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20 Cards in this Set
- Front
- Back
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Over the past three decades, the United States has
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persistently had a trade deficit.
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In an open economy, national saving equals
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domestic investment plus net capital outflow.
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Other things the same, a lower real interest rate decreases the quantity of
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loanable funds supplied.
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Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to
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rise because national saving rises.
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The explanation for the slope of
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the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.
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If a country has a positive net capital outflow, then
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on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.
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U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a factory in Mexico. Borrowing for factories in which location(s) is included in the U.S. demand for loanable funds?
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Mexico and the U.S.
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Other things the same, as the real interest rate rises
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domestic investment and net capital outflow both fall.
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Other things the same, if the interest rate falls, then
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firms will want to borrow more, which increases the quantity of loanable funds demanded.
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Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase
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more foreign assets, which increases the quantity of loanable funds demanded.
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Which of the following is most commonly used to monitor short-run changes in economic activity?
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real GDP.
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During recessions investment
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falls by a larger percentage than GDP.
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Real GDP
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moves in the opposite direction as unemployment.
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Historical evidence for the U.S. economy indicates that
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changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
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According to classical macroeconomic theory, changes in the money supply affect
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the price level, but not real GDP.
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The saying “Money is a veil.” means that
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while nominal variables are the first thing we may observe about an economy, what’s important are the real variables and the forces that determine them.
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Most economists believe that classical theory describes the world
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in the long run.
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Aggregate demand includes
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the quantity of goods and services households, firms, the government, and customer abroad want to buy.
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Which of the following is not included in aggregate demand?
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purchases of stock and bonds
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Other things the same, a decrease in the price level makes consumers feel
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more wealthy, so the quantity of goods and services demanded rises.
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