Things I Should Know But Don't pt. 2 Flashcards
Which statement best describes the effects of a fall in the price level?
a. The real exchange rate and interest rates rise.
b. The real exchange rate and interest rates fall.
c. The real exchange rate falls, and interest rates rise.
d. The real exchange rate rises, and interest rates fall.
b. The real exchange rate and interest rates fall.
What would make the price level decrease and real GDP increase?
a. Long-run aggregate supply shifts right.
b. Long-run aggregate supply shifts left.
c. Aggregate demand shifts right.
d. Aggregate demand shifts left.
a. Long-run aggregate supply shifts right.
A U.S. textbook publishing company sells texts to Canadian students. What are the effects of these sales?
a. U.S. net exports increase, and U.S. net capital outflow increases.
b. U.S. net exports increase, and U.S. net capital outflow decreases.
c. U.S. net exports decrease, and U.S. net capital outflow increases.
d. U.S. net exports decrease, and U.S. net capital outflow decreases.
a. U.S. net exports increase, and U.S. net capital outflow increases.
According to the liquidity-preference theory, how does an increase in the price level affect the interest rate?
a. It increases the money demand and the interest rate.
b. It lowers the money demand and the interest rate.
c. It increases the money demand and lowers the interest rate.
d. It lowers the money demand and increases the interest rate.
a. It increases the money demand and the interest rate.
Which statement best describes the pattern in the returns of index funds?
a. They typically have about the same rate of return as more actively managed funds.
b. They typically have lower rates of return than more actively managed funds.
c. There is no pattern; they may have either higher or lower rates than more actively managed funds.
d. They typically have higher rates of return than more actively managed funds.
d. They typically have higher rates of return than more actively managed funds.
How does the Bank of Canada conduct open-market transactions?
a. It prints new currency.
b. It buys or sells government bonds from or to the public.
c. It lowers the bank rate.
d. It increases its lending to chartered banks
b. It buys or sells government bonds from or to the public.
In the long run, when money is neutral, which of the following increases when the money supply growth rate increases?
a. real output growth
b. real interest rates
c. nominal interest rates
d. the money supply divided by the price level
c. nominal interest rates
What is the goal of the consumer price index?
a. to measure changes in the costs of production
b. to measure changes in the cost of living
c. to measure changes in the relative prices of consumer goods
d. to measure changes in the production of consumer goods
b. to measure changes in the cost of living
In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased the money supply. How might the central banks have done this?
a. by selling bonds on the open market, which would have raised the value of money
b. by purchasing bonds on the open market, which would have raised the value of money
c. by selling bonds on the open market, which would have lowered the value of money
d. by purchasing bonds on the open market, which would have lowered the value of money
d. by purchasing bonds on the open market, which would have lowered the value of money
According to Phelps and Friedman, in the short run, what effect does an increase in the money supply have on prices and unemployment?
a. It raises prices and unemployment.
b. It raises prices and reduces unemployment.
c. It reduces prices and raises unemployment.
d. It reduces prices and leaves unemployment unchanged.
b. It raises prices and reduces unemployment.
Which example would be included in Canadian consumption?
a. A Canadian resident buys a car manufactured in Brazil.
b. A French resident buys a new house in Canada
c. Beverly buys a newly issued share in a Canadian corporation
d. Samantha produces some artwork to decorate her house.
a. A Canadian resident buys a car manufactured in Brazil.
What are the effects of a decrease in Canadian interest rates?
a. a depreciation of the dollar and greater net exports
b. a depreciation of the dollar and smaller net exports
c. an appreciation of the dollar and greater net exports
d. an appreciation of the dollar and smaller net exports
a. a depreciation of the dollar and greater net exports
David is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Paul is a lawyer. He has looked for work for some time, but no law firms are hiring. Which of the following best describes the nature of their unemployment?
a. David and Paul are both frictionally unemployed.
b. David and Paul are both structurally unemployed.
c. David is frictionally unemployed, and Paul is structurally unemployed.
d. David is structurally unemployed, and Paul is frictionally unemployed.cross out
c. David is frictionally unemployed, and Paul is structurally unemployed.
Structural unemployment
Caused by a mismatch between the skills workers can offer and the skills that are in demand.
Net Capital Outflow
Difference between capital outflow and capital inflow. (capital outflow - capital inflow)
Capital inflow: When savings from another country finance domestic investment.
Capital outflow: Occurs when money saved domestically is invested in other countries.
positive when domestic residents are buying more foreign assets than foreigners are purchasing domestic assets. negative when foreigners are purchasing more domestic assets than residents are purchasing foreign assets.
