23. Suppose the U.S. government decides to increase its exports to Turkey. All o
ID: 1106545 • Letter: 2
Question
23. Suppose the U.S. government decides to increase its exports to Turkey. All other things unchanged, a) U.S. aggregate demand increases and Turkey's aggregate demand decreases. b) U.S. aggregate demand decreases and Turkey's aggregate demand increases. c) U.S. aggregate demand and Turkey's aggregate demand increase d) U.S. aggregate demand is not affected but Turkey's aggregate demand increases. 24. According to the "wealth effect", when the price level increases people feel less well off, and they decrease consumption in order to accumulate more wealth. rue b) False Suppose Dr. Stivender uses her ATM card to transfer $1,000 from her savings account to her checking account in Bessemer City National Bank. This action has immediately 25. a) increased the M1 measure of money supply by $1,000. b reduced the bank's required reserves by $1,000. c) increased the M2 measure of money supply by $1,000. d) not changed the M1 or M2 measures of money supply 26. American prisoners of war at prison camps in Germany during World War Il chose to accept chocolate bars (included in their Red Cross relief packages) in exchange for goods and services. Why were they willing to accept chocolate bars in exchange for other goods and services? a) b) c) d) because chocolate is a good source of energy because German prison camp authorities deemed chocolate bars to be legal tender because the prisoners knew that they could use the chocolate bars to buy other goods and services because the prisoners did not wish to consume chocolate bars due to the lack of dental care in the prison camp 27 To decrease the money supply, the Federal Reserve could a onduct an open market purchase of Treasury securities. b) lower the required reserve ratio. c) raise income taxes. d) raise the discount rate.Explanation / Answer
23.
A.
Increase in aggregate demand is also contributed by the increase in export and the export will be done to other nations such as Turkey whose demand will come down as the import to Turkey will increase.
24.
B.
Wealth effect says that increase in prices will raise the wealth and people will spend more.
25.
A.
Saving account deposit is the part of M2 money and checking account is the part of M1 money. Hence, the transfer of $1000 from saving account to the checking account will increase the M1 money supply by $1000 as checking account is the part of the M1 money.
26.
C
27.
D
Increase in discount rate will cause banks to raise the interest rates. It will discourage the people and firms to borrow the funds at higher interest rates. As a result, money supply will come down.
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