Table 36-1Suppose the economy of Macroland is described by the following:C = 200 + 0.8 DI (DI = disposable income)I = 300 + 0.2Y?50r (Y = GDP)(r, the interest rate, is measured in percentage points. For example, a 9 percent interest rate is r = 9).For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate atr = 5G = 750T = 0.25YX = 200M = 150 + 0.2YHint: DI = Y?T
From Table 36-1, find the trade deficit or surplus.
A. 475 deficit
B. 75 deficit
C. 75 surplus
D. 475 surplus
Answer: A
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Use the following diagram to answer the next question.
Based on this diagram, we can say ________.
A. crowding out is limiting the effectiveness of expansionary monetary policy B. investment demand will not respond when interest rates change C. there is a liquidity trap D. monetary policy is likely to be pro-cyclical
When U.S. residents buy products that were made in Japan, then ultimately the Japanese want
A) yen. B) dollars. C) Japanese goods. D) goods, including U.S.-made goods.
Government intervention to alter market structure or prevent abuse of market power is the basic purpose of
A. Antitrust policy. B. Government taxes. C. Social demand. D. Merit goods.
Which of the following is a false statement about the structure of the Federal Reserve System?
A. Exporter and importer interests are reflected B. State and regional interests are reflected C. Government (public) and private interests are reflected D. Banker and business interests are reflected