ECO102H1 Lecture Notes - Lecture 24: Excess Reserves, Fiscal Policy, Gdp Deflator

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19 Aug 2016

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ECO102H1 Full Course Notes

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50 mc, 1 mark each: 30 micro, 30 macro, common. 5 short answers, 50 marks total: 1 micro, 1 macro, 3 combination questions (micro and macro analogues) Sa is going to be different that the past (it"s benjamin/pesando/burley) Role of the government: externalities, public goods. Eco100y l0201: production, income, expenditure approaches, gdp deflator and cpi, unemployment and interest rates. National income determination: ae, multiplier, fiscal policy. Ad , as: sr eq, lr eq, fiscal policy, lr growth. Money and banking: money creation, money supply, demand for money, monetary policy. Inflation, unemployment and the government budget: inflation, unemployment. International trade: gains from trade, trade patters, exchange rates. Allocative efficiency: mc = p, cost to producer of last good sold = price paid by consumer, no dwl, total surplus is maximized. Externalities: private costs =/= social cost, production externalities= supply curve, consumption externalities-= demand curve, negatives: Smb > mb (benefits are lower: positives:

Related Questions

Sometimes, analysts use the price of specific products in different locations to compare currency valuation and purchasing power. For example, the Big Mac Index compares the purchasing power parity of many countries based on the price of a Big Mac. Locate the latest edition of this index that is accessible. Identify the five countries and the currencies with the lowest purchasing power parity according to this classification. Which currencies, if any, are overvalued?

viridiancaribou88

Macro-Economic question:

Letâs consider a basket of high-tech commodities and call it the MacBook Air Index. (a) What is the current value of the GBP-USD exchange rate according to Bloomberg (http://www.bloomberg.com/markets/currencies)? What are the two currencies in this currency pair? What does this exchange rate mean?

(b) What is the price of the least expensive 11-inch MacBook Air in the U.S. and in the U.K.?

(http://www.apple.com/macbook-air/ https://www.apple.com/uk/macbook-air/)

(c) How does the price of the MacBook Air in the U.K. compare with the price implied by the price in the U.S. and the current exchange rate?

(d) What exchange rate is implied by the price of the MacBook Air in the U.S. and the U.K.?

(e) Does Purchasing Power Parity (PPP) hold? Why?

1.Purchasing power parity implies that

a. the real exchange rate is equal to 1.

b. the law of one price does not hold.

c. inflation rates are equal across countries.

d. the real exchange rate is equal to 0.

e. if the domestic country has low prices, then the domestic currency will depreciate until foreign citizens can buy the same amount of goods as domestic citizens.

2.Which of the following is a prediction from the PPP model of exchange rates?

A. An increase in the US money supply leads to an appreciation of the dollar in the long run.

B. An increase in US production leads to a depreciation of the dollar.

C. An increase in US production will lead to a proportional increase in the inflation rate.

D, An increase in the US money supply leads to a depreciation of the dollar in the long run.

E.An increase in the US interest rates leads to a fall in prices.

3.Relative purchasing power parity predicts that

A.the difference between the inflation rates in the two countries should equal the ratio of the interest rates in the two countries.

B. the difference between the inflation rates in two countries should equal the per cent change in the exchange rate.

C.inflation rates should be equal across countries.

D.the real exchange rate should equal one.

E.relative price levels in the two countries should be equal when expressed in the same currency.

4.Which of the following is NOT a valid explanation for the failure of purchasing power parity?

a. Differences in monetary policies across countries

b. Lack of competition

c. Transportation costs

d. Trade barriers

5.If P represents (the level of) domestic prices, P* represents (the level of) foreign prices and E represents the exchange rate as units of domestic currency per units of foreign currency, then the real exchange rate equals

a. EP/P*	b. P*/EP
C. E/PP*	d. EP*/P
e. P/P*

6.The difference between nominal and real interest rates is that

A.Nominal interest rates are measured in terms of a country's output, while real interest rates are measured in monetary terms

B.Nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output

C.Nominal interest rates can fluctuate, while real interest rates always remain fixed

D.Real interest rates can fluctuate, while nominal interest rates always remain fixed

E.Real interest rates are the same in every country, while nominal interest rates are different for every country

7.Which of the following is predicted to cause the value (or price or cost) of U.S. goods to appreciate relative to the value (or price or cost) of foreign goods in the long run?

a. An increase in the growth rate of U.S. GNP. b. A decrease in the growth rate of U.S. GNP.

c. A decline in the growth rate of the U.S. money supply.

d. An increase in the price of petroleum that reduces world demand for American cars. e. An appreciation of the dollar.

jadewallaby469

ECO102H1 Lecture Notes - Lecture 24: Excess Reserves, Fiscal Policy, Gdp Deflator

ECO102H1 Full Course Notes

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