ECON 252 Final - Fall 2010

ECON 252 Final- - 1 Suppose the US government imposes an import quota on cars from Japan How does this trade policy affect the real exchange rate

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1. Suppose the US government imposes an import quota on cars from Japan. How does this trade policy affect the real exchange rate and net exports? a) The real exchange rate rises, and net exports increase. b) The real exchange rate rises, and net exports remain unchanged. c) The real exchange rate falls, and net exports increase. d) The real exchange rate falls, and net exports remain unchanged. 2. The long run effect of an increase in pessimism about future business conditions is to lower a) the price level and leave the real output unchanged. b) real output and raise the price level. c) real output and leave the price level unchanged. d) both real output and the price level. 3. The long run aggregate supply curve will shift to the right if the economy experiences: a) a decrease in population. b) decrease in the expected price level. c) a decrease in net exports d) Technological progress 4. An increase in the government budget deficit will cause real interest rates in the U.S. to _____ and investment in plant and equipment in the U.S. to ______. a) rise; rise b) rise; fall c) fall; rise d) fall; fall 5. An increase in the government budget deficit will cause a real ________ of the U.S. dollar against foreign currencies and a(n) _______ in net capital outflows from the U.S. a) appreciation; increase c) depreciation; increase b) appreciation; decrease d) depreciation; decrease 6. Which of the following is not one of the reasons for the downward slope of the AD curve? a) Wealth effects b) Interest-rate effects c) Exchange-rate effects d) Sticky wages and prices 7. The real interest rate equals a) the nominal rate minus the rate of inflation. b) the nominal rate divided by the rate of inflation. c) the nominal rate minus the price level. d) the nominal rate divided by the price level. 8. A real depreciation of the dollar can be explained by a) an increase in saving by U.S. households. b) an increase in perceived risk of U.S. assets relative to foreign assets. c) a decrease in the government budget deficit. d) All of the above. Econ 252 BLUE Final Page 1 of 5 Fall 2010
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9. Suppose the US economy is in recession. To stimulate the economy, the economic advisor to the President proposes a policy of increasing government spending by $60 billion. She argues that this will shift the AD curve rightward by $240 billion. If she is correct, the marginal propensity to consume equals: a) 0.25 b) 0.50 c) 0.75 d) 0.80 10. Suppose the rate of inflation in China is 5 percent and the rate of inflation in Japan is 3 percent. Assuming purchasing power parity we would expect
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This note was uploaded on 12/06/2011 for the course ECON 252 taught by Professor Robertholand during the Fall '08 term at Purdue University-West Lafayette.

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ECON 252 Final- - 1 Suppose the US government imposes an import quota on cars from Japan How does this trade policy affect the real exchange rate

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