Which of the following is considered to be the major cause of the recession of 2001?
a. A decrease in defense spending
b. A spike in oil prices and the collapse of the housing bubble
c. A decline in oil prices and the collapse of the housing bubble
d. Federal Reserve policy
e. None of the above.
B
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If the fundamental value of the nominal exchange rate equals 0.20 U.S. dollars per franc, but the franc is officially fixed at 0.15 U.S. dollars per franc, then the franc exchange rate is ________ and to maintain this exchange rate there will be ________ in the government's stock of international reserves.
A. undervalued; a net increase B. undervalued; a net decline C. overvalued; a net increase D. overvalued; a net decline
To pay for a current account deficit, a country can
A) borrow money from abroad. B) lend money abroad. C) increase official reserves to cover the shortfall. D) transfer money from the capital account to the official settlements account.
Picture an economy that is in general equilibrium. What would happen if the natural rate of unemployment were to experience an increase?
A) according to the Phillips curve, the ensuing negative unemployment gap would exert inflationary pressures B) according to Okun's Law, the ensuing negative unemployment gap would be consistent with a positive output gap C) according to the AD-AS framework, the LRAS curve would shift to the left and the ensuing positive output gap would be closed by subsequent leftward shifts in the AS curve to higher equilibrium levels of inflation D) all of the above E) none of the above
The equilibrium output level in the country of Plutonia is $44 billion, while its potential output is $74 billion. Suppose the central bank of the country implements an expansionary monetary policy. Which of the following is likely to occur?
a. An increase in interest rates will stimulate investment, shifting the aggregate demand curve to the right. b. A reduction in interest rates will stimulate investment, shifting the aggregate demand curve to the right. c. A reduction in interest rates will lower investment, shifting the aggregate demand curve to the left. d. An increase in interest rates will lower investment, shifting the aggregate demand curve to the left.