Describe the effects of a rise in the domestic real interest rate on the exchange rate and on both domestic and foreign net exports
What will be an ideal response?
The rise in the domestic real interest rate leads to a rise in the demand for domestic assets, raising the exchange rate. The rise in the exchange rate reduces domestic net exports and raises foreign net exports.
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In the case of perfect complements, more is not necessarily better. ?
Answer the following statement true (T) or false (F)
Assume a two-country, two-commodity, and two-input model. Let the two countries in this model be the United States and the Rest of the World and the two goods being produced by each of the countries be steel and wheat. The two factors of production used in producing the goods in each country are capital and land. If the United States is capital-abundant and wheat production is land-intensive, the Heckscher-Ohlin model would predict that the Rest of the World would
A. export steel and import wheat. B. export wheat and import steel. C. export both the goods to the United States. D. import both the goods from the United States.
Cyclical unemployment occurs:
A. because the government labels some people who aren't really in the labor force as unemployed. B. with economic fluctuations; it increases during bad times and decreases during good times. C. naturally during the normal workings of an economy, as people change jobs, move across the country, etc. D. because of a mismatch between the jobs that are available in the economy and the skills of workers seeking jobs.
The unconstrained supply of labor refers to the amount a household ________ within a given period at the current wage rate if it could find the work.
A. chooses not to work B. would like to work C. actually works D. is forced to work