Based on the Saving-Investment Diagram, if the difference between values G and E measures the net capital outflow, then ________. A) the difference between values G and E measures the trade surplus B) the difference between values H and D measures the trade surplus C) the domestic real interest rate is indicated by B D) […]
A turning point is A) a change in policy. B) a peak or a trough. C) a boom or a recession. D) a zero deviation from trend. ANSWER B
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 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. […]
The endogenous growth model predicts that A) there is convergence in incomes per capita across countries. B) output per capita is constant. C) rich countries will always become poor. D) differences in per capital incomes across countries persist forever. ANSWER D
Macroeconomic forecasting is made easier due to the fact that A) real GDP is variable about trend. B) the business cycle has a regular frequency. C) deviations from trend in real GDP are persistent. D) turning points are easy to predict. ANSWER C
How might asymmetric information cause a well-managed bank to be abandoned by its depositors? What will be an ideal response? ANSWER Bank depositors know little about their bank’s lending practices, except when a particular bank fails. Depositor’s at other banks have to wonder whether their bank is safe, which comes down to whether other […]
In an economy open to international trade where the interest rate at which saving and investment would be equal is ________ the world real interest rate ________. A) above; a trade surplus ensues B) below; a trade deficit ensues C) above; there is a net capital outflow D) below; there is a net capital inflow […]
Suppose the economy is just recovering from a recession and all signs now point to robust growth. How might this transition from recovery to expansion be reflected in the monetary policy curve? What will be an ideal response? ANSWER The monetary policy curve will have been relatively low, as policy makers kept interest rates […]
In the new Keynesian model, the ultimate effect on inflation of an anticipated aggregate demand shock is ________. A) less than if that event was unanticipated B) greater than if that event was unanticipated C) the same as would develop if that event had never occurred D) independent of whether or not that event is […]
Business cycle persistence refers to the property that A) real GDP is rarely exactly at trend. B) booms and recessions last a long time. C) when real GDP is above trend, it tends to stay above trend, and when it is below trend, it tends to stay below trend. D) business cycles are persistently hard […]
