Prices are regarded as sticky in ________.
A) new Keynesian and traditional Keynesian theory
B) real business cycle and new Keynesian theory
C) real business cycle and traditional Keynesian theory
D) traditional Keynesian, new Keynesian and real business cycle theory
Question 2If desired saving increases in a small open economy, net exports (net capital outflow) rise. What happens to net exports if desired saving rises in most of the world's economies at the same time?
What will be an ideal response?
Question 3Schooling is subsidized in the United States in part
A) so that the golden rule capital level can be reached.
B) because otherwise people would not get educated.
C) because there is a constitutional right to education.
D) because there is a positive externality from schooling.
Question 4Positive correlation between x and y implies that
A) when x is high, y is high.
B) when x is high, y is low.
C) when x is zero, y is positive.
D) x and y are positively unrelated.
Question 5Figure 19.1 shows the actual behavior of inventories. Based on the figure, in which month is the discrepancy between the actual level of inventories and the desired level of inventories likely to have been smallest?
A) March 2012
B) September 2009
C) March 2010
D) September 2010
Question 6iPods are less expensive in Canada than the United States, once the exchange rate is taken into account. This is an indication that
A) the nominal exchange rate is equal to one.
B) purchasing power parity does not hold.
C) the law of one price holds.
D) the exchange rate is fixed.
Question 7A belief that demand shocks are an important source of business cycle fluctuations implies a preference of ________.
A) the new Keynesian model over the traditional Keynesian model
B) the real business cycle model over the traditional Keynesian model
C) the real business cycle model over the new Keynesian model
D) the new Keynesian model over the real business cycle model
Question 8Prudential regulation ________.
A) requires that banks maintain the confidentiality of loan applications
B) is administered by a specific insurance company
C) is necessitated by the government's safety net for the banking system
D) is an effective substitute for prudential supervision
Question 9The idea that contact with others with high levels of human capital increases ones own human capital is called human capital
A) contagion.
B) externality.
C) transference.
D) convergence.
Question 10In a small open economy, goods market equilibrium occurs when desired saving minus desired investment equals net exports. Explain.
What will be an ideal response?
Question 11A principal reason that purchasing power parity does not hold exactly in practice is
A) that foreign and domestic assets are not perfect substitutes.
B) the existence of non-traded goods.
C) that consumers in different countries have different preferences.
D) that costs of production are not the same in all countries.
Question 12The collapse of one bank might lead easily to the failure of several others, because ________.
A) depositors cannot trust each other to keep their money in the bank
B) deposit insurance renders all banks equally fragile
C) no bank can survive when its competitors cease to operate
D) government regulators will step in to punish any bank suspected of poor management
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