If the exchange rate changes from $1 = 1.2 euros to $1 = 1.4 euros, then the U.S. dollar _____ and the euro _____.
a) appreciated; depreciated
b) depreciated; appreciated
c) depreciated; depreciated
d) appreciated; appreciated
Answer: a) appreciated; depreciated
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Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then
A) Alpha should specialize in knives and Beta should specialize in forks. B) Alpha should specialize in forks and Beta should specialize in knives. C) Alpha should specialize in producing both items. D) Beta should produce both items.
A $100 billion increase in government purchases would:
a. increase AD by $500 billion if MPC = 0.8. b. decrease AD by $300 billion if MPC = 2/3. c. decrease AD by $200 billion if MPC = 0.9. d. decrease AD by $40 billion if MPC = 0.4.
If you were a supply-side economist, you would argue that high levels of government spending
a. stimulate aggregate demand that in turn creates the incentive for increased aggregate supply b. add to aggregate supply because they bring more resources into being c. is limited by the taxes supplied to it by those paying the tax d. crowd out private sector investment which negatively affects GDP growth e. cause private sector investment to decrease because corporate taxes must be raised to finance the government spending
Aggregate supply tends to grow because
a. there are more workers in the economy every year. b. there is more capital in the economy every year. c. technology tends to improve every year. d. All of the above are correct.