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 If the US dollar appreciates against the Mexican PesoQuestion 17 options:

US exports to Mexico become less expensive for Mexicans


US exports to Mexico become more expensive for Mexicans


Mexican imports to the US become more expensive for Americans


The cost of Mexican imports to the US is not affected

Question 18 (2 points)

 


If a nation's aggregate expenditures are $850 billion but its GDP is only $800 billion, then

Question 18 options:


Firms reduced their inventories


Exports exceed imports


Firms added to their inventories


Imports exceed exports

Question 19 (2 points)

 








Monetarism asserts that inflation is always a result of growth in

Question 19 options:


Potential GDP


Nominal wages


The money supply


The nominal interest rate

Question 20 (2 points)

 








In an economy with DEFLATION of 2%, the real interest rate is 5%. What is the nominal interest rate?

Question 20 options:


10%


3%


7%


2%

Question 21 (2 points)

 








An economy produced 200 pencils last year, selling each pencil for $1.00. The same economy produced 220 pencils this year, selling each pencil for $2.00. What is the growth rate in real GDP?

Question 21 options:


40%


10%


20%


100%

Question 22 (2 points)

 








Consider a simple Keynesian model where the MPC is 0.75. The government can make a $400 billion increase in GDP by spending an additional

Question 22 options:


$1.6 trillion


$300 billion


$400 billion


$100 billion

Question 23 (2 points)

 








Rachel receives a one-time positive income shock (e.g. a lottery prize). How could we use data from this experiment to test different models of consumption spending?

Question 23 options:


Rachel's long-run MPC would be zero under consumption smoothing


Rachel's short-run MPC would be lower in the Keynesian model than under consumption smoothing


Rachel's short-run MPC is the same regardless of the model of consumption spending


Rachel's short-run MPC would be higher in the Keynesian model than under consumption smoothing

Question 24 (2 points)

 








All else equal, the IS/LM spending multiplier

Question 24 options:


Is equal to the Keynesian spending multiplier


Is smaller than the Keynesian spending multiplier


Could be larger or smaller than the Keynesian spending multiplier


Is larger than the Keynesian spending multiplier

Question 25 (2 points)

 








In the IS/LM model, what is the effect of a reduction in the price level P?

Question 25 options:


Y rises and r falls


Y falls and r falls


Y rises and r rises


Y falls and r rises

Question 26 (2 points)

 








What is the relationship between government spending and long-run economic growth?

Question 26 options:


Government spending improves economic growth


Government spending reduces economic growth


Government spending has no impact on economic growth


There is no simple answer without more information

Question 27 (2 points)

 








Stagflation (simultaneous high inflation and high unemployment) is a result of

Question 27 options:


Increases in AD


Reductions in AS


Reductions in AD


Increases in AS

Question 28 (2 points)

 








Next year, 3 million existing jobs will be eliminated in the economy and only 2 million new jobs will be created. Nevertheless, the unemployment rate will decline if

Question 28 options:


More than 1 million people join the labor force


Fewer than 3 million people leave the labor force


More than 3 million people join the labor force


More than 1 million people leave the labor force

Question 29 (2 points)

 








Fluctuations in consumption spending are ___ than GDP fluctuations. Fluctuations in investment spending are ___ than GDP fluctuations

Question 29 options:


more volatile...more volatile


more stable...more stable


more stable...more volatile


more volatile...more stable

Question 30 (2 points)

 








Wealth inequality tends to widen over the long-run when

Question 30 options:


The ratio of capital assets to GDP falls


The population growth rate exceeds the return on capital


Inheritances make up a growing fraction of GDP


The return on capital is greater than the rate of economic growth

Question 31 (2 points)

 








Modern endogenous growth theory asserts that the economy actually has unlimited growth potential because of the unlimited potential of

Question 31 options:


Capital


Expansionary fiscal policy


Monetary increases


Knowledge-driven technological change

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