Explain what factors cause shifts of the aggregate demand curve in the open economy model
What will be an ideal response?
The standard of list of determinants that appeared for the closed economy version of the AD relation still exists here (e.g. G, T, ... ). There are several international variables that must be added: Y*, E, P* and, in a fixed exchange rate regime, i*. The domestic price level also affects AD because of its effect on the real exchange rate.
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The quantity theory asserts that real GDP is
A) not influenced by the quantity of money. B) never different from potential GDP. C) equal to nominal GDP multiplied by the quantity of money. D) equal to nominal GDP divided by the quantity of money.
The original work on the application of the time inconsistency problem in macroeconomics is due to
A) Milton Friedman and Robert Lucas. B) Michael Hutchinson and Carl Walsh. C) Finn Kydland and Edward Prescott. D) Robert Barro and Donald Gordon.
The simple deposit multiplier? is
A) the reciprocal of the required reserve ratio. B) always 1. C) the same as the required reserve ratio. D) different from bank to bank even if the required reserve ratio is the same for all banks.
As the number of stocks in a portfolio rises,
a. both firm-specific risks and market risk fall. b. firm-specific risks fall; market risk does not. c. market risk falls; firm-specific risks do not. d. neither firm-specific risks nor market risk falls.