For a given domestic and foreign price level, an increase in the nominal exchange rate ________ the real exchange rate.
A. offsets any change in
B. may either increase or decrease
C. increases
D. decreases
Answer: C
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
A reason that economists keep an eye on both M2 and M1 is because
A) money market accounts are sometimes used like checking accounts and sometimes like savings accounts. B) during a recession, M1 is meaningless. C) M2 is more accurate than M1. D) both fluctuate widely and frequently in total dollar value.
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 quantity of real loanable funds per time period and current international transactions in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and current international transactions become more positive (or less negative). b. There is not enough information to determine what happens to these two macroeconomic variables. c. The quantity of real loanable funds per time period rises, and current international transactions become more negative (or less positive). d. The quantity of real loanable funds per time period rises, and current international transactions remain the same. e. The quantity of real loanable funds per time period and current international transactions remain the same.
Most modern financial centers use computers to match buyers and sellers. This absence of personal contact contradicts the definition of a market
Indicate whether the statement is true or false