Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP price index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The GDP Price Index rises, and nominal value of the domestic currency falls.
b. The GDP Price Index falls, and nominal value of the domestic currency rises.
c. The GDP Price Index falls, and nominal value of the domestic currency falls.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
.C
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The demand for loanable funds
A) increases if wealth increases. B) increases if the expected rate of profit decreases. C) increases in an expansion and decreases in a recession. D) increases if population growth declines. E) decreases in an expansion and increases in a recession.
If the government increases defense spending by $1 billion and the MPC is 0.8, how much additional spending will occur in the third “round” of spending?
A. $640 million B. $800 million C. $1 billion D. $1.8 billion
Jack has an MPC of 0.82 and Jill has an MPC of 0.78. Ceteris paribus, if the government transfers income from people who behave like Jack to people who behave like Jill,
A. Aggregate demand will increase. B. Aggregate demand will decrease. C. It is not possible to predict what will happen to aggregate demand. D. Aggregate demand will remain the same.
Joaquín is trying to raise support for a referendum that would improve the environment but diminish local manufacturing jobs by 5 percent. How could he use positive framing to encourage voters to support the referendum?
a. Argue that the environment is infinitely more important than a mere 5 percent of jobs. b. Point out that even if no action is taken, local manufacturing jobs will decline eventually anyway. c. Emphasize that the bill will save both the environment and 95 percent of local manufacturing jobs. d. Introduce another referendum that would improve the environment by 5 percent but diminish local manufacturing jobs by 95 percent.