The rate of inflation is the:
percentage change in the level of prices
If the transactions velocity of money remains constant while the quantity of money
doubles, the:
price of the average transaction multiplied by the number of transactions must double.
The income velocity of money:
is defined in the identity MV = PY.
Real money balances equal the:
amount of money expressed in terms of the quantity of goods and services it can
purchase.
The demand for real money balances is generally assumed to:
increase as real income increases.
If the quantity of real money balances is kY, where k is a constant, then velocity is:
1/k.
If the demand for real money balances is proportional to real income, velocity will:
remain constant.
When the demand for money parameter, k, is large, the velocity of money is ______ and
money is changing hands ______.
small; infrequently
Consider the money demand function that takes the form (M/P)d = kY, where M is the
quantity of money, P is the price level, and Y is real output. If the money supply is
growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is con
7 percent
The income velocity of money increases and the money demand parameter k ______ when
people want to hold ______ money.
decreases; less
The quantity equation for money, by itself:
may be thought of as a definition for velocity.
The quantity theory of money assumes that:
velocity is constant.
If income velocity is assumed to be constant, but no other assumptions are made, the level
of ______ is determined by M.
nominal GDP
If velocity is constant and, in addition, the factors of production and the production
function determine real GDP, then:
the price level is proportional to the money supply.
The classical dichotomy:
is said to hold when the values of real variables can be determined without any reference
to nominal variables or the existence of money.
According to the classical dichotomy, when the money supply decreases, _____ will
decrease.
the price level
A small country might want to use the money of a large country rather than print its own
money if the small country:
is likely to be unstable whereas the large country is likely to be stable.
An "open" economy is one in which:
there is trade in goods and services with the rest of the world.
A country's exports may be written as equal to:
GDP minus consumption of domestic goods and services minus investment of domestic
goods and services minus government purchases of domestic goods and services.
Net exports equal GDP minus domestic spending on:
all goods and services.
If domestic spending exceeds output, we ______ the difference�net exports are ______.
import; negative
The value of net exports is also the value of:
the excess of national saving over domestic investment.
If net capital outflow is positive, then:
the trade balance must be positive.
Net capital outflow is equal to:
national saving minus domestic investment.
Net capital outflow is equal to the amount that:
domestic investors lend abroad minus the amount that foreign investors lend here.
If domestic saving exceeds domestic investment, then net exports are ______ and net
capital outflows are ______.
positive; positive
In a small, open economy, if net exports are negative, then:
domestic spending is greater than output.
If domestic saving is less than domestic investment, then net exports are ______ and net
capital outflows are ______.
negative; negative
When exports exceed imports,
domestic investment does not exceed domestic saving.
In a small open economy, if exports equal $20 billion, imports equal $30 billion, and
domestic national saving equals $25 billion, then net capital outflow equals:
-$10 billion.
In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there
is a trade ______ and ______ net capital outflow.
deficit; negative
In a small open economy, if exports equal $15 billion and imports equal $8 billion, then
there is a trade ______ and ______ net capital outflow.
surplus; positive
In a small open economy, if domestic saving equals $50 billion and domestic investment
equals $50 billion, then there is ______ and net capital outflow equals ______.
balanced trade; $0
In a small open economy, if domestic investment exceeds domestic saving, then the extra
investment will be financed by:
lending from abroad.
In a small open economy, if domestic saving exceeds domestic investment, then the extra
saving will be used to:
make loans to foreigners.
The world interest rate:
is the interest rate prevailing in world financial markets.
In a country with a small open economy, the real interest rate will always be:
equal to the world real interest rate.
A small open economy with perfect capital mobility is not characterized by:
its domestic interest rate always exceeds the world interest rate.
Building an economic model based on the assumption of a small open economy is useful
because:
this simplifying assumption can assist our understanding and intuition of open economy
macroeconomics.
In a small open economy, if the world real interest rate is above the rate at which national
saving equals domestic investment, then there will be a trade ______ and ______ net capital
outflow.
surplus; positive
The percentage change in the nominal exchange rate equals the percentage change in the real
exchange rate plus the:
foreign inflation rate minus the domestic inflation rate.
If a country has a high rate of inflation relative to the United States, the dollar will buy:
more of the foreign currency over time.
One consequence of high inflation is a(n):
depreciating nominal exchange rate.
If the real exchange rate between the United States and Japan remains unchanged, and the
inflation rate in the United States is 6 percent and the inflation rate in Japan is 3 percent,
the:
yen will appreciate by 3 percent against the dollar.
If the nominal exchange rate falls 10 percent, the domestic price level rises 4 percent, and
the foreign price level rises 6 percent, the real exchange rate will fall:
12 percent.
If the number of employed workers equals 200 million and the number of unemployed
workers equals 20 million, the unemployment rate equals ______ percent (rounded to the
nearest percent).
9
In a steady state:
the number of people finding jobs equals the number of people losing jobs.
In the model of the steady-state unemployment rate with a fixed labor force, the rate of job
finding equals the percentage of the ______ who find a job each month, while the rate of job
separation equals the percentage of the ______ who lose their job eac
unemployed; employed
If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then
the unemployment rate is approximately:
s/(s + f).
If the fraction of employed workers who lose their jobs each month (the rate of job
separation) is 0.01 and the fraction of the unemployed who find a job each month is 0.09
(the rate of job findings), then the natural rate of unemployment is:
10 percent.
One reason for unemployment is that:
it takes time to match workers and jobs.
_____ is not a reason for frictional unemployment:
unemployed workers accept the first job offer that they receive.
Which of the following is an example of frictional unemployment?
Dave searches for a new job after voluntarily moving to San Diego.
Sectoral shifts:
make frictional employment inevitable.
A typical worker in the United States who is covered by unemployment insurance receives
______ percent of his or her former wages for ______ weeks.
50; 26
Wage rigidity:
prevents labor demand and labor supply from reaching the equilibrium level.
increases the rate of job finding.
_____ is not a cause of structural unemployment:
unemployment insurance.
If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of
labor will ______ the number unemployed.
increase
The minimum wage:
has its greatest impact on teenage unemployment.
Unions contribute to structural unemployment when collective bargaining results in wages:
above the equilibrium level.
One efficiency-wage theory implies that firms pay high wages because:
the more a firm pays its workers, the greater their incentive to stay with the firm.
The sectoral shifts explanation for changes in the U.S. natural rate of unemployment over
the past 50 years rests on the idea that oil-price volatility ______ the rate of job ______.
increased; separation