Question 1

Including investment and production in the two-good,two-period model with trade

Accepted Answer

A)  allows the country to equalize absorption and output demand. 
B)  renders terms of trade endogenous. 
C)  allows the country to react to changes in the interest rate. 
D)  allows the government to run budget deficits. 
A)  allows the country to equalize absorption and output demand. 
B)  renders terms of trade endogenous. 
C)  allows the country to react to changes in the interest rate. 
D)  allows the government to run budget deficits. C

Question 2

The behavior of investment and real GDP in the United States after the 1990s

Accepted Answer

A)  is not consistent with the two-period model with production. 
B)  is consistent with the effects of an increase in the government deficit in the two-period model with production. 
C)  is consistent with the effects of an increase in optimism about future total factor productivity in the two-period model with production. 
D)  is consistent with the effects of a decrease in the government deficit in the two-period model with production. 
A)  is not consistent with the two-period model with production. 
B)  is consistent with the effects of an increase in the government deficit in the two-period model with production. 
C)  is consistent with the effects of an increase in optimism about future total factor productivity in the two-period model with production. 
D)  is consistent with the effects of a decrease in the government deficit in the two-period model with production. C

Question 3

In a two-period model,holding everything else constant,an increase in government spending

Accepted Answer

A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus. 
A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus. B

Question 4

In a two-period model with default,if the nation defaults on its debts in the future period

Accepted Answer

A)  there are no consequences. 
B)  it bears a cost v. 
C)  collateral is seized. 
D)  it faces a higher interest rate. 
A)  there are no consequences. 
B)  it bears a cost v. 
C)  collateral is seized. 
D)  it faces a higher interest rate.

Question 5

In a two-period model with default,if the market interest rate is low,then

Accepted Answer

A)  default is more likely 
B)  there is no effect on the nation's default decision. 
C)  default is less likely. 
D)  the income effect is larger than the substitution effect. 
A)  default is more likely 
B)  there is no effect on the nation's default decision. 
C)  default is less likely. 
D)  the income effect is larger than the substitution effect.

Question 6

In a two-period model,holding everything else constant,an increase in future taxes

Accepted Answer

A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus, as long as Ricardian equivalence holds. 
A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus, as long as Ricardian equivalence holds.

Question 7

The current account surplus is not

Accepted Answer

A)  the trade balance. 
B)  the excess of national savings over investment. 
C)  private saving less government deficit. 
D)  output less taxes and trade deficit. 
A)  the trade balance. 
B)  the excess of national savings over investment. 
C)  private saving less government deficit. 
D)  output less taxes and trade deficit.

Question 8

In a two-period model with production,an anticipated future increase in domestic total factor productivity

Accepted Answer

A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  has no effect on domestic output and increases the current account surplus. 
D)  has no effect on domestic output and decreases the current account surplus. 
A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  has no effect on domestic output and increases the current account surplus. 
D)  has no effect on domestic output and decreases the current account surplus.

Question 9

In a two-period model with production,a shock that shifts the output demand curve to the right,and does not shift the output supply curve

Accepted Answer

A)  causes an increase in the current account surplus and an increase in real output. 
B)  causes no change in the current account surplus and an increase in real output. 
C)  causes a decrease in the current account surplus and no change in real output. 
D)  causes a decrease in the current account surplus and an increase in real output. 
A)  causes an increase in the current account surplus and an increase in real output. 
B)  causes no change in the current account surplus and an increase in real output. 
C)  causes a decrease in the current account surplus and no change in real output. 
D)  causes a decrease in the current account surplus and an increase in real output.

Question 10

In a two-period model,holding everything else constant,an increase in current-period income

Accepted Answer

A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus. 
A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus.

Question 11

In a two-period model with production,an increase in the world real interest rate

Accepted Answer

A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus. 
A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus.

Question 12

In the two-period model with production,an increase in anticipated future total factor productivity

Accepted Answer

A)  has no effect on domestic output, but reduces the current account surplus. 
B)  increases domestic output and increases the current account surplus. 
C)  reduces domestic output, and increases the current account surplus. 
D)  has no effect on domestic output, but increases the current account surplus. 
A)  has no effect on domestic output, but reduces the current account surplus. 
B)  increases domestic output and increases the current account surplus. 
C)  reduces domestic output, and increases the current account surplus. 
D)  has no effect on domestic output, but increases the current account surplus.

Question 13

When current account deficits are used to finance investment spending,such deficits may be self-correcting because

Accepted Answer

A)  they promote more responsible government policies. 
B)  the resulting increase in the capital stock over time shifts the output supply curve to the right. 
C)  the resulting increase in the capital stock over time shifts the output demand curve to the right. 
D)  the resulting increase in national indebtedness increases labor demand. 
A)  they promote more responsible government policies. 
B)  the resulting increase in the capital stock over time shifts the output supply curve to the right. 
C)  the resulting increase in the capital stock over time shifts the output demand curve to the right. 
D)  the resulting increase in national indebtedness increases labor demand.

Question 14

In a two-period model with production,a decrease in the world real interest rate

Accepted Answer

A)  increases the current account surplus and increases real output. 
B)  reduces the current account surplus and increases real output. 
C)  increases the current account surplus and reduces real output. 
D)  reduces the current account surplus and reduces real output. 
A)  increases the current account surplus and increases real output. 
B)  reduces the current account surplus and increases real output. 
C)  increases the current account surplus and reduces real output. 
D)  reduces the current account surplus and reduces real output.

Question 15

In a two-period model with production,a permanent increase in domestic government spending

Accepted Answer

A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus. 
A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus.

Question 16

In a two-period model,as long as wealth effects are small,an increase in the world real interest rate

Accepted Answer

A)  increases consumption and increases the current account surplus. 
B)  increases consumption and decreases the current account surplus. 
C)  decreases consumption and increases the current account surplus. 
D)  decreases consumption and decreases the current account surplus. 
A)  increases consumption and increases the current account surplus. 
B)  increases consumption and decreases the current account surplus. 
C)  decreases consumption and increases the current account surplus. 
D)  decreases consumption and decreases the current account surplus.

Question 17

In a two-period model with production,an increase in current domestic total factor productivity

Accepted Answer

A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus. 
A)  increases domestic output and increases the current account surplus. 
B)  increases domestic output and decreases the current account surplus. 
C)  decreases domestic output and increases the current account surplus. 
D)  decreases domestic output and decreases the current account surplus.

Question 18

In a two-period model with default,the nation defaults on its debt in the current period if

Accepted Answer

A)  the market interest rate is high, the cost of defaulting is low, and national debt is high. 
B)  the market interest rate is low, the cost of defaulting is low, and national debt is high. 
C)  the market interest rate is high, the cost of defaulting is high, and national debt is low. 
D)  the market interest rate is low, the cost of defaulting is high, and national debt is low. 
A)  the market interest rate is high, the cost of defaulting is low, and national debt is high. 
B)  the market interest rate is low, the cost of defaulting is low, and national debt is high. 
C)  the market interest rate is high, the cost of defaulting is high, and national debt is low. 
D)  the market interest rate is low, the cost of defaulting is high, and national debt is low.

Question 19

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

Accepted Answer

A)  increase the current account surplus. 
B)  decrease the current account surplus. 
C)  have no effect on the current account surplus. 
D)  have unpredictable effects on the current account surplus. 
A)  increase the current account surplus. 
B)  decrease the current account surplus. 
C)  have no effect on the current account surplus. 
D)  have unpredictable effects on the current account surplus.

Question 20

A current account deficit is

Accepted Answer

A)  good because a country wants to own the others. 
B)  bad because every country should have a surplus. 
C)  good because it allows to smooth consumption. 
D)  it does not matter. 
A)  good because a country wants to own the others. 
B)  bad because every country should have a surplus. 
C)  good because it allows to smooth consumption. 
D)  it does not matter.

Including investment and production in the two-good,two-period model with trade

The behavior of investment and real GDP in the United States after the 1990s

In a two-period model,holding everything else constant,an increase in government spending

In a two-period model with default,if the nation defaults on its debts in the future period

In a two-period model with default,if the market interest rate is low,then

In a two-period model,holding everything else constant,an increase in future taxes

The current account surplus is not

In a two-period model with production,an anticipated future increase in domestic total factor productivity

In a two-period model with production,a shock that shifts the output demand curve to the right,and does not shift the output supply curve

In a two-period model,holding everything else constant,an increase in current-period income

In a two-period model with production,an increase in the world real interest rate

In the two-period model with production,an increase in anticipated future total factor productivity

When current account deficits are used to finance investment spending,such deficits may be self-correcting because

In a two-period model with production,a decrease in the world real interest rate

In a two-period model with production,a permanent increase in domestic government spending

In a two-period model,as long as wealth effects are small,an increase in the world real interest rate

In a two-period model with production,an increase in current domestic total factor productivity

In a two-period model with default,the nation defaults on its debt in the current period if

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

A current account deficit is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work-Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption-Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters

Exam 15: International Trade in Goods and Assets

Including investment and production in the two-good,two-period model with trade

The behavior of investment and real GDP in the United States after the 1990s

In a two-period model,holding everything else constant,an increase in government spending

In a two-period model with default,if the nation defaults on its debts in the future period

In a two-period model with default,if the market interest rate is low,then

In a two-period model,holding everything else constant,an increase in future taxes

The current account surplus is not

In a two-period model with production,an anticipated future increase in domestic total factor productivity

In a two-period model with production,a shock that shifts the output demand curve to the right,and does not shift the output supply curve

In a two-period model,holding everything else constant,an increase in current-period income

In a two-period model with production,an increase in the world real interest rate

In the two-period model with production,an increase in anticipated future total factor productivity

When current account deficits are used to finance investment spending,such deficits may be self-correcting because

In a two-period model with production,a decrease in the world real interest rate

In a two-period model with production,a permanent increase in domestic government spending

In a two-period model,as long as wealth effects are small,an increase in the world real interest rate

In a two-period model with production,an increase in current domestic total factor productivity

In a two-period model with default,the nation defaults on its debt in the current period if

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

A current account deficit is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work-Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption-Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters