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30 Cards in this Set
- Front
- Back
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Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same?
A. menu costs B. shoeleather costs C. inflation tax D. All of the above are correct. |
D. All of the above are correct.
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You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced
A. a nominal gain, but no real gain, and you paid no taxes on the transaction. B. a nominal gain, but no real gain, and you paid taxes on the nominal gain. C. both a nominal gain and a real gain, and you paid taxes on the nominal gain. D. both a nominal gain and a real gain, and you paid taxes only on the real gain. |
B. a nominal gain, but no real gain, and you paid taxes on the nominal gain.
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If the U.S. real exchange rate appreciates, U.S. exports to Europe
A. fall, and European exports to the U.S. rise. B. and European exports to the U.S. both rise. C. rise, and European exports to the U.S. fall. D. and European exports to the U.S. both fall. |
A. fall, and European exports to the U.S. rise.
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Other things the same, which of the following would both make Americans more willing to buy Italian goods?
A. the nominal exchange rate rises, the price of goods in Italy falls B. the nominal exchange rate rises, the price of goods in Italy rises C. the nominal exchange rate falls, the price of goods in Italy rises D. the nominal exchange rate falls, the price of goods in Italy falls |
A. the nominal exchange rate rises, the price of goods in Italy falls
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Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if
A. prices in the U.S. were lower, or the number of euro the dollar purchased were lower. B. prices in the U.S. were higher, or the number of euro the dollar purchased were lower. C. prices in the U.S. were higher, or the number of euro the dollar purchased were higher. D. prices in the U.S. were lower, or the number of euro the dollar purchased were higher. |
C. prices in the U.S. were higher, or the number of euro the dollar purchased were higher.
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Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,
A. the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. B. the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. C. the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. D. the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow. |
A. the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.
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The law of one price states that
A. a good must sell at the price fixed by law. B. nominal exchange rates will not vary. C. a good cannot sell for a price greater than the legal price ceiling. D. a good must sell at the same price at all locations. |
D. a good must sell at the same price at all locations.
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A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?
A. $105 million B. $15 million C. -$105 million D. -$15 million |
D. -$15 million
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A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has
A. exports of $2 billion and a trade deficit of $1 billion. B. exports of $3 billion and a trade deficit of $1 billion. C. exports of $3 billion and a trade surplus of $1 billion. D. exports of $2 billion and a trade surplus of $1 billion. |
A. exports of $2 billion and a trade deficit of $1 billion.
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Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions
A. lower U.S. net exports and raise U.S. net capital outflows. B. raise U.S. net exports and lower U.S. net capital outflows. C. raise both U.S. net exports and U.S. net capital outflows. D. lower both U.S. net exports and U.S. net capital outflows. |
D. lower both U.S. net exports and U.S. net capital outflows.
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Purchasing-power parity theory does not hold at all times because
A. the same goods produced in different countries may be imperfect substitutes for each other. B. many goods are not easily transported. C. Both a and b are correct. D. prices are different across countries. |
C. Both a and b are correct.
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According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the
A. nominal exchange rate rises. B. real exchange rate falls. C. nominal exchange rate falls. D. real exchange rate rises. |
A. nominal exchange rate rises.
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In an open economy, the source of the demand for loanable funds is
A. investment + net capital outflow B. national saving C. national saving + net capital outflow D. investment + the government budget deficit |
A. investment + net capital outflow
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In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts
A. demand in the market for foreign-currency exchange to the right. B. supply in the market for foreign-currency exchange to the left. C. supply in the market for foreign-currency exchange to the right. D. demand in the market for foreign-currency exchange to the left. |
C. supply in the market for foreign-currency exchange to the right.
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An increase in a country's budget deficit
A. decreases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts left. B. decreases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts left. C. increases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts right. D. increases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts right. |
A. decreases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts left.
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If a country has a positive net capital outflow, then
A. on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. B. on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. C. on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. D. on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds. |
B. on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.
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When a country experiences capital flight, its net capital outflow,
A. which is part of the demand for loanable funds, decreases. B. which is part of the supply of loanable funds, decreases. C. which is part of the demand for loanable funds, increases. D. which is part of the supply of loanable funds, increases. |
C. which is part of the demand for loanable funds, increases.
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Which of the following is the most likely response to a decrease in the U.S. real interest rate?
A. a U.S. company decides to expand its factory B. a U.S. citizen decides to purchase fewer foreign bonds C. a German mutual fund decides to increase its deposits at a U.S. bank D. All of the above are consistent. |
A. a U.S. company decides to expand its factory
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If a country raises its budget deficit, then its
A. net capital outflow rises and net exports fall. B. net capital outflow and net exports fall. C. net capital outflow falls and net exports rise. D. net capital outflow and net exports rise. |
B. net capital outflow and net exports fall.
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Trade policies
A. affect a country's overall trade balance, but affect some firms or industries differently than others. B. do not affect either a country's overall trade balance or specific firms or industries. C. affect a country's overall trade balance, but affect all firms and industries the same. D. do not affect a country's overall trade balance, but affect some firms or industries differently than others. |
D. do not affect a country's overall trade balance, but affect some firms or industries differently than others.
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A government budget deficit
A. increases net capital outflow and decreases net exports. B. decreases net capital outflow and increases net exports. C. increases both net capital outflow and net exports. D. decreases both net capital outflow and net exports. |
D. decreases both net capital outflow and net exports.
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When a country's government budget deficit decreases,
A. the real exchange rate of its currency and its net exports increase. B. the real exchange rate of its currency decreases and its net exports increase. C. the real exchange rate of its currency increases and its net exports decrease. D. the real exchange rate of its currency and its net exports decrease. |
B. the real exchange rate of its currency decreases and its net exports increase.
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In an open economy, national saving equals
A. domestic investment plus net capital outflow. B. domestic investment minus net capital outflow. C. net capital outflow. D. domestic investment. |
A. domestic investment plus net capital outflow.
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In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have
A. lowered Argentinean interest rates and caused the Argentinean currency to depreciate. B. lowered Argentinean interest rates and caused the Argentinean currency to appreciate. C. raised Argentinean interest rates and caused the Argentinean currency to appreciate. D. raised Argentinean interest rates and caused the Argentinean currency to depreciate. |
D. raised Argentinean interest rates and caused the Argentinean currency to depreciate.
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Other things the same, a higher real interest rate raises the quantity of
A. loanable funds demanded. B. domestic investment. C. loanable funds supplied. D. net capital outflow. |
C. loanable funds supplied.
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Which of the following decrease if the U.S. imposes an import quota on computer components?
A. U.S. imports but not U.S. exports B. U.S. exports but not U.S. imports C. U.S. exports and U.S. imports D. neither U.S. exports nor U.S. imports |
C. U.S. exports and U.S. imports
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In the open-economy macroeconomic model, which of the following increases net capital outflow?
A. both a fall in the real exchange rate and a fall in the real interest rate B. a fall in the real exchange rate, but not a fall in the real interest rate C. a fall in the real interest rate, but not a fall in the real exchange rate D. neither a fall in the real exchange rate nor a fall in the real interest rate |
C. a fall in the real interest rate, but not a fall in the real exchange rate
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A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?
A. $70 billion B. $50 billion C. $90 billion D. $120 billion |
A. $70 billion
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When a country suffers from capital flight, the exchange rate
A. depreciates, because demand in the market for foreign-currency exchange shifts left. B. depreciates, because supply in the market for foreign-currency exchange shifts right. C. appreciates, because demand in the market for foreign-currency exchange shifts right. D. appreciates, because supply in the market for foreign-currency exchange shifts left. |
B. depreciates, because supply in the market for foreign-currency exchange shifts right.
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When a society decides to increase its quantity of physical capital, the society
A. is in effect deciding to consume fewer goods and services in the present. B. is apparently not very concerned about its rate of economic growth in the future. C. is in effect deciding to save less of its current income in the present. D. can avoid the usual need to face trade-offs. |
A. is in effect deciding to consume fewer goods and services in the present.
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