Consider a large open economy. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the domestic current account balance, foreign national saving, foreign investment, and the foreign
current account balance in each of the following scenarios? Show a diagram to illustrate your results. (a) current income rises in the foreign country (b) the future marginal product of capital rises in the domestic country (c) wealth rises in the foreign country
(a) The foreign savings curve shifts right, causing rw to fall. Domestic economy: S falls, I rises, CA falls. Foreign economy: SFor rises, IFor rises, CAFor rises (because CA falls).
(b) The domestic investment curve shifts right, causing rw to rise. Domestic economy: S rises, I rises, CA falls (because CAFor rises). Foreign economy: SFor rises, IFor falls, CAFor rises.
(c) The foreign savings curve shifts left, causing rw to rise. Domestic economy: S rises, I falls, CA rises. Foreign economy: SFor falls, IFor falls, CAFor falls (because CA rises).
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Mr. Garrison has recently obtained a bank card from South Park National Bank. Excited about the concept of using a little plastic card to get money from a machine, he quickly runs down to the nearest ATM and withdraws $500. This action has
A) reduced the bank's required reserves by $25 assuming the reserve ratio is 5 percent. B) reduced the money supply by $500. C) increased the money supply by $500. D) not changed the money supply.
Which of the following goods is least likely to be rivalrous in consumption?
A. a car B. a pair of shoes C. a book D. a computer E. a sunset
In your intermediate macroeconomics course, government expenditures and the money supply were treated as exogenous, in the sense that the variables could be changed to conduct economic policy to influence target variables,
but that these variables would not react to changes in the economy as a result of some fixed rule. The St. Louis Model, proposed by two researchers at the Federal Reserve in St. Louis, used this idea to test whether monetary policy or fiscal policy was more effective in influencing output behavior. Although there were various versions of this model, the basic specification was of the following type: ?ln(Yt) = ?0 + ?1?ln mt + ... + ?p?ln mt-p-1 + ?p+1?ln Gt + ... + ?p+q?ln Gt-q-1 + ut Assuming that money supply and government expenditures are exogenous, how would you estimate dynamic causal effects? Why do you think this type of model is no longer used by most to calculate fiscal and monetary multipliers? What will be an ideal response?
Rent controls a. are an example of price floors
b. are an example of price ceilings. c. destroy wealth by preventing the movement of apartments to higher-valued use. d. Both b and c