar, an increase in U.S. net exports, and so an increase in the
d. a depreciation oI the dollar, a decrease in U.S. net exports, and so a decrease in the
Figure 32-2
Real Exchange Rate
Quantity oI Dollars
&" !"" !&" #"" #&" $"" $&" %""
. "#
. "%
. "'
. ")
!
. !#
. !%
. !'
. !)
68. Refer to Figure 32-2. What are the equilibrium values oI the real exchange rate and net exports?
a. 1.4, 100
b. 1, 200
c. .6, 300
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d. None oI the above are correct.
69. II the demand Ior dollars in the market Ior Ioreign-currency exchange shiIts right, then the exchange rate
a. rises and the quantity oI dollars exchanged rises.
b. rises and the quantity oI dollars exchanged does not change.
c. Ialls and the quantity oI dollars exchanged Ialls.
d. Ialls and the quantity oI dollars exchanged does not change.
70. When the U.S. real interest rate Ialls, owning U.S. assets becomes
a. more attractive to both U.S. and Ioreign residents.
b. more attractive to U.S. residents and less attractive to Ioreign residents.
c. less attractive to U.S. residents and more attractive to Ioreign residents.
d. less attractive to both U.S. residents and Ioreign residents.
71. In the open-economy macroeconomic model, iI a country's interest rate rises, its net capital outIlow
a. rises and the real exchange rate rises.
b. Ialls and the real exchange rate Ialls.
c. rises and the real exchange rate Ialls.
d. Ialls and the real exchange rate rises.
72. In the open-economy macroeconomic model, iI the supply oI loanable Iunds shiIts right, then
a. the supply oI dollars in the market Ior Ioreign-currency exchange shiIts leIt.
b. the supply oI dollars in the market Ior Ioreign-currency exchange shiIts right.
c. the demand Ior dollars in the market Ior Ioreign-currency exchange shiIts leIt.
d. the demand Ior dollars in the market Ior Ioreign-currency exchange shiIts right.
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ReIer to this diagram to answer the questions below.
73. Refer to Figure 32-3. Which curve is determined by net capital outIlow only?
a. the demand curve in panel a.
b. the demand curve in panel c.
c. the supply curve in panel a.
d. the supply curve in panel c.
74. Suppose that Egypt has a government budget surplus, and then goes into deIicit. This change would
!!
a. increase national saving and shiIt Egypt's supply oI loanable Iunds leIt.
b. increase national saving and shiIt Egypt's demand Ior loanable Iunds right.
c. decrease national saving and shiIt Egypt's supply oI loanable Iunds leIt.
d. decrease national saving and shiIt Egypt's demand Ior loanable Iunds right.
75. An increase in the budget deIicit makes domestic interest rates
a. rise because the supply oI loanable Iunds shiIts leIt.
b. Iall because the supply oI loanable Iunds shiIts leIt.
c. rise because the demand Ior loanable Iunds shiIts right.
d. Iall because the demand Ior loanable Iunds shiIts right.
76. An increase in the budget deIicit causes domestic interest rates
a. and investment to rise.
b. to rise and investment to Iall.
c. to Iall and investment to rise.
d. and investment to Iall.
77. II the budget deIicit increases, then
a. an increase in the interest rate increases net capital outIlow.
b. an increase in the interest rate decreases net capital outIlow.
c. a decrease in the interest rate increases net capital outIlow.
d. a decrease in the interest rate decreases net capital outIlow.
78. When a country`s government budget deIicit increases,
a. the real exchange rate oI its currency and its net exports increase.
b. the real exchange rate oI its currency and its net exports decrease.
c. the real exchange rate oI its currency increases and its net exports decrease.
d. the real exchange rate oI its currency decreases and its net exports increase.
79. II the U.S. government went Irom a budget deIicit to a budget surplus then
a. the interest rate and the real exchange rate would increase.
b. the interest rate and the real exchange rate would decrease.
c. the interest rate would increase and the real exchange rate would decrease.
d. the interest rate would decrease and the real exchange rate would increase.
80. II the U.S. government increased its deIicit, then
a. U.S. bonds would pay higher interest but a dollar would purchase Iewer Ioreign goods.
b. U.S. bonds would pay higher interest and a dollar would purchase more Ioreign goods.
c. U.S. bonds would pay lower interest and a dollar would purchase Iewer Ioreign goods.
d. U.S. bonds would pay lower interest but a dollar would purchase more Ioreign goods.
81. An increase in the budget deIicit
a. raises net exports and domestic investment.
b. raises net exports and reduces domestic investment.
c. reduces net exports and raises domestic investment.
d. reduces net exports and domestic investment.
82. A government budget deIicit
a. increases both net capital outIlow and net exports.
b. decreases both net capital outIlow and net exports.
c. increases net capital outIlow and decreases net exports.
d. decreases net capital outIlow and increases net exports.
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83. II a government increases its budget deIicit, then interest rates
a. rise and the real exchange rate appreciates.
b. Iall and the real exchange rate depreciates.
c. rise and the real exchange rate depreciates.
d. Iall and the real exchange rate appreciates.
84. II the government oI a country with a zero trade balances increases its budget deIicit, then interest rates
a. rise and the trade balance moves to a surplus.
b. rise and the trade balance moves to a deIicit.
c. Iall and the trade balance moves to a surplus.
d. Iall and the trade balance moves to a deIicit.
85. Which oI the Iollowing contains a list only oI things that increase when the budget deIicit oI the U.S.
increases?
a. U.S. supply oI loanable Iunds, U.S. interest rates, U.S. domestic investment
b. U.S. imports, U.S. interest rates, the real exchange rate oI the dollar
c. U.S. interest rates, the real exchange rate oI the dollar, U.S. domestic investment
d. the real exchange rate oI the dollar, U.S. net capital outIlow, U.S. net exports
86. In 2002, the United States imposed restrictions on the importation oI steel into the United States. The open-
economy macroeconomic model shows that such a policy would
a. lower the real exchange rate and increase net exports.
b. lower the real exchange rate and have no eIIect on net exports.
c. raise the real exchange rate and decrease net exports.
d. raise the real exchange rate and have no eIIect on net exports.
87. II the U.S. put an import quota on vacuum cleaners, it would
a. raise U.S. net exports oI vacuum cleaners and raise net exports oI other U.S. goods.
b. raise U.S. net exports oI vacuum cleaners and lower net exports oI other U.S. goods.
c. lower U.S. net exports oI vacuum cleaners and raise net exports oI other U.S. goods.
d. lower U.S. net exports oI vacuum cleaners and lower net exports oI other U.S. goods.
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88. Refer to Figure 32-6. II the interest rate were initially at r2 and an import quota were imposed, the interest
rate would
a. stay at r2.
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b. decrease because supply would shiIt right.
c. increase because supply would shiIt leIt.
d. decrease because demand would shiIt leIt.
89. When a country suIIers Irom capital Ilight, the exchange rate
a. depreciates, because demand in the market Ior Ioreign-currency exchange shiIts leIt.
b. depreciates, because supply in the market Ior Ioreign-currency exchange shiIts right.
c. appreciates, because demand in the market Ior Ioreign-currency exchange shiIts right.
90. When a country experiences capital Ilight, the interest rate
a. Ialls because the demand Ior loanable Iunds shiIts leIt.
b. Ialls because the supply Ior loanable Iunds shiIts right.
c. rises because the demand Ior loanable Iunds shiIts right.
d. rises because the supply Ior loanable Iunds shiIts leIt.
91. When a country experiences capital Ilight its currency
a. appreciates and net exports rise.
b. appreciates and net exports Iall.
c. depreciates and net exports rise.
d. depreciates and net exports Iall.
92. The country oI Frequencia is politically very stable and has a long tradition oI respecting property rights. II
several other countries suddenly became politically unstable, we would expect Frequencia`s
a. real interest rate to rise.
b. real exchange rate to Iall.
c. net exports to Iall.
d. None oI the above is likely.
93. Which oI the Iollowing is most likely to result iI Ioreigners decide to withdraw the Iunds that they have
loaned to the United States?
a. U.S. net exports will rise
b. U.S. net capital outIlow will Iall.
c. U.S. domestic investment will rise
d. the dollar will appreciate
94. In 2002 it looked like the Argentinean government might deIault on its debt (which eventually it did). The
open-economy macroeconomic model predicts that this should have
a. raised Argentinean interest rates and caused the Argentinean currency to appreciate.
b. raised Argentinean interest rates and caused the Argentinean currency to depreciate.
c. lowered Argentinean interest rates and caused the Argentinean currency to appreciate.
d. lowered Argentinean interest rates and caused the Argentinean currency to depreciate.
The diagram below represents the market Ior loanable Iunds and the market Ior Ioreign-currency exchange in
Mexico. Use the diagram to answer the Iollowing questions.
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95. Refer to Figure 32-7. Supposing that the Mexican economy starts at r0 and E1. Which oI the Iollowing is
consistent with the eIIects oI capital Ilight?
a. the shiIt Irom D0 to D1 in Panel A
b. the shiIt Irom NCO0 to NCO1 in Panel B
c. the shiIt Irom S0 to S1 in Panel C
d. All oI the above shiIts are consistent with the eIIects oI capital Ilight.
96. Refer to Figure 32-7. Suppose the Mexican economy starts at r0 and E1. Which oI the Iollowing new
equilibrium is consistent with capital Ilight?
a. ro and E0
b. r1 and E0
c. r1 and E1
97. Which oI the Iollowing would both raise the U.S. exchange rate?
a. capital Ilight Irom other countries to the U.S. occurs and the U.S. moves Irom budget
surplus to budget deIicit
b. capital Ilight Irom other countries to the U.S. occurs and the U.S. moves Irom budget
deIicit to budget surplus
c. capital Ilight Irom the U.S. to other countries occurs, the U.S. moves Irom budget surplus
to budget deIicit
d. capital Ilight Irom U.S. to other countries occurs, the U.S. moves Irom budget deIicit to
budget surplus
98. II U.S. citizens decide to save a larger Iraction oI their incomes, the real interest rate
a. decreases, the real exchange rate oI the dollar depreciates, and U.S. net capital outIlow
increases.
b. decreases, the real exchange rate oI the dollar appreciates, and U.S. net capital outIlow
decreases.
c. increases, the real exchange rate oI the dollar appreciates, and U.S. net capital outIlow
decreases.
d. increases, the real exchange rate oI the dollar depreciates, and U.S. net capital outIlow
increases.
99. II a country institutes policies that lead domestic Iirms to desire more capital stock
!%
a. net capital outIlows rise and the real exchange rate rises.
b. net capital outIlows rise and the real exchange rate Ialls.
c. net capital outIlows Iall and the real exchange rate rises.
d. net capital outIlows and the real exchange rate Ialls.
100. II the government oI Colombia made policy changes that increased national saving, the real exchange rate oI
the peso would
a. depreciate and Colombian net exports would rise.
b. depreciate and Colombian net exports would Iall.
c. appreciate and Colombian net exports would rise.
d. appreciate and Colombian net exports would Iall.
101. Which oI the Iollowing is correct?
a. Economic Iluctuations are easily predicted by competent economists.
b. Recessions have never occurred very close together.
c. Other measures oI spending, income, and production do not Iluctuate closely with real
GDP.
102. Which oI the Iollowing statements is correct?
a. Most economists use the model oI aggregate demand and aggregate supply to analyze
short-run economic Iluctuations.
b. Economic Iluctuations are essentially unrelated to changes in business conditions.
c. Economic Iluctuations Iollow a regular, predictable pattern.
103. During recessions
a. sales and proIits Iall.
b. sales and proIits rise.
c. sales rise, proIits Iall.
d. proIits Iall, sales rise.
104. Real GDP
a. is the current dollar value oI all goods produced by the citizens oI an economy within a
given time.
b. measures economic activity and income.
c. is used primarily to measure long-run changes rather than short-run Iluctuations.
105. Historically, the change in real GDP during recessions has been
a. mostly a change in investment spending.
b. mostly a change in consumption spending.
c. about equally divided between consumption and investment spending.
d. sometimes mostly a change in consumption and sometimes mostly a change in investment.
106. Which part oI real GDP Iluctuates most over the course oI the business cycle?
a. consumption expenditures
b. government expenditures
c. investment expenditures
d. net exports
107. According to classical macroeconomic theory, changes in the money supply aIIect
a. nominal variables and real variables.
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b. nominal variables, but not real variables.
c. real variables, but not nominal variables.
d. neither nominal nor real variables.
108. Most economists believe that money neutrality holds
a. in the short run but not the long run.
b. in the long run but not the short run.
c. in both the short run and the long run.
d. in neither the short run nor the long run.
109. The average price level is measured by
a. any real variable.
b. the rate oI inIlation.
c. the level oI the money supply.
d. the CPI or the GDP deIlator.
110. The aggregate-demand curve shows the
a. quantity oI labor and other inputs that Iirms want to buy at each price level.
b. quantity oI labor and other inputs that Iirms want to buy at each inIlation rate.
c. quantity oI domestically produced goods and services that households want to buy at each
price level.
d. quantity oI domestically produced goods and services that households, Iirms, the
government, and customers abroad want to buy at each price level.
111. Which oI the Iollowing adjust to bring aggregate supply and demand into balance?
a. the price level and real output
b. the real rate oI interest and the money supply
c. government expenditures and taxes
d. the saving rate and net exports
112. Other things the same, a Iall in an economy's overall level oI prices tends to
a. raise both the quantity demanded and supplied oI goods and services.
b. raise the quantity demanded oI goods and services, but lower the quantity supplied.
c. lower the quantity demanded oI goods and services, but raise the quantity supplied.
d. lower both the quantity demanded and the quantity supplied oI goods and services.
113. The wealth eIIect, interest-rate eIIect, and exchange-rate eIIect are all explanations Ior
a. the slope oI short-run aggregate supply.
b. the slope oI long-run aggregate supply.
c. the slope oI the aggregate-demand curve.
d. everything that makes the aggregate-demand curve shiIt.
114. When the price level changes, which oI the Iollowing variables will change and thereby cause a change in the
aggregate quantity oI goods and services demanded?
a. the real value oI wealth
b. the interest rate
c. the value oI currency in the market Ior Ioreign exchange
115. Other things the same, as the price level Ialls,
a. the money supply Ialls.
b. interest rates rise.
c. a dollar buys more domestic goods.
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d. the aggregate-demand curve shiIts right.
116. Other things the same, an increase in the price level makes consumers Ieel
a. less wealthy, so the quantity oI goods and services demanded Ialls.
b. less wealthy, so the quantity oI goods and services demanded rises.
c. more wealthy, so the quantity oI goods and services demanded rises.
d. more wealthy, so the quantity oI goods and services demanded Ialls.
117. Other things the same, a decrease in the price level motivates people to hold
a. less money, so they lend less, and the interest rate rises.
b. less money, so they lend more, and the interest rate Ialls.
c. more money, so they lend more, and the interest rate rises.
d. more money, so they lend less, and the interest rate Ialls.
118. Other things the same, when the price level rises, interest rates
a. rise, which means consumers will want to spend more on homebuilding.
b. rise, which means consumers will want to spend less on homebuilding.
c. Iall, which means consumers will want to spend more on homebuilding.
d. Iall, which means consumers will want to spend less on homebuilding.
119. In the context oI the aggregate-demand curve, the interest-rate eIIect reIers to the idea that, when the price
level increases,
a. the real value oI money decreases; in turn, the real value oI the dollar increases in Ioreign
exchange markets, which decreases net exports.
b. the real value oI money decreases; in turn, interest rates increase, which decreases net
exports.
c. households increase their holdings oI money; in turn, interest rates decrease, which
reduces spending on investment goods.
d. households increase their holdings oI money; in turn, interest rates increase, which reduces
spending on investment goods.
120. Other things the same, iI the price level rises, people
a. increase Ioreign bond purchases, so the supply oI dollars in the market Ior Ioreign-
currency exchange increases.
b. increase Ioreign bond purchases, so the supply oI dollars in the market Ior Ioreign-
currency exchange decreases.
c. decrease Ioreign bond purchases, so the supply oI dollars in the market Ior Ioreign-
currency exchange increases.
d. decrease Ioreign bond purchases, so the supply oI dollars in the market Ior Ioreign-
currency exchange decreases.
121. When the dollar appreciates, U.S.
a. exports decrease, while imports increase.
b. exports and imports decrease.
c. exports and imports increase.
d. exports increase, while imports decrease.
122. Other things the same, an increase in the price level causes the interest rate to
a. increase, the dollar to depreciate, and net exports to increase.
b. increase, the dollar to appreciate, and net exports to decrease.
c. decrease, the dollar to depreciate, and net exports to increase.
d. decrease, the dollar to appreciate, and net exports to decrease.
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123. Other things the same, the aggregate quantity oI goods demanded in the U.S. increases iI
a. real wealth Ialls.
b. the interest rate rises.
c. the dollar depreciates.
124. Other things the same, the aggregate quantity oI goods demanded decreases iI
a. real wealth Ialls.
b. the interest rate rises.
c. the dollar appreciates.
125. Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce
capital purchases. Their reaction would initially shiIt
a. aggregate demand right.
b. aggregate demand leIt.
c. aggregate supply right.
d. aggregate supply leIt.
126. The initial impact oI the repeal oI an investment tax credit is to shiIt
a. aggregate demand right.
b. aggregate demand leIt.
c. aggregate supply right.
d. aggregate supply leIt.
127. Aggregate demand shiIts right when the government
a. raises personal income taxes.
b. increases the money supply.
c. repeals an investment tax credit.
128. At the end oI World War II many European countries were rebuilding and so were eager to buy capital goods
and had rising incomes. We would expect that the rebuilding increased aggregate demand in
a. both the United States and Europe.
b. the United States but not Europe.
c. Europe, but not the United States.
d. neither the United States, nor Europe.
129. At a given price level, an increase in which oI the Iollowing shiIts aggregate demand to the right?
a. consumption
b. investment
c. government expenditures
130. The long-run aggregate supply curve shows that by itselI a permanent change in aggregate demand would
lead to a long-run change
a. in the price level and output.
b. in the price level, but not output.
c. in output, but not the price level.
d. in neither the price level nor output.
131. The long-run aggregate supply curve would shiIt right iI the government were to
a. increase the minimum-wage.
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b. make unemployment beneIits more generous.
c. raise taxes on investment spending.
132. The long-run aggregate supply curve shiIts right iI
a. the price level rises.
b. the price level Ialls.
c. the capital stock increases.
d. the capital stock decreases.
133. Which oI the Iollowing, other things the same, would make the price level decrease and real GDP increase?
a. long-run aggregate supply shiIts right
b. long-run aggregate supply shiIts leIt
c. aggregate demand shiIts right
d. aggregate demand shiIts leIt
134. The sticky-wage theory oI the short-run aggregate supply curve says that when the price level is lower than
expected,
a. production is more proIitable and employment rises.
b. production is more proIitable and employment Ialls.
c. production is less proIitable and employment rises.
d. production is less proIitable and employment Ialls.
135. The sticky-wage theory oI the short-run aggregate supply curve says that the quantity oI output Iirms supply
will increase iI
a. the price level is higher than expected making production more proIitable.
b. the price level is higher than expected making production less proIitable.
c. the price level is lower than expected making production more proIitable.
d. the price level is higher than expected making production less proIitable.
136. II there are sticky wages, and the price level is greater than what was expected, then
a. the quantity oI aggregate goods and services supplied Ialls, which is shown by a shiIt oI
the short-run aggregate supply curve to the leIt.
b. the quantity oI aggregate goods and services supplied Ialls, as shown by a movement to
the leIt along the short-run aggregate supply curve.
c. the quantity oI aggregate goods and services supplied rises, as shown by a shiIt oI the
short-run aggregate supply curve to the right.
d. the quantity oI aggregate goods and services supplied rises, as shown by a movement to
the right along the short-run aggregate supply curve.
137. Other things the same, an unexpected Iall in the price level results in some Iirms having
a. lower than desired prices which increases their sales.
b. lower than desired prices which depresses their sales.
c. higher than desired prices which increases their sales.
d. higher than desired prices which depresses their sales.
138. According to the misperceptions theory oI aggregate supply, iI a Iirm thought that inIlation was going to be 5
percent and actual inIlation was 6 percent, then the Iirm would believe that the relative price oI what they
produce had
a. increased, so they would increase production.
b. increased, so they would decrease production.
c. decreased, so they would increase production.
d. decreased, so they would decrease production.
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139. Suppose workers notice a Iall in their nominal wage but are slow to notice that the price oI things they
consume have Iallen by the same percentage. They may inIer that the reward to working is
a. temporarily low and so supply a smaller quantity oI labor.
b. temporarily low and so supply a larger quantity oI labor.
c. temporarily high and so supply a smaller quantity oI labor.
d. temporarily high and so supply a larger quantity oI labor.
140. Other things the same, the aggregate quantity oI output supplied will increase iI the price level
a. is lower than expected so that Iirms believe the relative price oI their output has increased.
b. is lower than expected so that Iirms believe the relative price oI their output has decreased.
c. is higher than expected so that Iirms believe the relative price oI their output has
increased.
d. is higher than expected so that Iirms believe the relative price oI their output has
decreased.
141. An increase in the expected price level shiIts the
a. short-run and long-run aggregate supply curves leIt.
b. the short-run but not the long-run aggregate supply curve leIt.
c. the long-run but not the short-run aggregate supply curve leIt.
d. neither the long-run nor the short-run aggregate supply curve leIt.
142. Which oI the Iollowing would cause prices and real GDP to rise in the short run?
a. an increase in the expected price level
b. an increase in the money supply
c. a decrease in the capital stock
Consider the exhibit below Ior the Iollowing questions.
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A
B
C
D
143. Refer to Figure 33-1. II the economy is at A and there is a Iall in aggregate demand, in the short run the
economy
a. stays at A.
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b. moves to B.
c. moves to C.
d. moves to D.
The Stock Market Boom of 2014
Imagine that in 2014 the economy is in long-run equilibrium. Then stock prices rise more than expected and
stay high Ior some time.
144. Refer to Stock Market Boom 2014. How is the new long-run equilibrium diIIerent Irom the original one?
a. the price level and real GDP are higher
b. the price level and real GDP are lower.
c. the price level is higher and real GDP is the same.
d. the price level is the same and real GDP is higher.
145. Other things the same, an increase in the expected price level shiIts
a. short-run aggregate supply right.
b. short-run aggregate supply leIt.
c. aggregate-demand right.
d. aggregated-demand leIt.
146. Suppose the economy is in long-run equilibrium. II there is a sharp increase in the minimum wage as well as
an increase in pessimism about Iuture business conditions, then we would expect that in the short-run,
a. real GDP will rise and the price level might rise, Iall, or stay the same.
b. real GDP will Iall and the price level might rise, Iall, or stay the same.
c. the price level will rise, and real GDP might rise, Iall, or stay the same.
d. the price level will Iall, and real GDP might rise, Iall, or stay the same.
147. Suppose the economy is in long-run equilibrium. In a short span oI time, there is a large inIlux oI skilled
immigrants, a major new discovery oI oil, and a major new technological advance in electricity production. In
the short run, we would expect
a. the price level to rise and real GDP to Iall.
b. the price level to Iall and real GDP to rise.
c. the price level and real GDP both to stay the same.
d. All oI the above are possible.
148. Suppose the economy is in long-run equilibrium. II there is a sharp decline in the stock market combined with
a signiIicant increase in immigration oI skilled workers, then in the short run,
a. real GDP will rise and the price level might rise, Iall, or stay the same. In the long-run,
real GDP will rise and the price level might rise, Iall, or stay the same.
b. the price level will Iall, and real GDP might rise, Iall, or stay the same. In the long-run,
real GDP and the price level will be unaIIected.
c. the price level will rise, and real GDP might rise, Iall, or stay the same. In the long run,
real GDP will rise and the price level will Iall.
d. the price level will Iall, and real GDP might rise, Iall, or stay the same. In the long run,
real GDP will rise and the price level will Iall.
149. Changes in the price oI oil
a. can only lead to recessions.
b. have not contributed much to output Iluctuations in the United States.
c. change the economy principally by changing aggregate demand.
d. created both inIlation and recession in the United States in the 1970s.
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150. Keynes explained that recessions and depressions occur because oI
a. excess aggregate demand.
b. inadequate aggregate demand.
c. excess aggregate supply.
d. inadequate aggregate supply.
151. The interest-rate eIIect
a. depends on the idea that increases in interest rates decrease the quantity oI goods and
services demanded.
b. depends on the idea that increases in interest rates decrease the quantity oI goods and
services supplied.
c. is responsible Ior the downward slope oI the money-demand curve.
d. is the least important reason, in the case oI the United States, Ior the downward slope oI
the aggregate-demand curve.
152. The wealth eIIect helps explain the slope oI the aggregate-demand curve. This eIIect is
a. relatively important in the United States because expenditures on consumer durables is
very responsive to changes in wealth.
b. relatively important in the United States because consumption spending is a large part oI
GDP.
c. relatively unimportant in the United States because money holdings are a small part oI
consumer wealth.
d. relatively unimportant because it takes a large change in wealth to cause a signiIicant
change in interest rates.
153. In recent years, the Federal Reserve has conducted policy by setting a target Ior the
a. size oI the money supply.
b. growth rate oI the money supply.
c. Iederal Iunds rate.
d. discount rate.
154. Liquidity preIerence reIers directly to Keynes' theory concerning
a. the eIIects oI changes in money demand and supply on interest rates.
b. the eIIects oI changes in money demand and supply on exchange rates.
c. the eIIects oI wealth on expenditures.
d. the diIIerence between temporary and permanent changes in income.
155. II expected inIlation is constant, then when the nominal interest rate increases, the real interest rate
a. increases by more than the change in the nominal interest rate.
b. increases by the change in the nominal interest rate.
c. decreases by the change in the nominal interest rate.
d. decreases by more than the change in the nominal interest rate.
156. The theory oI liquidity preIerence assumes that the nominal supply oI money is determined by the
a. level oI real output only.
b. interest rate only.
c. level oI real output and by the interest rate.
d. Federal Reserve.
Figure 34-2. On the leIt-hand graph, MS represents the supply oI money and MD represents the demand Ior
money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along
the axes oI both graphs.
"#
.
r
r
!
#
MS
MD
MD
!
#
P
P
!
#
AD
Y Y
! #
157. Refer to Figure 34-2. Assume the money market is always in equilibrium. Under the assumptions oI the
model,
a. the quantity oI goods and services demanded is higher at P2 than it is at P1.
b. the quantity oI money is higher at Y1 than it is at Y2.
c. an increase in r Irom r1 to r2 is associated with a decrease in Y Irom Y1 to Y2.
158. II, at some interest rate, the quantity oI money supplied is greater than the quantity oI money demanded,
people will desire to
a. sell interest-bearing assets, causing the interest rate to decrease.
b. sell interest-bearing assets, causing the interest rate to increase.
c. buy interest-bearing assets, causing the interest rate to decrease.
d. buy interest-bearing assets, causing the interest rate to increase.
159. II the price level Ialls, then
a. the interest rate Ialls and spending on goods and services Ialls.
b. the interest rate Ialls and spending on goods and services rises.
c. the interest rate rises and spending on goods and services Ialls.
d. the interest rate rises and spending on goods and services rises.
160. Which oI the Iollowing events would shiIt money demand to the leIt?
a. an increase in the price level
b. a decrease in the price level
c. an increase in the interest rate
d. a decrease in the interest rate
161. Which oI the Iollowing events would shiIt money demand to the leIt?
a. an increase in the interest rate or an increase in the price level
b. an increase in the interest rate, but not an increase in the price level
c. an increase in the price level, but not an increase in the interest rate
d. neither an increase in the interest rate nor an increase in the price level
162. Assume the money market is initially in equilibrium. II the price level increases, then according to liquidity
preIerence theory there is an excess
"$
a. supply oI money until the interest rate increases.
b. supply oI money until the interest rate decreases.
c. demand Ior money until the interest rate increases.
d. demand Ior money until the interest rate decreases.
163. According to liquidity preIerence theory, iI the price level decreases, then
a. the interest rate Ialls because money demand shiIts right.
b. the interest rate Ialls because money demand shiIts leIt.
c. the interest rate rises because money supply shiIts right.
d. the interest rate rises because money supply shiIts leIt.
164. According to liquidity preIerence theory, iI the price level increases, then the equilibrium interest rate
a. rises and the aggregate quantity oI goods demanded rises.
b. rises and the aggregate quantity oI goods demanded Ialls.
c. Ialls and the aggregate quantity oI goods demanded rises.
d. Ialls and the aggregate quantity oI goods demanded Ialls.
165. Other things the same, which oI the Iollowing responses would we expect Irom an increase in U.S. interest
rates?
a. Your aunt puts more money in her savings account.
b. Foreign citizens decide to buy Iewer U.S. bonds.
c. You decide to purchase a new oven Ior your cookie Iactory.
166. Other things the same, which oI the Iollowing responses would we expect to result Irom an decrease in U.S.
interest rates?
a. U.S. citizens decide to hold more Ioreign bonds.
b. People choose to hold more currency.
c. You decide to purchase a new oven Ior your cookie Iactory.
167. According to liquidity preIerence theory, an increase in the price level causes the interest rate to
a. increase, which increases the quantity oI goods and services demanded.
b. increase, which decreases the quantity oI goods and services demanded.
c. decrease, which increases the quantity oI goods and services demanded.
d. decrease, which decreases the quantity oI goods and services demanded.
168. According to the theory oI liquidity preIerence, an increase in the price level causes the
a. interest rate and investment to rise.
b. interest rate and investment to Iall.
c. interest rate to rise and investment to Iall.
d. interest rate to Iall and investment to rise.
169. Which oI the Iollowing shiIts aggregate demand to the right?
a. an increase in the price level
b. an increase in the money supply
c. a decrease in the price level
d. a decrease in the money supply
170. II the Fed conducts open-market purchases, the money supply
a. increases and aggregate demand shiIts right.
b. increases and aggregate demand shiIts leIt.
c. decreases and aggregate demand shiIts right.
"%
d. decreases and aggregate demand shiIts leIt.
171. In which oI the Iollowing cases does the aggregate-demand curve shiIt to the right?
a. The price level rises, causing the interest rate to Iall.
b. The price level Ialls, causing the interest rate to Iall.
c. The money supply increases, causing the interest rate to Iall.
d. The money supply decreases, causing the interest rate to Iall.
172. In the short run, open-market sales
a. increase the price level and real GDP.
b. decrease the price level and real GDP.
c. increases the price level and decreases real GDP.
d. decreases the price level and increases real GDP.
173. The Federal Funds rate is the interest rate
a. banks charge each other Ior short-term loans.
b. the Fed charges depository institutions Ior short-term loans.
c. the Fed pays on deposits.
d. interest rate on 3 month Treasury bills.
174. II the interest rate is above the Fed's target, the Fed should
a. buy bonds to increase the money supply.
b. buy bonds to decrease the money supply.
c. sell bonds to increase the money supply.
d. sell bonds to decrease the money supply.
175. II the stock market booms, then
a. aggregate demand increases, which the Fed could oIIset by increasing the money supply.
b. aggregate supply increases, which the Fed could oIIset by increasing the money supply.
c. aggregate demand increases, which the Fed could oIIset by decreasing the money supply.
d. aggregate supply increases, which the Fed could oIIset by decreasing the money supply.
176. II the stock market booms, then
a. household spending increases. To oIIset the eIIects oI this on the price level and real GDP,
the Fed would increase the money supply.
b. household spending increases. To oIIset the eIIects oI this on the price level and real GDP,
the Fed would decrease the money supply.
c. household spending decreases. To oIIset the eIIects oI this on the price level and real
GDP, the Fed would increase the money supply.
d. household spending decreases. To oIIset the eIIects oI this on the price level and real
GDP, the Fed would decrease the money supply.
177. When the Fed decreases the money supply, we expect
a. interest rates and stock prices to rise.
b. interest rates and stock prices to Iall.
c. interest rates to rise and stock prices to Iall.
d. interest rates to Iall and stock prices to rise.
178. In the long run, Iiscal policy primarily aIIects
a. aggregate demand. In the short run, it aIIects primarily aggregate supply.
b. aggregate supply. In the short run, it aIIects primarily saving, investment, and growth.
c. saving, investment, and growth. In the short run, it aIIects primarily aggregate demand.
d. saving, investment, and growth. In the short run, it aIIects primarily aggregate supply.
"&
179. II the multiplier is 5, then the MPC is
a. 0.05.
b. 0.5.
c. 0.6.
d. 0.8.
180. II the multiplier is 2.5, then the MPC is
a. 0.2.
b. 0.6.
c. 0.75.
d. 1.00.
181. Which oI the Iollowing policy actions shiIts the aggregate-demand curve?
a. an increase in the money supply
b. an increase in taxes
c. an increase in government spending
Scenario 34-1. Take the Iollowing inIormation as given Ior a small, imaginary economy:
When income is $10,000, consumption spending is $6,500.
When income is $11,000, consumption spending is $7,300.
182. Refer to Scenario 34-1. The multiplier Ior this economy is
a. 2.86.
b. 2.98.
c. 4.00.
d. 5.00.
183. Suppose the multiplier has a value that exceeds 1, and there are no crowding out or investment accelerator
eIIects. Which oI the Iollowing would shiIt aggregate demand to the right by more than the increase in
expenditures?
a. an increase in government expenditures
b. an increase in net exports
c. an increase in investment spending
184. Suppose there are both multiplier and crowding out eIIects but without any accelerator eIIects. An increase in
government expenditures would deIinitely
a. shiIt aggregate demand right by a larger amount than the increase in government
expenditures.
b. shiIt aggregate demand right by the same amount as an the increase in government
expenditures.
c. shiIt aggregate demand right by a smaller amount than the increase in government
expenditures.
d. Any oI the above outcomes are possible.
185. Assume there is a multiplier eIIect, some crowding out, and no accelerator eIIect. An increase in government
expenditures changes aggregate demand more,
a. the smaller the MPC and the stronger the inIluence oI income on money demand.
b. the smaller the MPC and the weaker the inIluence oI income on money demand.
c. the larger the MPC and the stronger the inIluence oI income on money demand.
"'
d. the larger the MPC and the weaker the inIluence oI income on money demand.
186. II the marginal propensity to consume is 5/6, and there is no investment accelerator or crowding out, a $20
billion increase in government expenditures would shiIt the aggregate demand curve right by
a. $60 billion, but the eIIect would be larger iI there were an investment accelerator.
b. $60 billion, but the eIIect would be smaller iI there were an investment accelerator.
c. $120 billion, but the eIIect would be larger iI there were an investment accelerator.
d. $120 billion, but the eIIect would be smaller iI there were an investment accelerator.
187. Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out eIIects. II
government expenditures increase by $25 billion, then aggregate demand
a. shiIts rightward by $62.5 billion.
b. shiIts rightward by $50.0 billion.
c. shiIts rightward by $32.5 billion.
188. Assume the multiplier is 5 and that the crowding-out eIIect is $20 billion. An increase in government
purchases oI $10 billion will shiIt the aggregate-demand curve to the
a. right by $150 billion.
b. right by $70 billion.
c. right by $30 billion.
189. Imagine that the government increases its spending by $20 billion. Which oI the Iollowing by itselI would
tend to make the change in aggregate demand diIIerent Irom $20 billion?
a. both the multiplier eIIect and the crowding-out eIIect
b. the multiplier eIIect, but not the crowding-out eIIect
c. the crowding-out eIIect, but not the multiplier eIIect
d. neither the crowding out eIIect nor the multiplier eIIect
190. A tax increase has
a. a multiplier eIIect but not a crowding out eIIect
b. a crowding out eIIect but not a multiplier eIIect
c. both a crowding out and multiplier eIIect
d. neither a multiplier or crowding out eIIect
191. Suppose the MPC is 0.60. Assume there are no crowding out or investment accelerator eIIects. II the
government increases expenditures by $200 billion, then by how much does aggregate demand shiIt to the
right? II the government decreases taxes by $200 billion, then by how much does aggregate demand shiIt to
the right?
a. $300 billion and $180 billion
b. $300 billion and $300 billion
c. $500 billion and $300 billion
d. $500 billion and $500 billion
192. Supply-side economists believe that a reduction in the tax rate
a. always decrease government tax revenue.
b. shiIts the aggregate supply curve to the right.
c. provides no incentive Ior people to work more.
d. would decrease consumption.
193. II Congress cuts spending to balance the Iederal budget, the Fed can act to prevent unemployment and
recession by
"(
a. buying bonds to increase the money supply
b. buying bonds to decrease the money supply.
c. selling bonds to increase the money supply.
d. selling bonds to decrease the money supply.
194. Who asserted that 'the Federal Reserve`s job is to take away the punch bowl just as the party gets going?
a. president George W. Bush
b. president John F. Kennedy
c. economist John Maynard Keynes
d. Iormer chairman oI the Federal Reserve System William McChesney Martin
195. Monetary policy
a. can be implemented quickly and most oI its impact on aggregate demand occurs very soon
aIter policy is implemented.
b. can be implemented quickly, but most oI its impact on aggregate demand occurs months
aIter policy is implemented.
c. cannot be implemented quickly, but once implemented most oI its impact on aggregate
demand occurs very soon aIterward.
d. cannot be implemented quickly and most oI its impact on aggregate demand occurs
months aIter policy is implemented.
196. The price oI imported oil rises. II the government wanted to stabilize output, which oI the Iollowing could it
do?
a. increase government expenditures or increase the money supply
b. increase government expenditures or decrease the money supply
c. decrease government expenditures or increase the money supply
d. decrease government expenditures or decrease the money supply
197. Suppose aggregate demand shiIts to the leIt and policymakers want to stabilize output. What can they do?
a. repeal an investment tax credit or increase the money supply
b. repeal an investment tax credit or decrease the money supply
c. institute an investment tax credit or increase the money supply
d. institute an investment tax credit or decrease the money supply
198. Which oI the Iollowing is not an automatic stabilizer?
a. the minimum wage
b. the unemployment compensation system
c. the Iederal income tax
d. the welIare system
199. During recessions, taxes tend to
a. rise and thereby increase aggregate demand.
b. rise and thereby decrease aggregate demand.
c. Iall and thereby increase aggregate demand.
d. Iall and thereby decrease aggregate demand.
200. During recessions, automatic stabilizers tend to make the government's budget
a. move toward deIicit.
b. move toward surplus.
c. move toward balance.
d. not necessarily move the budget in any particular direction.
")
STUDY GUIDE 2 EC 2200-6 TR 3.30pm Covering chapters 31, 32, 33, and 34]
Answer Section
MULTIPLE CHOICE
1. ANS: A PTS: 1 DIF: 1 REF: 31-0
NAT: Analytic LOC: International trade and Iinance TOP: International trade
MSC: DeIinitional
2. ANS: C PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net exports
MSC: Applicative
3. ANS: D PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Exports
MSC: Applicative
4. ANS: B PTS: 1 DIF: 1 REF: 31-1
MSC: Applicative
5. ANS: B PTS: 1 DIF: 1 REF: 31-1
MSC: Applicative
6. ANS: A PTS: 1 DIF: 1 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Exports , Imports , Trade balance
MSC: Applicative
7. ANS: C PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Exports , Imports , Net exports
MSC: Interpretive
8. ANS: B PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: U.S. trade Iacts
MSC: DeIinitional
9. ANS: C PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: U.S. trade Iacts
MSC: DeIinitional
10. ANS: B PTS: 1 DIF: 1 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Foreign direct investment
MSC: Interpretive
11. ANS: A PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net capital outIlow
MSC: Analytical
12. ANS: A PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance
TOP: Foreign direct investment , Foreign portIolio investment , Net capital outIlow
MSC: Interpretive
13. ANS: A PTS: 1 DIF: 1 REF: 31-1
TOP: Foreign direct investment , Net capital outIlow MSC: Interpretive
14. ANS: D PTS: 1 DIF: 1 REF: 31-1
MSC: Interpretive
#*
15. ANS: A PTS: 1 DIF: 1 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Investment decisions
MSC: DeIinitional
16. ANS: A PTS: 1 DIF: 2 REF: 31-1
TOP: Net capital outIlow , Foreign investment MSC: Applicative
17. ANS: A PTS: 1 DIF: 2 REF: 31-1
MSC: Applicative
18. ANS: B PTS: 1 DIF: 1 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net capital outIlow , Net exports
MSC: DeIinitional
19. ANS: D PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net capital outIlow , Net exports
MSC: Applicative
20. ANS: C PTS: 1 DIF: 3 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net exports , Net capital outIlow
MSC: Applicative
21. ANS: D PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net exports , Net capital outIlow
MSC: Applicative
22. ANS: D PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Net capital outIlow , Trade balance
MSC: Interpretive
23. ANS: D PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: National accounts
MSC: Applicative
24. ANS: A PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: National accounts
MSC: Applicative
25. ANS: C PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: U.S. trade
MSC: DeIinitional
26. ANS: A PTS: 1 DIF: 2 REF: 31-1
MSC: DeIinitional
27. ANS: C PTS: 1 DIF: 2 REF: 31-1
MSC: DeIinitional
28. ANS: C PTS: 1 DIF: 2 REF: 31-1
MSC: DeIinitional
29. ANS: B PTS: 1 DIF: 2 REF: 31-1
MSC: DeIinitional
30. ANS: C PTS: 1 DIF: 2 REF: 31-1
NAT: Analytic LOC: International trade and Iinance TOP: Saving
MSC: Interpretive
31. ANS: A PTS: 1 DIF: 2 REF: 31-2
#!
TOP: Nominal exchange rate , Net capital outIlow MSC: Interpretive
32. ANS: B PTS: 1 DIF: 1 REF: 31-2
NAT: Analytic LOC: International trade and Iinance TOP: Real exchange rate
MSC: DeIinitional
33. ANS: C PTS: 1 DIF: 2 REF: 31-2
MSC: Analytical
34. ANS: C PTS: 1 DIF: 2 REF: 31-2
MSC: Analytical
35. ANS: A PTS: 1 DIF: 2 REF: 31-2
MSC: Applicative
36. ANS: C PTS: 1 DIF: 2 REF: 31-2
MSC: Analytical
37. ANS: A PTS: 1 DIF: 3 REF: 31-2
MSC: Analytical
38. ANS: A PTS: 1 DIF: 2 REF: 31-2
MSC: Analytical
39. ANS: C PTS: 1 DIF: 1 REF: 31-2
NAT: Analytic LOC: International trade and Iinance TOP: Appreciation , Real exchange rate
MSC: Applicative
40. ANS: D PTS: 1 DIF: 3 REF: 31-2
MSC: Analytical
41. ANS: B PTS: 1 DIF: 1 REF: 31-3
NAT: Analytic LOC: International trade and Iinance TOP: Nominal exchange rate volatility
MSC: DeIinitional
42. ANS: B PTS: 1 DIF: 1 REF: 31-3
NAT: Analytic LOC: International trade and Iinance TOP: Purchasing-power parity
MSC: DeIinitional
43. ANS: B PTS: 1 DIF: 2 REF: 31-3
TOP: Nominal exchange rate , Real exchange rate MSC: DeIinitional
44. ANS: C PTS: 1 DIF: 2 REF: 31-3
TOP: Nominal exchange rate , Real exchange rate MSC: Analytical
45. ANS: D PTS: 1 DIF: 1 REF: 31-3
MSC: Applicative
46. ANS: A PTS: 1 DIF: 2 REF: 31-3
NAT: Analytic LOC: International trade and Iinance TOP: Arbitrage , Real exchange rate
MSC: Analytical
47. ANS: C PTS: 1 DIF: 3 REF: 31-3
NAT: Analytic LOC: International trade and Iinance TOP: Arbitrage , Real exchange rate
#"
MSC: Analytical
48. ANS: C PTS: 1 DIF: 3 REF: 31-3
MSC: Applicative
49. ANS: C PTS: 1 DIF: 3 REF: 31-3
MSC: Analytical
50. ANS: A PTS: 1 DIF: 2 REF: 31-2
MSC: Analytical
51. ANS: C PTS: 1 DIF: 1 REF: 32-0
TOP: Open-economy macroeconomic model MSC: DeIinitional
52. ANS: D PTS: 1 DIF: 1 REF: 32-1
TOP: Supply oI loanable Iunds , Demand Ior loanable Iunds MSC: Applicative
53. ANS: A PTS: 1 DIF: 2 REF: 32-1
TOP: Demand Ior loanable Iunds , Supply oI loanable Iunds MSC: DeIinitional
54. ANS: C PTS: 1 DIF: 2 REF: 32-1
NAT: Analytic LOC: International trade and Iinance TOP: Demand Ior loanable Iunds
MSC: Applicative
55. ANS: B PTS: 1 DIF: 1 REF: 32-1
TOP: Domestic investment , Net capital outIlow MSC: Applicative
56. ANS: B PTS: 1 DIF: 1 REF: 32-1
MSC: Applicative
57. ANS: C PTS: 1 DIF: 1 REF: 32-1
TOP: Net capital outIlow , Demand Ior loanable Iunds MSC: Applicative
58. ANS: C PTS: 1 DIF: 1 REF: 32-1
NAT: Analytic LOC: International trade and Iinance TOP: Market Ior loanable Iunds
MSC: Applicative
59. ANS: D PTS: 1 DIF: 2 REF: 32-1
MSC: Analytical
60. ANS: B PTS: 1 DIF: 1 REF: 32-1
MSC: Applicative
61. ANS: D PTS: 1 DIF: 2 REF: 32-1
MSC: DeIinitional
62. ANS: C PTS: 1 DIF: 2 REF: 32-1
NAT: Analytic LOC: International trade and Iinance TOP: Supply oI Ioreign currency
MSC: Applicative
63. ANS: C PTS: 1 DIF: 3 REF: 32-1
NAT: Analytic LOC: International trade and Iinance TOP: Demand Ior Ioreign currency
MSC: Interpretive
##
64. ANS: D PTS: 1 DIF: 2 REF: 32-1
NAT: Analytic LOC: International trade and Iinance TOP: Demand Ior loanable Iunds
MSC: Interpretive
65. ANS: A PTS: 1 DIF: 3 REF: 32-1
TOP: Demand Ior Ioreign currency , Supply oI Ioreign currency MSC: Analytical
66. ANS: C PTS: 1 DIF: 1 REF: 32-1
TOP: Market Ior Ioreign-currency exchange MSC: DeIinitional
67. ANS: C PTS: 1 DIF: 3 REF: 32-1
TOP: Market Ior Ioreign-currency exchange MSC: Analytical
68. ANS: B PTS: 1 DIF: 1 REF: 32-1
TOP: Market Ior Ioreign-currency exchange MSC: Applicative
69. ANS: B PTS: 1 DIF: 1 REF: 32-1
TOP: Market Ior Ioreign-currency exchange MSC: Analytical
70. ANS: D PTS: 1 DIF: 1 REF: 32-2
TOP: Open-economy macroeconomic model , Net capital outIlow
MSC: Applicative
71. ANS: D PTS: 1 DIF: 2 REF: 32-2
TOP: Open-economy macroeconomic model , Market Ior Ioreign-currency exchange
MSC: Applicative
72. ANS: B PTS: 1 DIF: 2 REF: 32-2
TOP: Open-economy macroeconomic model MSC: Analytical
73. ANS: D PTS: 1 DIF: 2 REF: 32-2
TOP: Open-economy macroeconomic model MSC: Interpretive
74. ANS: C PTS: 1 DIF: 2 REF: 32-3
TOP: Budget surpluses , Market Ior loanable Iunds MSC: Applicative
75. ANS: A PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Market Ior loanable Iunds MSC: Analytical
76. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Interest rates , Investment MSC: Analytical
77. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Open-economy macroeconomic model , Budget deIicits MSC: Analytical
78. ANS: C PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Exchange rate , Net exports MSC: Analytical
79. ANS: B PTS: 1 DIF: 2 REF: 32-3
#$
TOP: Budget surpluses , Interest rates , Exchange rate MSC: Applicative
80. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Exchange rate , Interest rates MSC: Applicative
81. ANS: D PTS: 1 DIF: 2 REF: 32-3
NAT: Analytic LOC: International trade and Iinance TOP: Budget deIicits , Net exports
MSC: Analytical
82. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Net capital outIlow , Net exports MSC: Applicative
83. ANS: A PTS: 1 DIF: 2 REF: 32-3
TOP: Budget surpluses , Interest rates , Exchange rate MSC: Analytical
84. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Budget deIicits , Interest rates , Net exports MSC: Analytical
85. ANS: B PTS: 1 DIF: 3 REF: 32-3
NAT: Analytic LOC: International trade and Iinance TOP: Budget deIicits
MSC: Analytical
86. ANS: D PTS: 1 DIF: 3 REF: 32-3
TOP: Import quotas , Exchange rate , Net exports MSC: Analytical
87. ANS: B PTS: 1 DIF: 3 REF: 32-3
TOP: Import quotas , Microeconomic eIIects oI import quotas MSC: Analytical
88. ANS: A PTS: 1 DIF: 2 REF: 32-3
NAT: Analytic LOC: International trade and Iinance TOP: Import quotas , Interest rates
MSC: Applicative
89. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Capital Ilight , Market Ior Ioreign-currency exchange MSC: Analytical
90. ANS: C PTS: 1 DIF: 2 REF: 32-3
TOP: Capital Ilight , Open-economy macroeconomic model MSC: Analytical
91. ANS: C PTS: 1 DIF: 2 REF: 32-3
TOP: Capital Ilight , Exchange rate , Net exports MSC: Applicative
92. ANS: C PTS: 1 DIF: 3 REF: 32-3
93. ANS: A PTS: 1 DIF: 3 REF: 32-3
94. ANS: B PTS: 1 DIF: 2 REF: 32-3
TOP: Capital Ilight , Exchange rate , Interest rates MSC: Analytical
95. ANS: D PTS: 1 DIF: 2 REF: 32-3
TOP: Capital Ilight , Open-economy macroeconomic model MSC: Applicative
#%
96. ANS: B PTS: 1 DIF: 2 REF: 32-3
97. ANS: A PTS: 1 DIF: 3 REF: 32-3
TOP: Open-economy macroeconomic model policies and actions , Exchange rate
MSC: Analytical
98. ANS: A PTS: 1 DIF: 2 REF: 32-3
NAT: Analytic LOC: International trade and Iinance TOP: Saving policy
MSC: Analytical
99. ANS: C PTS: 1 DIF: 3 REF: 32-3
MSC: Analytical
100. ANS: A PTS: 1 DIF: 2 REF: 32-3
MSC: Analytical
101. ANS: D PTS: 1 DIF: 1 REF: 33-1
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Business cycle MSC: DeIinitional
102. ANS: A PTS: 1 DIF: 1 REF: 33-1
TOP: Economic Iluctuations MSC: Interpretive
103. ANS: A PTS: 1 DIF: 1 REF: 33-1
TOP: Business cycle MSC: DeIinitional
104. ANS: B PTS: 1 DIF: 1 REF: 33-1
TOP: Real GDP MSC: DeIinitional
105. ANS: A PTS: 1 DIF: 1 REF: 33-1
TOP: Investment and the business cycle MSC: DeIinitional
106. ANS: C PTS: 1 DIF: 1 REF: 33-1
TOP: Investment and the business cycle MSC: DeIinitional
107. ANS: B PTS: 1 DIF: 1 REF: 33-2
TOP: Classical theory MSC: DeIinitional
108. ANS: B PTS: 1 DIF: 1 REF: 33-2
TOP: Classical theory MSC: DeIinitional
109. ANS: D PTS: 1 DIF: 1 REF: 33-2
TOP: Price level MSC: DeIinitional
110. ANS: D PTS: 1 DIF: 2 REF: 33-2
TOP: Aggregate-demand curve MSC: Interpretive
111. ANS: A PTS: 1 DIF: 1 REF: 33-2
TOP: Aggregate demand and aggregate supply model MSC: DeIinitional
#&
112. ANS: B PTS: 1 DIF: 1 REF: 33-3
TOP: Aggregate demand and supply slopes MSC: DeIinitional
113. ANS: C PTS: 1 DIF: 1 REF: 33-3
TOP: Aggregate demand slope MSC: DeIinitional
114. ANS: D PTS: 1 DIF: 2 REF: 33-3
TOP: Aggregate demand , Exchange-rate eIIect , Interest-rate eIIect , Wealth eIIect
MSC: Interpretive
115. ANS: C PTS: 1 DIF: 2 REF: 33-3
TOP: Wealth eIIect MSC: DeIinitional
116. ANS: A PTS: 1 DIF: 1 REF: 33-3
TOP: Wealth eIIect MSC: Interpretive
117. ANS: B PTS: 1 DIF: 2 REF: 33-3
TOP: Interest-rate eIIect MSC: Analytical
118. ANS: B PTS: 1 DIF: 2 REF: 33-3
119. ANS: D PTS: 1 DIF: 3 REF: 33-3
120. ANS: D PTS: 1 DIF: 3 REF: 33-3
TOP: Exchange-rate eIIect MSC: Analytical
121. ANS: A PTS: 1 DIF: 2 REF: 33-3
TOP: Exchange-rate eIIect MSC: DeIinitional
122. ANS: B PTS: 1 DIF: 3 REF: 33-3
TOP: Exchange-rate eIIect , Interest-rate eIIect MSC: Analytical
123. ANS: C PTS: 1 DIF: 2 REF: 33-3
TOP: Exchange-rate eIIect , Interest-rate eIIect , Exchange-rate eIIect
MSC: Analytical
124. ANS: D PTS: 1 DIF: 1 REF: 33-3
TOP: Aggregate demand slope MSC: DeIinitional
125. ANS: B PTS: 1 DIF: 2 REF: 33-3
TOP: Aggregate demand shiIts , Investment MSC: Applicative
126. ANS: B PTS: 1 DIF: 2 REF: 33-3
NAT: Analytic LOC: Monetary and Iiscal policy
TOP: Aggregate demand shiIts , Fiscal policy MSC: Applicative
127. ANS: B PTS: 1 DIF: 2 REF: 33-3
#'
TOP: Aggregate demand shiIts , Monetary policy , Fiscal policy MSC: Applicative
128. ANS: A PTS: 1 DIF: 2 REF: 33-3
TOP: Aggregate demand shiIts , Investment , Net exports MSC: Applicative
129. ANS: D PTS: 1 DIF: 1 REF: 33-3
TOP: Aggregate demand shiIts , Fiscal policy MSC: Applicative
130. ANS: B PTS: 1 DIF: 2 REF: 33-4
TOP: Long-run aggregate supply MSC: Analytical
131. ANS: D PTS: 1 DIF: 2 REF: 33-4
TOP: Long-run aggregate supply shiIts MSC: Applicative
132. ANS: C PTS: 1 DIF: 2 REF: 33-4
TOP: Long-run aggregate supply shiIts MSC: Applicative
133. ANS: A PTS: 1 DIF: 1 REF: 33-4
TOP: Long-run equilibrium MSC: Analytical
134. ANS: D PTS: 1 DIF: 2 REF: 33-4
TOP: Sticky-wage theory MSC: DeIinitional
135. ANS: A PTS: 1 DIF: 1 REF: 33-4
TOP: Sticky-wage theory MSC: DeIinitional
136. ANS: D PTS: 1 DIF: 2 REF: 33-4
TOP: Sticky-wage theory MSC: Analytical
137. ANS: D PTS: 1 DIF: 2 REF: 33-4
TOP: Sticky-price theory MSC: Analytical
138. ANS: A PTS: 1 DIF: 2 REF: 33-4
TOP: Misperceptions theory MSC: Applicative
139. ANS: A PTS: 1 DIF: 2 REF: 33-4
TOP: Misperceptions theory MSC: Analytical
140. ANS: C PTS: 1 DIF: 2 REF: 33-4
TOP: Misperceptions theory MSC: Analytical
141. ANS: B PTS: 1 DIF: 2 REF: 33-4
TOP: Short-run aggregate supply shiIts , Price expectations MSC: Applicative
142. ANS: B PTS: 1 DIF: 2 REF: 33-5
TOP: Short-run equilibrium MSC: Analytical
143. ANS: D PTS: 1 DIF: 1 REF: 33-5
TOP: Short-run equilibrium MSC: Analytical
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144. ANS: C PTS: 1 DIF: 2 REF: 33-5
TOP: Long-run equilibrium MSC: Analytical
145. ANS: B PTS: 1 DIF: 2 REF: 33-5
TOP: Aggregate supply shiIts , Price expectations MSC: Applicative
146. ANS: B PTS: 1 DIF: 3 REF: 33-5
TOP: Aggregate demand shiIts , Pessimism , Aggregate supply shiIts , Minimum wage
MSC: Analytical
147. ANS: B PTS: 1 DIF: 3 REF: 33-5
TOP: Aggregate supply shiIts MSC: Analytical
148. ANS: D PTS: 1 DIF: 3 REF: 33-5
TOP: Short-run equilibrium , Long-run equilibrium , Immigration , Stock prices
MSC: Analytical
149. ANS: D PTS: 1 DIF: 1 REF: 33-5
TOP: Aggregate supply shiIts , Oil prices MSC: DeIinitional
150. ANS: B PTS: 1 DIF: 1 REF: 33-5
TOP: Keynes MSC: DeIinitional
151. ANS: A PTS: 1 DIF: 2 REF: 34-1
TOP: Interest-rate eIIect MSC: Interpretive
152. ANS: C PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Wealth eIIect
MSC: DeIinitional
153. ANS: C PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Federal Iunds rate , Monetary policy
MSC: DeIinitional
154. ANS: A PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Theory oI liquidity preIerence
MSC: DeIinitional
155. ANS: B PTS: 1 DIF: 1 REF: 34-1
TOP: Nominal interest rate , Real interest rate MSC: Interpretive
156. ANS: D PTS: 1 DIF: 1 REF: 34-1
TOP: Theory oI liquidity preIerence , Money supply MSC: DeIinitional
157. ANS: C PTS: 1 DIF: 2 REF: 34-1
TOP: Aggregate-demand curve , Money market MSC: Interpretive
158. ANS: C PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Money market equilibrium
MSC: Analytical
159. ANS: B PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: The role oI money TOP: Money market
#)
MSC: Applicative
160. ANS: B PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Money demand shiIts
MSC: Applicative
161. ANS: D PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Money demand shiIts
MSC: Applicative
162. ANS: C PTS: 1 DIF: 2 REF: 34-1
MSC: Analytical
163. ANS: B PTS: 1 DIF: 2 REF: 34-1
MSC: Analytical
164. ANS: B PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Interest-rate eIIect
MSC: Analytical
165. ANS: A PTS: 1 DIF: 1 REF: 34-1
MSC: Applicative
166. ANS: D PTS: 1 DIF: 2 REF: 34-1
MSC: Applicative
167. ANS: B PTS: 1 DIF: 2 REF: 34-1
MSC: Analytical
168. ANS: C PTS: 1 DIF: 2 REF: 34-1
MSC: Analytical
169. ANS: B PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Aggregate demand shiIts
MSC: Applicative
170. ANS: A PTS: 1 DIF: 2 REF: 34-1
TOP: Open-market operations , Aggregate-demand shiIts MSC: Analytical
171. ANS: C PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Aggregate demand shiIts
MSC: Analytical
172. ANS: B PTS: 1 DIF: 2 REF: 34-1
TOP: Open-market operations , Short-run equilibrium MSC: Analytical
173. ANS: A PTS: 1 DIF: 1 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Federal Iunds rate
MSC: DeIinitional
174. ANS: A PTS: 1 DIF: 2 REF: 34-1
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Interest-rate targeting
MSC: Analytical
175. ANS: C PTS: 1 DIF: 2 REF: 34-1
TOP: Federal Reserve System , Stock prices MSC: Analytical
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176. ANS: B PTS: 1 DIF: 2 REF: 34-1
TOP: Federal Reserve System , Stock prices MSC: Analytical
177. ANS: C PTS: 1 DIF: 2 REF: 34-1
TOP: Federal Reserve System , Stock prices , Money supply shiIts
MSC: Applicative
178. ANS: C PTS: 1 DIF: 1 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Fiscal policy
MSC: Interpretive
179. ANS: D PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Multiplier
MSC: Applicative
180. ANS: B PTS: 1 DIF: 2 REF: 34-2
MSC: Applicative
181. ANS: D PTS: 1 DIF: 2 REF: 34-2
TOP: Monetary policy , Fiscal policy , Aggregate demand shiIts MSC: Interpretive
182. ANS: D PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Multiplier eIIect
MSC: Applicative
183. ANS: D PTS: 1 DIF: 2 REF: 34-2
MSC: Interpretive
184. ANS: D PTS: 1 DIF: 1 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Multiplier , Crowding out
MSC: Applicative
185. ANS: D PTS: 1 DIF: 3 REF: 34-2
MSC: Analytical
186. ANS: C PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Multiplier , Investment accelerator
MSC: Applicative
187. ANS: A PTS: 1 DIF: 2 REF: 34-2
MSC: Applicative
188. ANS: C PTS: 1 DIF: 2 REF: 34-2
MSC: Analytical
189. ANS: A PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Fiscal policy
MSC: Applicative
190. ANS: C PTS: 1 DIF: 2 REF: 34-2
MSC: Interpretive
191. ANS: C PTS: 1 DIF: 3 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Multiplier , Taxes
MSC: Analytical
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192. ANS: B PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Taxes , Aggregate supply
MSC: DeIinitional
193. ANS: A PTS: 1 DIF: 2 REF: 34-2
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Stabilization policy
MSC: Analytical
194. ANS: D PTS: 1 DIF: 1 REF: 34-3
MSC: DeIinitional
195. ANS: B PTS: 1 DIF: 2 REF: 34-3
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Policy lags
MSC: DeIinitional
196. ANS: A PTS: 1 DIF: 2 REF: 34-3
MSC: Applicative
197. ANS: C PTS: 1 DIF: 2 REF: 34-3
MSC: Applicative
198. ANS: A PTS: 1 DIF: 1 REF: 34-3
NAT: Analytic LOC: Monetary and Iiscal policy TOP: Automatic stabilizers
MSC: DeIinitional
199. ANS: C PTS: 1 DIF: 2 REF: 34-3
MSC: Analytical
200. ANS: A PTS: 1 DIF: 2 REF: 34-3
MSC: Analytical
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Econ 2200 Exam 3

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STUDY GUIDE 2 EC 2200-6 TR 3.

30pm Covering chapters 31, 32, 33, and 34]

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