ecn101_m2_ans

ecn101_m2_ans - Part 1 Multiple Choices(2 points each 1 If...

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Part 1: Multiple Choices (2 points each) 1. If the money supply is held constant, then an increase in the nominal interest rate will ________ the demand for money and _______ the price level. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease Answer: c 2. All of the following are costs of fully expected inflation except that expected inflation: a. causes lower real wages. b. leads to shoeleather costs. c. increases menu costs. d. leads to taxing of nominal capital gains that are not real. Answer: a 3. In practice, in order to stop a hyperinflation, in addition to stopping monetary growth, the government must: a. lower taxes and raise government spending. b. raise taxes and reduce government spending. c. change from one kind of currency to another. d. call for a new election. Answer: b 4. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: a. make loans to the government. b. make loans to foreigners. c. repay the national debt. d. repay loans to the Federal Reserve. Answer: b 5. In a small open economy, if domestic saving equals $ 50 billion and domestic investment equals $ 50 billion, then there is _______ and _______ net capital outflow. a. a trade deficit; $ 100 billion b. balanced trade; $0 c. a trade surplus; $ 100 billion d. balanced trade; $ 100 billion Answer: b 6. If the real exchange rate is high, foreign goods: a. and domestic goods are both relatively expensive. b. and domestic goods are both relatively cheap.
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ecn101_m2_ans - Part 1 Multiple Choices(2 points each 1 If...

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