Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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How is competitiveness defined in the AD-AS-CCE model?
a. | Price of domestic goods | b. | Relative price of domestic to foreign
goods | c. | Real exchange rate | d. | Nominal exchange
rate |
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2.
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All of the following can shift the AD schedule, except for:
a. | Change in the autonomous factors of investment | b. | Change in the
marginal propensity to consume | c. | Change in government
spending | d. | Change in demand for exports |
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3.
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Under what condition will the BT schedule be flatter than the AD curve?
a. | When the marginal propensity to consume is greater than zero. | b. | When the marginal
propensity to save is greater than zero. | c. | When the marginal propensity to import is
greater than zero. | d. | When one minus the marginal propensity to
consume is less than one. |
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4.
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The NAIRU will fall when
a. | there is a depreciation of the exchange rate. | b. | there is an
appreciation of the exchange rate. | c. | there is an increase in the mark-up by
firms. | d. | there is an increase in trade union power. |
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5.
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All of the following describe the Competing Claims Equilibrium except
for:
a. | It is the LRAS in the open economy. | b. | There is an inverse relationship between the
real exchange rate and the equilibrium level of output. | c. | There is an inverse
relationship between the CCE and the NAIRU. | d. | It is an upward sloping
function. |
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6.
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Which of the following is a true statement?
a. | There is a unique NAIRU in the Salter-Swn model. | b. | There is a range of
output where inflation is stable, depending on the real exchange rate in the AD-AS-CCE
model. | c. | There is always long-run AS that constrains the economy. | d. | Different real
exchange rates are associated with the unique NAIRU. |
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7.
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What is the sustainable level of output?
a. | The level of output found at the intersection of the CCE and BT
curves. | b. | The level of output found at the intersection of the AD and CCE
curves. | c. | The level of output found at the intersection of the AD and BT
curves. | d. | The level of output at which the trade deficit is
sustainable. |
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8.
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Which of the following are not part of the equilibrium in the open economy
version of the AD-AS model?
a. | Equilibrium in the goods market | b. | Output is the level where unemployment is at
the NAIRU | c. | Trade position is balanced | d. | Equilibrium in the money
market |
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9.
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Which of the following statements describing the Salter-Swan model is not
true?
a. | In the short run, the economy will be on the AD curve. | b. | In the short run,
the economy will be on the CCE schedule. | c. | In the long run, the economy will be on the CCE
schedule. | d. | In the very long run, the economy will need to maintain a balance of trade
equilibrium. |
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10.
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Which of the following can cause an increase in the sustainable level of
output?
a. | Shift in the CCE schedule | c. | Shift in the CCE and BT
schedules | b. | Shift in the AD schedule | d. | Shift in the AD and BT schedules |
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