Question 1

The supply of public savings in the economy is equal to

Accepted Answer

A)  tY* - G 
B)  Y* - C0 - Cy(1 - t)Y*. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r. 
A)  tY* - G 
B)  Y* - C0 - Cy(1 - t)Y*. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r.

Question 2

If the real interest rate ________, foreign saving will _________.

Accepted Answer

A)  increases; decrease 
B)  decreases; decrease 
C)  decreases; increase 
D)  increases; remain the same 
A)  increases; decrease 
B)  decreases; decrease 
C)  decreases; increase 
D)  increases; remain the same

Question 3

The equilibrium condition in the financial markets is

Accepted Answer

A)  household saving minus investment spending plus tax revenue minus government spending equals net exports. 
B)  household saving plus government savings plus net exports equals investment spending. 
C)  tax revenue minus government spending equals net exports. 
D)  private saving plus investment spending plus tax revenue minus government spending equals net exports. 
A)  household saving minus investment spending plus tax revenue minus government spending equals net exports. 
B)  household saving plus government savings plus net exports equals investment spending. 
C)  tax revenue minus government spending equals net exports. 
D)  private saving plus investment spending plus tax revenue minus government spending equals net exports.

Question 4

The supply of international savings in the economy is equal to

Accepted Answer

A)  tY*-G0. 
B)  (1-t-(1-t)Cy)Y*-C0. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r. 
A)  tY*-G0. 
B)  (1-t-(1-t)Cy)Y*-C0. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r.

Question 5

If domestic businesses become more optimistic about the future, r would equal

Accepted Answer

A)     Io x (Ir + X      r ) 
B)      Io / (Ir + X     r ) 
C)      Io x (Ir - X    r ) 
D)      -Io / (Ir + X     r ) 
A)     Io x (Ir + X      r ) 
B)      Io / (Ir + X     r ) 
C)      Io x (Ir - X    r ) 
D)      -Io / (Ir + X     r )

Question 6

If domestic businesses become more optimistic about the future,

Accepted Answer

A)  Io would increase and r would decrease. 
B)  Io would increase and r would increase. 
C)  Io would decrease and r would decrease. 
D)  Io would decrease and r would increase. 
A)  Io would increase and r would decrease. 
B)  Io would increase and r would increase. 
C)  Io would decrease and r would decrease. 
D)  Io would decrease and r would increase.

Question 7

The interest rate __________ in response to ________ in government purchases because

Accepted Answer

A)  increases; an increase; more government purchases means more government savings. 
B)  increases; an increase; more government purchases means less government savings. 
C)  decreases; an increase; more government purchases means less government savings. 
D)  decreases; a decrease; less government purchases means less government savings. 
A)  increases; an increase; more government purchases means more government savings. 
B)  increases; an increase; more government purchases means less government savings. 
C)  decreases; an increase; more government purchases means less government savings. 
D)  decreases; a decrease; less government purchases means less government savings.

Question 8

The change in consumption spending (     C) which occurs as a result of a change in government purchases (     G) is equal to

Accepted Answer

A)  Cy x   G 
B)  -Cy x   G 
C)  -Cy x (1-t) x   Y 
D)  0 
A)  Cy x   G 
B)  -Cy x   G 
C)  -Cy x (1-t) x   Y 
D)  0

Question 9

If the change in government purchases is denoted by   G, the resulting change in r (   r) would be equal to

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

In the flexible-price model, a decrease in the tax rate will result in

Accepted Answer

A)  an increase in potential output. 
B)  an increase in household saving. 
C)  a increase in investment expenditures. 
D)  a decrease in the interest rate. 
A)  an increase in potential output. 
B)  an increase in household saving. 
C)  a increase in investment expenditures. 
D)  a decrease in the interest rate.

Question 11

The equilibrium condition in the financial markets is

Accepted Answer

A)  household saving equals investment spending. 
B)  household saving plus government saving minus net exports equals investment spending. 
C)  household saving plus government saving plus net exports equals investment spending. 
D)  government spending equals tax revenue. 
A)  household saving equals investment spending. 
B)  household saving plus government saving minus net exports equals investment spending. 
C)  household saving plus government saving plus net exports equals investment spending. 
D)  government spending equals tax revenue.

Question 12

The flow-of-funds through __________ is key to understanding why the real interest rate brings the economy to equilibrium.

Accepted Answer

A)  labor markets 
B)  goods and services markets 
C)  financial markets 
D)  foreign exchange 
A)  labor markets 
B)  goods and services markets 
C)  financial markets 
D)  foreign exchange

Question 13

The equilibrium interest rate will ________ if ___________.

Accepted Answer

A)  increase; the foreign real interest rate increases 
B)  decrease; the foreign real interest rate increases 
C)  increases; foreign income decreases 
D)  decrease; foreign income and the foreign real interest rate increase 
A)  increase; the foreign real interest rate increases 
B)  decrease; the foreign real interest rate increases 
C)  increases; foreign income decreases 
D)  decrease; foreign income and the foreign real interest rate increase

Question 14

If the real interest rate ________, government saving will _________.

Accepted Answer

A)  increases; remain the same 
B)  decreases; decrease 
C)  decreases; increase 
D)  increases; decrease 
A)  increases; remain the same 
B)  decreases; decrease 
C)  decreases; increase 
D)  increases; decrease

Question 15

If total saving increases,

Accepted Answer

A)  the real interest rate will decrease and investment spending will increase. 
B)  the real interest rate will decrease and investment spending will decrease. 
C)  the real interest rate will increase and investment spending will decrease. 
D)  the real interest rate will increase and investment spending will increase. 
A)  the real interest rate will decrease and investment spending will increase. 
B)  the real interest rate will decrease and investment spending will decrease. 
C)  the real interest rate will increase and investment spending will decrease. 
D)  the real interest rate will increase and investment spending will increase.

Question 16

The questions with which Chapter 7 is concerned include each of the following except:

Accepted Answer

A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the fixed-price model to consumption, investment, government, and net export spending? 
A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the fixed-price model to consumption, investment, government, and net export spending?

Question 17

The equilibrium interest rate will ________ if _________.

Accepted Answer

A)  increase; foreign income decreases 
B)  decrease; foreign income decreases 
C)  increase; the foreign real interest rate decreases 
D)  stay the same; the foreign real interest rate increases and foreign income decreases 
A)  increase; foreign income decreases 
B)  decrease; foreign income decreases 
C)  increase; the foreign real interest rate decreases 
D)  stay the same; the foreign real interest rate increases and foreign income decreases

Question 18

The questions with which Chapter 7 is concerned include each of the following except:

Accepted Answer

A)  In the fixed-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending? 
A)  In the fixed-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending?

Question 19

The negative of net exports represents

Accepted Answer

A)  the net flow of purchasing power that domestic spenders channel into domestic financial markets. 
B)  the net flow of purchasing power that foreigners channel into domestic financial markets. 
C)  the amount of exports minus depreciation that is channeled into domestic financial markets. 
D)  the amount of exports after taxes are paid that is channeled into domestic financial markets. 
A)  the net flow of purchasing power that domestic spenders channel into domestic financial markets. 
B)  the net flow of purchasing power that foreigners channel into domestic financial markets. 
C)  the amount of exports minus depreciation that is channeled into domestic financial markets. 
D)  the amount of exports after taxes are paid that is channeled into domestic financial markets.

Question 20

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30;    r = 10,

Accepted Answer

A)      C would equal $168 billion. 
B)      C would equal -$168 billion. 
C)      C would equal 0. 
D)      C would equal $180 billion. 
A)      C would equal $168 billion. 
B)      C would equal -$168 billion. 
C)      C would equal 0. 
D)      C would equal $180 billion.

The supply of public savings in the economy is equal to

If the real interest rate , foreign saving will _.

The equilibrium condition in the financial markets is

The supply of international savings in the economy is equal to

If domestic businesses become more optimistic about the future, r would equal

If domestic businesses become more optimistic about the future,

The interest rate __ in response to in government purchases because

The change in consumption spending ( C) which occurs as a result of a change in government purchases ( G) is equal to

If the change in government purchases is denoted by G, the resulting change in r ( r) would be equal to

In the flexible-price model, a decrease in the tax rate will result in

The equilibrium condition in the financial markets is

The flow-of-funds through __________ is key to understanding why the real interest rate brings the economy to equilibrium.

The equilibrium interest rate will if ___.

If the real interest rate , government saving will _.

If total saving increases,

The questions with which Chapter 7 is concerned include each of the following except:

The equilibrium interest rate will if _.

The questions with which Chapter 7 is concerned include each of the following except:

The negative of net exports represents

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 7: Equilibrium in the Flexible-Price M Odel

The supply of public savings in the economy is equal to

If the real interest rate ________, foreign saving will _________.

The equilibrium condition in the financial markets is

The supply of international savings in the economy is equal to

If domestic businesses become more optimistic about the future, r would equal

If domestic businesses become more optimistic about the future,

The interest rate __________ in response to ________ in government purchases because

The change in consumption spending ( C) which occurs as a result of a change in government purchases ( G) is equal to

If the change in government purchases is denoted by G, the resulting change in r ( r) would be equal to

In the flexible-price model, a decrease in the tax rate will result in

The equilibrium condition in the financial markets is

The flow-of-funds through __________ is key to understanding why the real interest rate brings the economy to equilibrium.

The equilibrium interest rate will ________ if ___________.

If the real interest rate ________, government saving will _________.

If total saving increases,

The questions with which Chapter 7 is concerned include each of the following except:

The equilibrium interest rate will ________ if _________.

The questions with which Chapter 7 is concerned include each of the following except:

The negative of net exports represents

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30; r = 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

If the real interest rate , foreign saving will _.

The interest rate __ in response to in government purchases because

The equilibrium interest rate will if ___.

If the real interest rate , government saving will _.

The equilibrium interest rate will if _.

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,