Reference no: EM13175729
1. What is the distinction between net investment and gross investment? Which is the total amount spent on investment in a given year? Which is the change in the capital stock?
2. Is an illiquid company necessarily insolvent? Is an insolvent company necessarily illiquid? Briefly explain your answers.
3. What is the distinction between the nominal interest rate and the real interest rate?
4. In a diagram, show the effect on the real interest rate and amount of investment if people's disposable income increases.
5. Explain how a government budget deficit affects the market for loanable funds. What is the effect on investment? Ignore the possibility of a Ricardo-Barro effect.
6. Before there is any international trade or international lending and borrowing, suppose the world real interest rate is less than the real interest rate within a nation. Once the nation is open to international trade and international lending and borrowing, will the nation's net exports be negative or positive? Explain your answer.
Answer the following multiple choice questions.
7. The ____ interest rate approximately equals the ____ interest rate minus ____.
a. nominal; real; depreciation
b. nominal; real; inflation
c. real; nominal; depreciation
d. real; nominal; inflation
8. Crowding out can be the result of
a. an increase in the government budget deficit.
b. a decrease in the government budget deficit.
c. an increase in the government budget surplus.
d. an increase in expected profit.
9. If the world real interest rate is greater than the nation's real interest rate, then the country will ____ abroad and the country's exports will be ___ its imports.
a. borrow from; greater than
b. loan to; greater than
c. borrow from; be less than
d. loan to; be less than
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What occurs when real gdp exceeds potential gdp
: What is the effect on the aggregate demand curve of the increase in government purchases? What occurs when real GDP exceeds potential GDP? What curve shifts in order to restore real GDP to potential GDP? Why does this curve shift?
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What effect does this have on the current exchange rate
: Suppose the market for dollars is in equilibrium, then the expected future exchange rate rises. What effect does this have on the current exchange rate?
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Determine the effect on the interest rate
: Suppose that the demand for money increases. Using a diagram with a money demand curve and a money supply curve, determine the effect on the interest rate.
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Describe the federal reserve system
: Describe the Federal Reserve System. Be sure to mention and discuss the Board of Governors, the regional Federal Reserve banks, and the Federal Open Market Committee.
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What is distinction between net investment, gross investment
: What is the distinction between net investment and gross investment? Which is the total amount spent on investment in a given year? Which is the change in the capital stock?
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How much did the increase in capital per hour of work
: Suppose that real GDP per hour of work grew by 6 percent last year and the capital per hour of work grew 9 percent. Using the one third rule, by how much did the increase in capital per hour of work increase real GDP per hour of work?
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How does an increase in population affect potential real gdp
: How does an increase in population affect potential real GDP? In your answer, be sure to mention the role played by the labor market.
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Calculate the labor force
: If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force is
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What is the difference between real gdp and nominal gdp
: Measured as the long-term growth of potential GDP, how has economic growth in the United States changed over the decades since 1962? There was a slowdown in growth-when was it and what is it called?What is the difference between real GDP and nominal ..
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