Economics 1B Quiz 5 S2001

Economics 1B Quiz 5 S2001 - Economics 1B Quiz #5 Department...

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Economics 1B Quiz #5 Department of Economics Professor Siegler UC Davis Spring 2011 1. In the spending allocation model, which of the following best explains what will happen if the government purchases share of GDP falls? a. The net export share of GDP will fall with it. b. The consumption share of GDP will fall with it. c. The investment, consumption, and/or net export share of GDP will rise. d. The investment share of GDP will fall with it. e. It is not clear whether any of the other shares will change since we don't know what happens to GDP. ANS: C 2. Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2011 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2011 would be ____ and imports of German sweaters would ____. a. $25; increase b. $25; decrease c. $100; increase d. $100; decrease e. $50; remain constant ANS: A 3. A higher real interest rate a. causes the exchange rate to increase, which causes the share of net exports to rise. b. causes the exchange rate to fall, which results in a decline in the share of net exports. c. causes the exchange rate to fall, which causes the share of net exports to rise. d. causes the exchange rate to increase, which results in a decline in the share of net exports. e. has an uncertain effect on both exchange rates and the share of net exports. ANS: D
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4. Which of the following best explains what is meant by the term “crowding out”? a. An increase in government purchases causes interest rates to rise and results in a decline in investment expenditures. b.
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This note was uploaded on 02/07/2012 for the course ECON 1b taught by Professor Sheffrin during the Spring '07 term at UC Davis.

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Economics 1B Quiz 5 S2001 - Economics 1B Quiz #5 Department...

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