Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve
When the domestic real exchange rate appreciates, domestic goods become more expensive relative to foreign goods. This induces domestic residents to buy more goods overseas, which increases imports. The appreciation also induces foreign citizens to buy fewer domestic goods, so exports fall. The decline in exports and increase in imports decrease net exports, and so the demand for domestic currency declines. The inverse relation between the exchange rate and the quantity of domestic currency demanded in the market for foreign-currency exchange is represented by the downward-sloping demand curve.
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If Congress passed a one-time tax cut in order to stimulate the economy in 2014, and tax rate levels returned to their pre-2014 level in 2015, how should this tax cut affect the economy?
A) The tax cut would increase consumption spending more than would a permanent tax cut. B) The tax cut would lower the price level in 2014. C) The tax cut would increase consumption spending by the same amount as would a permanent tax cut. D) The tax cut would increase consumption spending less than would a permanent tax cut.
The central bank in the New Keynesian model pursues a policy of
A) fixed money supply. B) inflation between 2 and 3%. C) zero inflation. D) targeting the market interest rate.
How do the Bureau of Labor Statistics and the Bureau of the Census estimate U.S. unemployment each month?
a. They contact each state's unemployment office and gather data on new claims for unemployment. b. They randomly survey about 60,000 U.S. households to determine how many people are in the labor force, and what proportion of them is unemployed. c. They track released prisoners. These agencies adjust released prisoner employment unemployment rate proxy (PURP). d. None of the above are correct.
Reasons for studying economics include
a. all of the following b. to better understand world issues by applying the tools of economic analysis c. to help design more effective solutions to society's problems d. to help prepare for careers in fields such as law and politics e. to better understand the impact of world events on an individual's life