Suppose the United States experiences a long period of inflation relative to other countries. How will this affect U.S. net exports?
What will be an ideal response?
If inflation in the United States is higher than inflation in other countries, then prices of products and services produced in the United States increase more rapidly than the prices of products and services of other countries. This difference in the price levels decreases the demand for U.S. goods relative to foreign goods. U.S. exports decrease, imports increase, and U.S. net exports decline.
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Briefly describe how the Bretton Woods system worked. What advantages did it have over the gold standard? What problems did the Bretton Woods system eventually encounter?
What will be an ideal response?
The real business cycle model replicates the key business cycle regularities
A) both qualitatively and quantitatively. B) qualitatively but not quantitatively. C) quantitatively but not qualitatively. D) neither qualitatively nor quantitatively.
The demand curve for Japanese yen is downward sloping because when the exchange rate (dollars per yen) falls,
a. Japanese goods become cheaper so foreigners buy more of them and need more yen to do so b. foreigners need more dollars to buy one yen so they can now afford more Japanese goods c. the demand curve for yen shifts to the right as foreigners buy more Japanese goods d. foreign goods become cheaper so Japanese buy more of them and need more yen to do so e. the supply of yen increases in response to people demanding more yen
All of the following statements about consuming in excess of one's disposable income are true, except:
A. It is possible, and it's called dissaving B. In this case, the values of both saving and the APS are negative C. (APC + APS) will be less than 1 in this situation D. The value of APC will be greater than 1 in this case