Question 1

The aggregate demand for home input can be written as a function of: I.Real exchange rate.
II.Government spending.
III.Disposable income.
A)I only
B)III only
C)I and III
D)II and III
E)I,II,and III

Accepted Answer

The aggregate demand for home input is influenced by the real exchange rate, government spending, and disposable income. The real exchange rate affects the competitiveness of home goods versus foreign goods, government spending directly influences aggregate demand, and disposable income affects consumer spending.

Question 2

What have we assumed when we conclude that a real depreciation of the currency improves the current account?
A)The volume effect outweighs the value effect.
B)The value effect outweighs the volume effect.
C)All else equal and the volume effect outweighs the value effect.
D)All else equal and the value effect outweighs the volume effect.
E)All else equal and the volume effect equals the value effect.

Accepted Answer

The answer of What have we assumed when we conclude...

Question 3

What is the real exchange rate? What is its relationship to the current account?

Accepted Answer

The answer of What is the real exchange rate? What...

Question 4

How does a rise in real income affect aggregate demand?
A)Y ↑ implies Yd ↑ implies Im ↑ implies CA ↓ implies AD ↓,but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by more.
B)Y ↑ implies Yd ↑ implies Im ↓ implies CA ↓ implies AD ↓,but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by more.
C)Y ↑ implies Yd ↑ implies Im ↑ implies CA ↑ implies AD ↑,and Y ↑ implies Yd ↑ implies C ↑ implies AD ↑.
D)Y ↑ implies Yd ↑ implies Im ↑ implies CA ↓ implies AD ↓,but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by less.
E)Y ↑ implies Yd ↑ implies Im ↓ implies CA ↓ implies AD ↓,but Y ↑ implies Yd ↑ implies C ↑ implies AD ↑ by less.

Accepted Answer

A rise in real income (Y) increases disposable income (Yd), which leads to an increase in consumption (C) and imports (Im). While increased imports can worsen the current account (CA), leading to a potential decrease in aggregate demand (AD), the increase in consumption has a more significant positive effect on AD, causing it to increase overall.

Question 5

Which one of the following statements is the MOST accurate?
A)A rise in domestic real income raises aggregate demand for home output.
B)A rise in domestic real income decreases aggregate demand for home output because of the increase demand for import.
C)A rise in domestic real income keeps aggregate demand for home output at the same level.
D)It is difficult to tell whether a rise in domestic real income affects positively or negatively aggregate demand for home output.
E)A rise in domestic real income decreases aggregate demand for home output because the CA is raised.

Accepted Answer

When domestic real income rises, people have more money to spend, which increases their demand for goods and services including home output. This increase in demand leads to a rise in aggregate demand for home output. Option B is incorrect because an increase in real income does not necessarily mean an increase in demand for imports. Option C is incorrect because a rise in real income will increase demand for home output. Option D and E are incorrect because a rise in real income will increase aggregate demand for home output, and the current account balance may or may not be affected depending on the specific economic conditions.

Question 6

Explain how does an increase in the real exchange rate affect exports and imports?

Accepted Answer

The answer of Explain how does an increase in the...

Question 7

Explain the difference between the following two expressions: Y = C(Y^d)+ I + G + CA(EP /P,Y^d)and Y = C + I +G + CA

Accepted Answer

The answer of Explain the difference between the following two...

Question 8

Please discuss the volume effect and the value effect in regards to how the current account will move given a change in the real exchange rate.

Accepted Answer

The answer of Please discuss the volume effect and the...

Question 9

Fill in the following table.

Accepted Answer

The answer of Fill in the following table. ...

Question 10

What is an accurate implication resulting from an increase in income?
A)an increase in exchange rate
B)a decrease in exchange rate
C)a decrease in consumption
D)a decrease in output
E)an increase in consumption

Accepted Answer

An increase in income typically leads to an increase in consumption, since people have more disposable income to spend on goods and services.

Question 11

Monetary expansion causes the current account balance to increase in the short run.Discuss.Is the same the case for fiscal expansion?

Accepted Answer

The answer of Monetary expansion causes the current account balance...

Question 12

Find the real exchange rate for the following case: Assume that the representative basket of European goods and services costs 40 euros and the representative U.S.basket costs $50,and the dollar/euro exchange rate is $0.90 per euro,then the price of the European basket in terms of U.S.basket is ________.

Accepted Answer

The answer of Find the real exchange rate for the...

Question 13

Which one of the following statements is MOST accurate?
A)Factors of production can only be over-employed in the short run.
B)Factors of production can only be under-employed in the short run.
C)Factors of production can be over- or under-employed in the long run.
D)Factors of production can be over- or under-employed in the short run.
E)Factors of production are fully employed in the short run.

Accepted Answer

Factors of production can be over- or under-employed in the short run, depending on the level of demand for goods and services. In the long run, the supply of factors of production can be adjusted to meet demand, but in the short run, some factors may be more difficult to adjust than others, leading to over- or under-employment.

Question 14

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S.basket costs $125,and the dollar/euro exchange rate is $0.75 per euro,then the price of the European basket in terms of U.S.basket is:

Accepted Answer

The answer of Find the real exchange rate for the...

Question 15

Explain how does a rise in real income affect aggregate demand?

Accepted Answer

The answer of Explain how does a rise in real...

Question 16

A country's domestic currency's real exchange rate,q,is best described by
A)the price of similar goods in the same market.
B)the price of the domestic basket in terms of the foreign one.
C)the price of a domestic basket.
D)the price of the foreign basket in terms of the domestic basket.
E)the price of different goods baskets in the same market.

Accepted Answer

The answer of A country's domestic currency's real exchange rate,q,is...

Question 17

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S.basket costs $90,and the dollar/euro exchange rate is $0.80 per euro,then the price of the European basket in terms of U.S.basket is:

Accepted Answer

The answer of Find the real exchange rate for the...

Question 18

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S.basket costs $200,and the dollar/euro exchange rate is $1.20 per euro,then the price of the European basket in terms of U.S.basket is:

Accepted Answer

The answer of Find the real exchange rate for the...

Question 19

Fill in the following table.

Accepted Answer

The answer of Fill in the following table. ...

Question 20

In the short-run,any rise in the real exchange rate,EP  /P,will cause
A)an upward shift in the aggregate demand function and a reduction in output.
B)an upward shift in the aggregate demand function and an expansion of output.
C)a downward shift in the aggregate demand function and an expansion of output.
D)an downward shift in the aggregate demand function and a reduction in output.
E)an upward shift in the aggregate demand function but leaves output intact.

Accepted Answer

The answer of In the short-run,any rise in the real...

Quiz 17: Output and the Exchange Rate in the Short Run

The aggregate demand for home input can be written as a function of: I.Real exchange rate. II.Government spending. III.Disposable income.

What have we assumed when we conclude that a real depreciation of the currency improves the current account?

What is the real exchange rate? What is its relationship to the current account?

How does a rise in real income affect aggregate demand?

Which one of the following statements is the MOST accurate?

Explain how does an increase in the real exchange rate affect exports and imports?

Explain the difference between the following two expressions: Y = C(Yd)+ I + G + CA(EP /P,Yd)and Y = C + I +G + CA

Please discuss the volume effect and the value effect in regards to how the current account will move given a change in the real exchange rate.

Fill in the following table.

What is an accurate implication resulting from an increase in income?

Monetary expansion causes the current account balance to increase in the short run.Discuss.Is the same the case for fiscal expansion?

Which one of the following statements is MOST accurate?

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S.basket costs $125,and the dollar/euro exchange rate is $0.75 per euro,then the price of the European basket in terms of U.S.basket is:

Explain how does a rise in real income affect aggregate demand?

A country's domestic currency's real exchange rate,q,is best described by

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S.basket costs $90,and the dollar/euro exchange rate is $0.80 per euro,then the price of the European basket in terms of U.S.basket is:

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S.basket costs $200,and the dollar/euro exchange rate is $1.20 per euro,then the price of the European basket in terms of U.S.basket is:

Fill in the following table.

In the short-run,any rise in the real exchange rate,EP /P,will cause

Explain the difference between the following two expressions: Y = C(Y^d)+ I + G + CA(EP /P,Y^d)and Y = C + I +G + CA