08 Jun Question Question 1 The average household income in the US is
Question
Question 1
The average household income in the US is $60,000. The marginal propensity to consume = MPC = .90. If household income increases by 10% to $66,000 then the increase in consumer spending = C, per household will be:
A. $5,400.
B. $5,940
C. $6,000
D. $600
Question 2
The economy’s Investment Function, I(i), indicates that when the expected real rate of interest increases agents in the economy respond by:
A. undertaking new and additional investment projects
B. cancelling or postponing investment projects
C. maintaining investment at the previous pace
Question 3
The price of a PC tablet made in Europe is 500 Euros. Let the exchange rate rise from $1.30/Euro to $1.40 /Euro. This increase in the exchange rate represents a depreciation in its value since more US dollars are needed to purchase each Euro. What happens to the import price of this tablet and the number of tablets imported into the US?
A. The US price rises from $650 to $700 and imports into the US increase
B. The US price declines from $700 to $650 and imports into the US increase
C. The US price rises from $650 to $700 and imports into the US decline
D. The price remains at $650 and imports remain constant
Question 4
The effective real exchange rate between the US dollar and foreign currencies increases in level and depreciates in value. What impact will that have on spending patterns by consuming households in the US and abroad?
A. Expenditure Switching from foreign to US products in the US (less US imports) and from foreign to US made goods abroad (more US exports)
B. Expenditure Switching from US to foreign made products in the US (more US imports) and from US to foreign made goods abroad (less US exports)
Question 5
If a basket of goods costs PUS = $100 in the United States and PMex = 400 pesos in Mexico, and if the exchange rate is $1 = 5 pesos: E$/peso = $.20, then what is the real exchange rate and how do the prices for Mexican goods compare to those for US goods?
.
A. The Real Exchange Rate is 1.25 and US goods are less expensive than Mexican goods
B. The Real Exchange Rate is 0.80 and US goods are less expensive than Mexican goods
C. The Real Exchange Rate is 1.25 and Mexican goods are less expensive than US goods
D. The Real Exchange Rate is 0.80 and Mexican goods are less expensive than US goods
Question 6
Which of the following would lead to an appreciation in the real exchange rate for the US dollar = qUS ? This means that the level q is lower so that foreign-made products are morecostly compared to US made products.
A. an increase in E – the nominal exchange rate
B. an increase in P(For) – the level of foreign prices
C. an increase in P(US) – the US price level
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