From 1975 to 1995, the value of the dollar in terms of yen fell from over 300 yen per dollar to about 100 yen per dollar. Considering the impact of this alone, this would likely:
A. make the U.S. AD curve steeper.
B. shift the U.S. AD curve to the left.
C. shift the U.S. AD curve to the right.
D. make the U.S. AD curve flatter.
Answer: C
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If you were a professor of economics and asked the class what would happen when the Fed raises the legal reserve requirement, you would hope to hear that the
a. banks must reduce the amount of loans they make b. banks can increase the amount of loans they make c. banks must reduce the interest rate they charge on the loans they make d. banks can raise the interest rate on loans they make e. banks must reduce the federal funds rate they charge to other banks
If the real interest rate were -7%, this is:
a. A clear sign that it is better to borrow than to lend. b. Not clear sign that it is better to borrow than to lend because this decision depends on expected inflation. c. Actually, it is impossible for the real interest rate to be -7% because the real interest rate can approach zero, but it can never be less than zero. d. A clear sign that it is better to lend than to borrow.
Assume the government decides to decrease taxes and to finance the expected budget deficit with borrowing in the real credit market. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the left. b. Start the analysis in the real goods market with aggregate demand shifting to the right. c. Start the analysis in the real goods market with aggregate supply shifting to the left. d. Start the analysis in the real goods market with aggregate supply shifting to the right. e. Start the analysis in the real credit market with demand for real credit shifting to the right.
Forward exchange contracts are used for hedging but not for speculating.
Answer the following statement true (T) or false (F)