A shift to the left by the IS curve can be achieved by all of the following, EXCEPT a(n):
A) decrease in government spending.
B) increase in taxes.
C) increase in the foreign interest rate.
D) increase in the domestic price level.
Answer: C) increase in the foreign interest rate.
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When the Fed raises the target for federal funds, it
A) sells government bonds. B) increases the discount rate. C) buys government bonds. D) increases the required reserve ratio.
Suppose the GDP deflator in the United States is 125 and the GDP deflator in Japan is 100. Also assume the United States has trade barriers on Japanese goods in the form of quotas
What does this imply about the exchange rate of yen per dollar under the theory of purchasing power parity in the long run? A) The exchange rate of yen per dollar will be equal to 1.25. B) The exchange rate of yen per dollar will be greater than 0.8. C) The exchange rate of yen per dollar will be less than 0.8. D) The exchange rate of yen per dollar will be equal to 0.8.