(06.01–06.06 HC) Country Alpha and Country Beta are trading partners each with a current account balance of zero. Country Alpha’s currency is the dollar, and Country Beta’s currency is the euro. If inflation in Country Alpha increases while Country Beta’s price level stays flat, will it result in a current account deficit, surplus, or no change for Country Alpha? Explain. Draw a graph of the foreign exchange market for the dollar of Country Alpha. Illustrate the effect of the inflation change from part (a) on the value of its dollar compared to the euro of Country Beta. Now if tastes in Country Beta shift toward goods of Country Alpha, what will be the impact on the demand for the dollar of Country Alpha? Explain. Based on part (c), what will be the effect on the value of the dollar of Country Alpha compared to the euro of Country Beta?

(03.01–03.08, 04.07 HC) A country is in a short-run macroeconomic equilibrium. At its current output, its actual unemployment rate is less than its natural rate of unemployment. Illustrate this economy on a fully-labeled aggregate demand—aggregate supply model. Include aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label the short-run equilibrium price level PLE and the short-run equilibrium output YE. Label the full-employment level of output YF. If the government and central bank do not intervene, how would this economy adjust in the long run? Explain. Illustrate the process of part (b) on your graph from part (a). The government decides to use fiscal policy to correct the economic situation in part (a). Assume the difference between the short-run and long-run equilibrium output is worth $50 billion, and the marginal propensity to consume is 0.8. Calculate one specific and effective fiscal policy action the government could take. What would be the short-run impact of the government’s action on the unemployment rate? What would be the short-run impact of the government’s action on the potential output of the economy? Will the long-run equilibrium price level if the government intervenes be less than, equal to, or greater than the long-run equilibrium price level without intervention? Show the impact of the government intervention from part (d) on the equilibrium real interest rate on a fully labeled loanable funds market graph. Will the long-run aggregate supply curve move as a result of the change from part (h)? Explain.

(01.01–01.03, 05.06 HC) Assume that Atlantis and the Mushroom Kingdom use equal resources to produce consumer and capital goods, as illustrated in the table below showing maximum possible production figures. Country Capital Goods Consumer Goods Atlantis 60 units 180 units Mushroom Kingdom 20 units 100 units Draw a fully labeled production possibility curve for Atlantis. Place capital goods on the vertical axis and consumer goods on the horizontal axis. Assume constant opportunity cost. On your graph from part (a), label an inefficient point of production I, an efficient point of production E, and an unattainable point of production U. Which country has the comparative advantage in the production of capital goods? Explain. If Atlantis shifted from producing 10 units of capital goods and 150 units of consumer goods to producing 24 units of capital goods and 108 units of consumer goods, what would be the impact on its economic growth in the long run? Based on the data table, what range of capital goods could be traded for 15 units of consumer goods that would be mutually beneficial?

(03.08 MC) If the government of a country is implementing a policy of increasing taxes in order to reduce aggregate demand, then which of the following is true for the economy of the country?

(02.03 MC) An economy’s natural unemployment rate is 9 percent, its structural unemployment rate is 2 percent, and its cyclical unemployment rate is 3 percent. Based on this data, its frictional unemployment rate is ________, and its actual unemployment rate is ________.

(02.04 LC) The CPI will be ________ when there is ________ in the quality of a good and its price remains the same.

(01.02 MC)Use the following excerpts to answer the question below.”Probably never before, or since, has a mighty emperor…ordered his conquests to cease until it was decided if they were just.”Source: Lewis Hanke, Colonial Latin America historian”By any standards, the debate is one of the most extraordinary events in Western political history: A country engaged in conquest is accused of doing so unjustly.”Source: Robert McAfee Brown, religion and ethics scholarWhich of the following is a true statement about these two quotes?

(03.07 HC) Use the graph to answer the question that follows.Assume that the economy is in a short-run equilibrium as shown on the accompanying graph. Without government intervention, what adjustment over time can be expected?

(04.02 LC)The provisions established by Pinckney’s Treaty were important to the development of United States commerce because they

(02.05 MC) If the rate of inflation unexpectedly increases, which of the following individuals will suffer a loss?