practice_final - practice final Multiple Choice Identify...

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practice final Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default. An economic reason for her decision might be that a. she dislikes U.S. foreign policy. b. the Chilean bonds pay a higher rate of interest. c. the U.S. government is more stable than the Chilean government. d. None of the above provide an economic reason for buying the riskier bond. ____ 2. From 2000-2004 net capital outflow as a percent of GDP became a a. larger positive number. b. smaller positive number. c. larger negative number. d. smaller negative number ____ 3. Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels in a. foreign countries rise. b. the United States rises. c. both countries rise. d. both countries fall. ____ 4. Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area. Suppose a Mc- Donald’s Big Mac costs $3.50 in the United States and 2.45 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing power parity? a. Both the tall-latte and the Big Mac. b. Neither the tall-latte nor the Big Mac. c. The tall-latte but not the Big Mac. d. The Big Mac but not the tall-latte. ____ 5. Other things the same, a lower real interest rate decreases the quantity of a. loanable funds demanded. b. loanable funds supplied. c. domestic investment. d. net capital outflow.
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____ 6. Other things the same, an increase in the interest rate would tend to reduce a. domestic investment, but not net capital outflow. b. net capital outflow, but not domestic investment. c. both domestic investment and net capital outflow. d. neither domestic investment nor not capital outflow. ____ 7. In an open economy the supply of loanable funds comes from a. national saving. Demand comes from only domestic investment. b. national saving. Demand comes from domestic investment and net capital outflow. c. Only net capital outflow. Demand for loanable funds comes from national saving. d. domestic investment and net capital outflow. Demand for loanable funds comes from na- tional saving. ____ 8. Which of the following would make both the equilibrium interest rate and the equilibrium quantity of loanable funds decrease? a. The demand for loanable funds shifts right. b. The demand for loanable funds shifts left. c. The supply of loanable funds shifts right. d. The supply of loanable funds shifts left. ____ 9.
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This note was uploaded on 06/11/2008 for the course ECON 201 taught by Professor Salehie during the Spring '08 term at University of Washington.

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practice_final - practice final Multiple Choice Identify...

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