QUE

If Savings =Investment, then we must be in a closed economy.

True

False

QUE

When there is excess supply in the money market, the interest rates falls.

True

False

QUE

The CPI does not account for consumer's ability to substitute to other goods.

True

False

QUE

When production and the price level are both rising, Real GDP will increase by less than Nominal GDP, because Real GDP captures both the increase in production and the increase in the price level.

True

False

QUE

Suppose that consumption does not depend on the interest rate.If the demand for investment decreases,the equilibrium interest rate __________ and the level of savings ____________.

decreases; remains unchanged

decreases; decreases

remains unchanged;decreases

remains unchanged;remains unchanged

QUE

Which of the following about a small open economy with a floating exchange ratein the Mundell-Fleming model is FALSE:

Expansionarymonetary policy creates demand for domestic goods

Contractionary fiscal policy crowds out net exports because the exchange rate rises.

The exchange rate has no effect on the LM curve.

Residents are unrestricted when it comes to borrowing or lending inworld financial markets.