Economics: Inflation and Net Capital Outflow

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Final Examination of Economics

1.When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an a.excess demand for money, so the price level will rise. b.excess demand for money, so the price level will fall. c.excess supply of money, so the price level will rise. d.excess supply of money, so the price level will fall.

2.According to the classical dichotomy, when the money supply doubles which of the following double? a.the price level and nominal GDP
b.the price level and real GDP
c.only real GDP
d.only the price level

3.The money supply in Tazland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Tazland? a.the price level and velocity are both 8

b.the price level is 8 and velocity is 4
c.the price level and velocity are both 4
d.the price level is 4 and velocity is 8

4.Suppose that the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen? a.People who held money would feel poorer.
b.Prices would rise.
c.People who had lent money at a fixed interest rate would feel poorer. d.All of the above are correct.

5.If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent, what is the real interest rate? a.7 percent
b.5 percent
c.3 percent
d.3/5 percent

6.If a country changes its corporate tax laws so that domestic firms build and manage more firms overseas, then this country will a.increase foreign direct investment which increases net capital outflow. b.increase foreign direct investment which decreases net capital outflow. c.increase foreign portfolio investment which increases net capital outflow. d.increase foreign portfolio investment which decreases net capital outflow.

7.When a French vineyard establishes a distribution center in the U.S., U.S. net capital outflow a.increases because the foreign company makes a portfolio investment in the U.S. b.declines because the foreign company makes a portfolio investment in the U.S. c.increases because the foreign company makes a direct investment in capital in the U.S. d.declines because the foreign company makes a direct investment in capital in the U.S.

8.A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports a.increase, and U.S. net capital outflow increases.
b.increase, and U.S. net capital outflow decreases.
c.decrease, and U.S. net capital outflow increases.
d.decrease, and U.S. net capital outflow decreases.

9.Jill (American) uses some euros (Euro dollars) to purchase a bond issued by a French vineyard. This exchange a.increases U.S. net capital outflow by more than the value of the bond. b.increases U.S. net capital outflow by the value of the bond. c.does not change U.S. net capital outflow.

d.decreases U.S. net capital outflow.

10.A country has $60 million of saving and domestic investment of $40 million. Net exports are a.$20 million.
b.-$20 million.
c.$100 million.
d.-$100 million.

11.Other things the same, the real exchange rate between American and British goods would be higher if a.prices of British goods were higher, or the number of pounds a dollar purchased was higher. b.prices of British goods were higher, or the number of pounds a dollar purchased was lower. c.prices of British goods were lower, or the number of pounds a dollar purchased was higher. d.prices of British goods were lower, or the number of pounds a dollar purchased was lower.

12.U.S. corporation Well’s Petroleum borrows money to build an oil well in Texas and to build another in Venezuela. a.The borrowing for the well in the U.S. and the...
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