Question

1. Suppose there is an outbreak of a virus in the U.S. that causes labor productivity to greatly decrease. Further assume that, at the same time, the real interest rate in Canada is expected tp decrease sharply in the near future. Everything else held constant, the cumulative effect of these changes will cause the real interest rate in the U.S. to ____
   a. either increase, decrease, or remain the same

b. increase

c. remain constant

d. decrease

2. the standard for oil internationally is that a barrel of oil is always priced in terms of U.S. dollars no matter where it is sold. Suppose that, after a recent OPEC meeting, the price of a barrel of oil rises. Everything else held constant, this would cause the U.S. dollar to _____ against the currencies of oil exporting countries.

a. remain constant

b. either appreciate, depreciate, or remain constant

c. depreciate

d. appreciate

Answer 1

Q-1 :: ANSWER :: (B) Decrease

Explanation ::

=> The Virus Outbreak In US That Cause Labor Productivity Greatly Decrease So Output in Economy Of US Decrease So Supply Of Goods in US Decrease So If Aggregate Demand Increase It Leads to Increase Inflation In The Country So If Inflation Occur In US It Leads to Decrease in Real Interest Rate In The US. In Canada Real Interest Rate Increase Slightly It Is Because Labor Productivity Not Decrease there And Virus Outbreak also Not Happened Their.

=> So To Increase Long Run Real Interest rate US Should Have to Increase Its Labor Productivity By Providing Them.Benefits and Fed Have To Increase The Money Supply so once Labor Productivity Increase It Increase the Overall GDP Growth and Real Interest rate Also Increase.

Q-2 :: ANSWER :: (C) Depreciate

Explanation ::

=>       When the Oil Prices Rise by OPEC It Means Oil Per Barrel Is Costly For some Countries so Rise In Oil Prices Decrease The Demand For it so As Oil Price Are Valued in Dollar So once Demand for Oil Decrease The Exchange of US Dollar Also Decrease So US Have More Dollar In Their Country As Dollar Supply Increase In The Country As Prices For Oil is Increased So Once Supply For Dollar Increase It Depreciate the US Dollar and It Increase The US Export Because Dollar Is More Cheaper For Foreign Countries.

=>    So We Assume That Increase In Oil Price Depreciate The US Dollar In The Long Run and Also In the Short Run.