1. T/F Most tax payments increase as GDP increases.

2. T/F Government spending influences spending indirectly.

3. T/F During the 2008 presidential campaign, candidate Barack Obama argued in favor of repealing the majority of the Bush tax cuts in order to increase government revenue.

4. T/F Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.

5. T/F In 2007, the value of the American dollar rose relative to the euro.

6. T/F If British government bonds pay a higher interest rate than U.S. government bonds, the dollar should appreciate.

7. In the short run, tax cuts that are intended to increase aggregate supple have

a. almost no effect on aggreagate demand, and a small effect on aggregate supply.

b. about an equal effect on both aggregate demand and aggregate supply.

c. a much greater effect of aggregate demand than on aggregate supply.

d. almost no effect on aggregate supply, and a negative effect on aggregate demand.

8. A deficit nation in a fixed exchange rate system can improve its balance of ayments by increasing _____

9. One method for a deficit country to correct the situation under a fixed exchange rate system is to _____.

10. The decline in the value of the dollar from 1985 to 1988 was beneficial to _____

11. The different effects of fiscal and monetary policy in an open economy with mobile capital hinges on their different effect on _____

12. The saving rate in the United States fell to nearly zero in the early 2000s. One of the contributing factors to this development was the _____.

13. Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?

14. Suppose that a tariff is imposed on imports of minivan. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the tariff is paid by the buyers of the minivan?

15. Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value. The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart. Using the purchasing power parity theory, explain the exchange rate between the yen and the euro.