Suppose that the U.S. government budget deficit decreases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does
The supply of loanable funds curve shifts right because a reduction in the deficit raises national saving which is the source of the supply of loanable funds. As the supply of loanable funds shifts right, the interest rate falls. This decrease in the interest rate causes the quantity of net capital outflow to rise, which means that U.S. residents will supply more dollars in order to purchase more foreign assets. So the supply of dollars in the foreign-currency exchange market shifts right.
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Positive spending shocks lead to ________ inflation ________
A) higher; in both the short and long runs B) higher; in the short run but not in the long run C) lower; in both the short and long runs D) lower; in the short run but not in the long run
What are the advantages of bank deposits compared to other types of assets?
What will be an ideal response?
Panel data
A) is also called longitudinal data. B) is the same as time series data. C) studies a group of people at a point in time. D) typically uses control and treatment groups.
If free entry and exit were not possible,
A. in the long run firms would break even. B. in the long run firms would lose money. C. in the long run firms would make money. D. It is impossible to tell what would happen without more cost and revenue information.