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18 Cards in this Set
- Front
- Back
At a price level below equilibrium people want to hold
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less money than the Fed has created, so spending would rise.
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Under the assumptions of quantity theory, if the money supply increases by 3 percentage points which of the following increases by 3 percentage points?
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the price level but not real GDP
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Crystal borrows money at a fixed nominal interest rate expecting inflation to be 2%. However, inflation is 3%. The real interest rate is
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less than expected so wealth is transferred from the lender to Crystal.
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Higher inflation makes relative prices
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vary more than they otherwise would making markets less able to allocate resources to their best use.
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Nearly all hyperinflations follow the same pattern: high government spending is financed by increases in the money supply. T?F
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True
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As inflation rises, people choose to hold less money. The resources used to reduce money holdings are called shoeleather costs.
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True
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Suppose the price of the product you sell stays the same, but the prices of other goods and services rise, this means that the
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Real value of your product fell.
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As the price level rises, the value of money rises.
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False
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purchasing-power parity hold?
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the nominal exchange rate is 12 pesos per dollar, the price in Mexico is 36 pesos, and the price in the U.S. is $3
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Improvements in transportation help to explain the increase in both U.S. imports and exports relative to GDP.
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True
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A mutual fund in China buys $100,000 of bonds sold by a U.S. corporation. This is an example of
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-foreign portfolio investment. By itself it reduces U.S. net capital outflow
-Foreign portfolio investment is when a foreigner purchases domestic assets but does not actively manage the business she funds. |
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A country buys $560 billion of goods and services abroad and sells $610 billion of goods and services abroad. Its exports are
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-610 billion and it has a trade surplus of $50 billion
-A country has a trade surplus when its net exports, which equals exports - imports, are greater than zero. |
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correct way to find the real exchange rate?Formula
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A U.S. retail store uses dollars to purchase yuan (Chinese currency) it then uses all of these yuan to buy toys from a Chinese firm. Overall these transactions have
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decreased U.S. net exports and decreased U.S. net capital outflow.
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If a country's real GDP is 10,000, its consumption is 6,500, its government expenditures are 2,000 and its net exports are 500 what are saving and net capital outflow?
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foreign portfolio investment. By itself it reduces U.S. net capital outflow.
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Other things the same, if the U.S. dollar appreciates, then U.S. goods become
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more expensive relative to foreign goods, so U.S. net exports decrease.
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Purchasing-power parity means that the prices of goods in terms of local currencies must be the same across countries.
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False
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If the U.S. inflation rate is positive and higher than the inflation rate in Australia over the next few years then
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the U.S. dollar will buy fewer goods in the U.S. and buy fewer Australian dollars in the market for foreign currency exchange.
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