Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?
- In the short run, unemployment will increase and inflation will fall.
- In the short run, unemployment will increase and inflation will rise.
- In the short run, unemployment will decrease and inflation will rise.
- In the short run, unemployment will decrease and inflation will fall.
Which of the following is NOT required for paper dollars to work as a medium of exchange?
- An established and regulated system of fiat money
- Intrinsic value backed by gold
- Government prosecution of counterfeiters
- Acceptance as part of social convention
A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?
- $650 billion
- $600 billion
- $400 billion
- $350 billion