Unit 1-2
Having the insufficient balance on your card to make a purchase is an example of...?
Scarcity
Identify the 2 multipliers
Tax Multiplier, (Expenditure or Spending) Multiplier
Which of the following is NOT in M1:
A. Currency
B. Checkable Deposits
C. Timed Deposits
D. Savings Deposit
That's in M2.
An increase in the expected inflation rate will cause which of the following?
A rightward shift in the short-run Phillips curve
Country X
Exports 235M
Imports 300M
Net Income Abroad 20M
Net Unilateral Transfers -15M
The table shows some of Country X’s balance of payments data for 2018. Which of the following is true about Country X’s current account balance and financial capital flows?
Country X has a current account deficit of $60 million and has net financial capital inflows.
Name the 4 Economic resources
Land, Labor, Capital, Entrepreneurship
If the government taxes business owners, what will happen on the Aggregate Demand and Supply Curve?
The Aggregate Supply curve will shift to the left or decrease.
What is adjusted by actual inflation rate?
Real Interest Rates
The economy is at long-run equilibrium. The central bank contracts money supply. What happens to real output?
No change in the long run.
Which of the following will happen to aggregate demand in the United States if the United States dollar appreciates in foreign exchange markets?
Aggregate demand will decrease because net exports will decrease.
China makes 250 trucks and 50 tons of coffee
Malaysia makes 300trucks and 100 tons of coffee
What Terms of trade would be mutually beneficial for both countries?
1 ton of coffee for 4 trucks
Country A is currently at long-run equilibrium. If its government practices a contractionary policy, explain the transmission that will follow:
Consumption and Investment go down so AD decreases, leading to an increase of unemployment, RDGP goes down, Price Levels go down, inflation goes down.
Someone takes a 9% one year fixed rate loan. They expect to pay a real interest rate of 5%. If the person only paid 3% interest rate, what is the actual inflation rate?
9-3= 6%
Actual Inflation = Nominal - Actual Interest
Identify the quantity theory of money
Price level will increase at the same rate as the money supply.
Assuming the government of a country imposes a tariff on its imports of foreign goods, what is the likely effect on the country’s currency in foreign exchange markets?
The supply of the currency will decrease and the currency will appreciate.
What are the 4 parts that are included in GDP?
Consumption Spending, Investment Spending, Net Exports, Government Spending.
Identify the formulas of the 2 multipliers
Spending/Expenditure Multiplier: 1/1-MPC or 1/MPS
Someone deposits $50 at the bank. Because of this, required reserves is $10. No excess reserves. What is maximum change in the money supply because of this $50 deposit?
10/50 = 0.2
1/0.2 =5 (Money Multiplier)
5 X 40 = 200
Suppose nominal GDP is $25 million, the price level is 1.25, and the money supply is $10 million. What is real GDP and the velocity of money according to the quantity theory of money?
Responses
Real GDP is $20 million, and the velocity of money is 2.5.
How will an increase in private savings in the United States most likely affect financial capital flows and the value of the dollar in foreign exchange markets?
The United States will experience financial capital outflows, and the dollar will depreciate.
What type of unemployment is the following:
Being laid off as a cash register due to automated check-out.
Structural Unemployment
If the marginal propensity to consume is 0.75, what will happen if government spending increases by 100 billion dollars. Explain and Answer.
Increase of $400B because 1/1-MPC = 1/0.25 = 4
4 times 100B = 400B
Identify 2 policies that would restore full-employment output for a country that is in a recession.
Decrease Taxes
Decrease Administered Rates
Increase Government Spending
Suppose a country's government increases the allowable deduction for individual retirement accounts per person. Holding all other influences constant, how would this policy action affect the country’s loanable funds market, its production possibilities curve, and its long-run aggregate supply (LRAS) curve?
Private savings would increase and real interest rates would decrease in the loanable funds market, the nation’s production possibilities curve would shift outward, and its LRAS curve would shift to the right.
Which of the following will most likely cause an inflow of financial capital to Canada?
An increase in the Canadian federal budget deficit