For an open economy, which of the following expressions represents net exports (NX)?
A) S + G - T - I
B) S + G - T + I
C) S + T - G + I
D) G - T + I - S
E) none of the above
E
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Suppose the Japanese yen increases in its value relative to the U.S. dollar. In the U.S. economy,
A) the price level will increase and real GDP will fall if the increase in aggregate demand is less than the decrease in aggregate supply. B) the price level will increase and real GDP will fall if the decrease in aggregate demand is more than the increase in aggregate supply. C) the price level will fall and real GDP will increase if the increase in aggregate supply is greater than the decrease in aggregate demand. D) the price level will fall and real GDP will decrease if the decrease in aggregate demand is less than the increase in aggregate supply.
The Federal Open Market Committee:
A. makes decisions that influence the nation's fiscal policy. B. reports directly to Congress. C. makes decisions that affect excess reserves available to banks. D. determines who may buy and sell government bonds.
Under a floating exchange-rate regime, with a contraction in the money supply, which of the following is likely to happen in the short run?
A. Inflow of foreign capital B. Deficit in the financial account C. Rise in the domestic price level D. Increase in the country's holdings of official international reserves
Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium. For Year 2, graph aggregate demand, long-run aggregate supply, and short-run aggregate supply such that the condition of the economy
will induce the Federal Reserve to conduct a contractionary monetary policy. Briefly explain the condition of the economy and what the Federal Reserve is attempting to do. What will be an ideal response?