Question 1

In the AD/AS framework, when the economy is in long-run equilibrium,

Accepted Answer

A)  inflation is occurring. 
B)  the entire labor force is employed. 
C)  actual prices are equal to expected prices. 
D)  actual levels of income and employment are less than the natural levels of income and Employment. 
A)  inflation is occurring. 
B)  the entire labor force is employed. 
C)  actual prices are equal to expected prices. 
D)  actual levels of income and employment are less than the natural levels of income and Employment.

Question 2

Other things equal, a rise in foreign interest rates leads to __________ in the home Country's equilibrium level of income and to __________ in the home country's price Level in the short run.

Accepted Answer

A)  a rise; a fall 
B)  a rise; no change 
C)  no change; a fall 
D)  a rise; a rise 
A)  a rise; a fall 
B)  a rise; no change 
C)  no change; a fall 
D)  a rise; a rise

Question 3

Expansionary aggregate demand-oriented fiscal policy leads, ceteris paribus, to

Accepted Answer

A)  a short-run fall in both income and the price level. 
B)  a short-run rise in income and a fall in the price level. 
C)  no change in the long-run equilibrium level of income and to an increase in the price Level. 
D)  both an increase in the long-run equilibrium level of income and an increase in the Price level. 
A)  a short-run fall in both income and the price level. 
B)  a short-run rise in income and a fall in the price level. 
C)  no change in the long-run equilibrium level of income and to an increase in the price Level. 
D)  both an increase in the long-run equilibrium level of income and an increase in the Price level.

Question 4

An expansion of the domestic money supply

Accepted Answer

A)  will increase aggregate demand under a fixed rate system. 
B)  will have no effect on aggregate demand under a flexible rate system. 
C)  will lead to an inflow of short-term capital under fixed exchange rates. 
D)  will lead to an expansion of aggregate demand and to upward pressure on domestic Prices under a flexible rate system. 
A)  will increase aggregate demand under a fixed rate system. 
B)  will have no effect on aggregate demand under a flexible rate system. 
C)  will lead to an inflow of short-term capital under fixed exchange rates. 
D)  will lead to an expansion of aggregate demand and to upward pressure on domestic Prices under a flexible rate system.

Question 5

Suppose that the government attempts to stimulate income and employment by using monetary policy. Explain how this will affect the economy in the short run and the long run. What must occur for this policy action to have a permanent impact on income and employment? How might this occur?

Accepted Answer

In the short run, using monetary policy

Question 6

The derivation of the aggregate demand curve (AD) in the closed economy builds upon the fact that, as the domestic price level rises, other things equal, the

Accepted Answer

A)  LM curve shifts to the left. 
B)  LM curve shifts to the right. 
C)  IS curve shifts to the left. 
D)  IS curve shifts to the right. 
A)  LM curve shifts to the left. 
B)  LM curve shifts to the right. 
C)  IS curve shifts to the left. 
D)  IS curve shifts to the right.

Question 7

When a country is in equilibrium on its long-run aggregate supply curve, the actual price level facing economic agents

Accepted Answer

A)  is greater than the price level expected by economic agents. 
B)  is equal to the price level expected by economic agents. 
C)  is less than the price level expected by economic agents. 
D)  is greater than, equal to, or less than the price level expected by economic agents - Cannot be determined without more information. 
A)  is greater than the price level expected by economic agents. 
B)  is equal to the price level expected by economic agents. 
C)  is less than the price level expected by economic agents. 
D)  is greater than, equal to, or less than the price level expected by economic agents - Cannot be determined without more information.

Question 8

In a situation of stagflation, the use of aggregate demand-oriented macro policy to address the problem of unemployment would, at least in the short run, __________ the price level and __________ the level of output in the economy.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

In the AD/AS framework, when the economy is in long-run equilibrium,

Other things equal, a rise in foreign interest rates leads to in the home Country's equilibrium level of income and to in the home country's price Level in the short run.

Expansionary aggregate demand-oriented fiscal policy leads, ceteris paribus, to

An expansion of the domestic money supply

Suppose that the government attempts to stimulate income and employment by using monetary policy. Explain how this will affect the economy in the short run and the long run. What must occur for this policy action to have a permanent impact on income and employment? How might this occur?

The derivation of the aggregate demand curve (AD) in the closed economy builds upon the fact that, as the domestic price level rises, other things equal, the

When a country is in equilibrium on its long-run aggregate supply curve, the actual price level facing economic agents

In a situation of stagflation, the use of aggregate demand-oriented macro policy to address the problem of unemployment would, at least in the short run, the price level and the level of output in the economy.

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

The Classical World of David Ricardo and Comparative Advantage

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

International Trade and the Developing Countries

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters

Exam 27: Prices and Output in the Open Economy: Aggregate Supply and Demand

In the AD/AS framework, when the economy is in long-run equilibrium,

Other things equal, a rise in foreign interest rates leads to __________ in the home Country's equilibrium level of income and to __________ in the home country's price Level in the short run.

Expansionary aggregate demand-oriented fiscal policy leads, ceteris paribus, to

An expansion of the domestic money supply

Suppose that the government attempts to stimulate income and employment by using monetary policy. Explain how this will affect the economy in the short run and the long run. What must occur for this policy action to have a permanent impact on income and employment? How might this occur?

The derivation of the aggregate demand curve (AD) in the closed economy builds upon the fact that, as the domestic price level rises, other things equal, the

When a country is in equilibrium on its long-run aggregate supply curve, the actual price level facing economic agents

In a situation of stagflation, the use of aggregate demand-oriented macro policy to address the problem of unemployment would, at least in the short run, __________ the price level and __________ the level of output in the economy.

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

The Classical World of David Ricardo and Comparative Advantage

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

International Trade and the Developing Countries

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters

Other things equal, a rise in foreign interest rates leads to in the home Country's equilibrium level of income and to in the home country's price Level in the short run.

In a situation of stagflation, the use of aggregate demand-oriented macro policy to address the problem of unemployment would, at least in the short run, the price level and the level of output in the economy.