What are the effects of an expansionary monetary policy on interest rates and output in an open economy with floating exchange rates?
What will be an ideal response?
With an expansionary monetary policy in an open economy with floating exchange rates, the MP curve shifts down, which leads to a higher output gap and decreases the real interest rate. The lower real interest rate makes investment less attractive in the United States, so net capital outflows increase. The dollar depreciates in value, and net exports and output increase.
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Land is:
A) an artificially created input whose supply is fixed. B) a naturally occurring input whose supply is fixed. C) an artificially created input whose supply is variable. D) a naturally occurring input whose supply is variable.
In the long run, an increase in productivity would cause output to ________ and the aggregate price level to ________
A) fall; rise B) fall; fall C) rise; fall D) rise; rise
In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2 . In 2007, a sandwich cost $5 . The base year is 2006 . If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?
a. $0.83 b. $2.25 c. $2.50 d. $3.00
The major protection against sudden mass attempt to withdraw cash from banks is the:
A. Federal Reserve. B. Consumer Protection Act. C. deposit insurance provided by the FDIC. D. gold and silver backing the dollar.