1.

Question 1

When do net exports rise?

1 point

When current aggregate income declines

When the real exchange rate declines

When foreign income rises

All of the above

None of the above

2.

Question 2

In the short run, when prices are sticky and the goods market is in equilibrium, income rises as the interest rate declines because:

1 point

Investment expenditure rises

Imports decline

Exports rise

All of the above

None of the above

3.

Question 3

Suppose P, P^*, Y, Y^*, \pi, R, T, and G are exogenously given and the interest parity condition holds. Then aggregate "preferred" expenditure, D, rises when:

1 point

The domestic aggregate price level rises.

The foreign aggregate price level rises.

The nominal interest rate rises.

Net taxes collected by the government rises.

All of the above

4.

Question 4

In general, as aggregate income of an economy rises:

1 point

Consumption demand rises by less than the income increase.

Consumption demand rises by more than the income increase.

Consumption demand rises by the same amount as the income increase.

Net exports rise by more than the income increase.

Net exports rise by the same amount as the income increase.

5.

Question 5

Which of the following factors does not shift the aggregate "preferred" expenditure (D) curve of an economy?

1 point

The aggregate real income of the economy

The aggregate price level

Government expenditure

The aggregate real income of the rest of the world

6.

Question 6

Which of the following factors shifts the IS curve?

1 point

Government expenditure

Real income of the rest of the world

The aggregate price level

All of the above

None of the above

7.

Question 7

Latin America is a major export market for the US. If, as a result of a slump in commodity prices, the real incomes in Latin American countries decline, what would be the impact on the IS curve of the US economy?

1 point

The IS curve would not be affected.

The IS curve would shift to the right.

The IS curve would shift to the left.

The impact on the IS curve cannot be determined.

8.

Question 8

This year, country B held presidential elections and the government of the incumbent president temporarily increased public expenditure to win greater political support. Assuming that M^s, P, P^*, Y^*, and T were exogenously given, what kind of impact must this policy have had on the IS curve in country B?

1 point

The IS curve should not have been affected.

The IS curve must have shifted to the right.

The IS curve must have shifted to the left.

The impact on the IS curve cannot be determined.

9.

Question 9

This year, country T held politically sensitive parliamentary elections and the government of the incumbent ruling party temporarily increased public expenditure to enhance its popularity. The government financed the additional expenditure by selling more bonds. Assuming that M^s, P, P^*, Y^*, and T were exogenously given, what kind of impact must this policy have had on the LM curve in country T?

1 point

The LM curve should not have been affected.

The LM curve must have shifted to downward.

The LM curve must have shifted to upward.

The impact on the LM curve cannot be determined.

10.

Question 10

This year, country E held politically sensitive parliamentary elections and the government of the incumbent ruling party temporarily increased public expenditure to enhance its popularity. The government financed the additional expenditure by getting the country's central bank to print money to finance the additional expenditure. Assuming that P, P^*, Y^*, and T were exogenously given, what kind of impact must this policy have had on the real income and interest rate in country E?

1 point

Both real income and interest rate must have declined.

Real income must have declined and interest rate must have risen.

Real income must have risen and interest rate must have declined.

Both real income and interest rate must have risen.

Real income must have risen, but the impact on interest rate would depend on other factors.