Question 1

An exchange rate appreciation will shift the aggregate demand curve inward.

Accepted Answer

A) True 
 B)False

Question 2

One possible cure for the trade deficit is protectionism.

Accepted Answer

A) True 
 B)False

Question 3

The trade deficits of the 1980s and 1990s reflects American desire for foreign

Accepted Answer

A)  assets and foreign desire for American goods and services. 
B)  goods and services and foreign assets. 
C)  goods and services and foreign desire for American assets. 
D)  assets now and foreign goods and services in the future. 
A)  assets and foreign desire for American goods and services. 
B)  goods and services and foreign assets. 
C)  goods and services and foreign desire for American assets. 
D)  assets now and foreign goods and services in the future.

Question 4

Booms and recessions are transmitted to other countries.

Accepted Answer

A) True 
 B)False

Question 5

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

Accepted Answer

A)  Congress removed all tariffs and trade restrictions on imports. 
B)  NAFTA was introduced and Mexican exports flooded the United States. 
C)  the international value of the dollar fell during the 1990s,which encouraged U.S.exports. 
D)  the international value of the dollar rose in the last half of the 1990s,which encouraged U.S.imports and damaged U.S.exports. 
A)  Congress removed all tariffs and trade restrictions on imports. 
B)  NAFTA was introduced and Mexican exports flooded the United States. 
C)  the international value of the dollar fell during the 1990s,which encouraged U.S.exports. 
D)  the international value of the dollar rose in the last half of the 1990s,which encouraged U.S.imports and damaged U.S.exports.

Question 6

An increase in the value of the U.S.dollar relative to the Japanese yen will

Accepted Answer

A)  increase aggregate demand in the United States. 
B)  decrease aggregate supply in the United States. 
C)  increase aggregate demand in Japan. 
D)  increase aggregate supply in Japan. 
A)  increase aggregate demand in the United States. 
B)  decrease aggregate supply in the United States. 
C)  increase aggregate demand in Japan. 
D)  increase aggregate supply in Japan.

Question 7

If a currency appreciates,a country's net exports

Accepted Answer

A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases. 
A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases.

Question 8

In Table 20-2,what is equilibrium GDP?

Accepted Answer

A)  $2,500 
B)  $3,500 
C)  $4,500 
D)  $5,500 
A)  $2,500 
B)  $3,500 
C)  $4,500 
D)  $5,500

Question 9

When the dollar depreciates,the prices of imported inputs

Accepted Answer

A)  fall and aggregate supply shifts outward. 
B)  fall and aggregate supply shifts inward. 
C)  rise and aggregate supply shifts outward. 
D)  rise and aggregate supply shifts inward. 
A)  fall and aggregate supply shifts outward. 
B)  fall and aggregate supply shifts inward. 
C)  rise and aggregate supply shifts outward. 
D)  rise and aggregate supply shifts inward.

Question 10

Figure 20-4  
-Which of the situations illustrated in Figure 20-4 shows a currency appreciation leading to disinflation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

Under a floating exchange rate system with mobile international capital,it is always true that current account

Accepted Answer

A)  deficit + capital account surplus = trade deficit. 
B)  surplus − capital account surplus = trade deficit. 
C)  surplus + capital account deficit = 0. 
D)  surplus − capital account surplus = 0. 
A)  deficit + capital account surplus = trade deficit. 
B)  surplus − capital account surplus = trade deficit. 
C)  surplus + capital account deficit = 0. 
D)  surplus − capital account surplus = 0.

Question 12

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

Accepted Answer

A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long,the Germans,Japanese,and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits,personal consumption must be reduced to build up wealth to repay the debt created. 
A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long,the Germans,Japanese,and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits,personal consumption must be reduced to build up wealth to repay the debt created.

Question 13

How does a budget deficit lead to a trade deficit?

Accepted Answer

A)  The trade deficit triggers higher interest rates,which increase the budget deficit. 
B)  The budget deficit leads to higher interest rates and exchange rates,which shrink net exports. 
C)  The trade deficit causes lower interest rates,which leads to economic recession and a budget deficit. 
D)  The budget deficit causes lower exchange rates,which decrease net exports. 
A)  The trade deficit triggers higher interest rates,which increase the budget deficit. 
B)  The budget deficit leads to higher interest rates and exchange rates,which shrink net exports. 
C)  The trade deficit causes lower interest rates,which leads to economic recession and a budget deficit. 
D)  The budget deficit causes lower exchange rates,which decrease net exports.

Question 14

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is correct?

Accepted Answer

A)  Current account surplus + capital account surplus = 1 
B)  Current account surplus − capital account surplus = 0 
C)  Current account surplus + capital account surplus = 0 
D)  Current account surplus − capital account surplus = 1 
A)  Current account surplus + capital account surplus = 1 
B)  Current account surplus − capital account surplus = 0 
C)  Current account surplus + capital account surplus = 0 
D)  Current account surplus − capital account surplus = 1

Question 16

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

Accepted Answer

A)  the federal budget must always be in balance. 
B)  when a country exports more goods and services than it imports,it also imports assets equal to the difference. 
C)  current account deficits should be avoided. 
D)  trade deficits tend to be eliminated automatically. 
A)  the federal budget must always be in balance. 
B)  when a country exports more goods and services than it imports,it also imports assets equal to the difference. 
C)  current account deficits should be avoided. 
D)  trade deficits tend to be eliminated automatically.

Question 17

To eliminate the trade deficits in the late 1990s would have required,in addition to the reduction of the federal budget deficit,an increase in

Accepted Answer

A)  investment spending. 
B)  the exchange value of the dollar. 
C)  the U.S.price level. 
D)  the saving rate. 
A)  investment spending. 
B)  the exchange value of the dollar. 
C)  the U.S.price level. 
D)  the saving rate.

Question 18

An increase in the U.S.price level relative to the price level of other countries would

Accepted Answer

A)  increase U.S.net exports and increase aggregate demand. 
B)  increase U.S.net exports and increase aggregate supply. 
C)  reduce U.S.net exports and reduce aggregate demand. 
D)  reduce U.S.net exports and increase aggregate demand. 
A)  increase U.S.net exports and increase aggregate demand. 
B)  increase U.S.net exports and increase aggregate supply. 
C)  reduce U.S.net exports and reduce aggregate demand. 
D)  reduce U.S.net exports and increase aggregate demand.

Question 19

What are the economic effects of a currency depreciation?

Accepted Answer

A)  It will decrease aggregate demand and aggregate supply,so that output will certainly fall,and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply,so that output will certainly rise,and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply,so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply,so that prices will certainly fall and output may fall as well. 
A)  It will decrease aggregate demand and aggregate supply,so that output will certainly fall,and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply,so that output will certainly rise,and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply,so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply,so that prices will certainly fall and output may fall as well.

Question 20

If the dollar appreciates,American consumers will buy more foreign goods and services.

Accepted Answer

A) True 
 B)False

An exchange rate appreciation will shift the aggregate demand curve inward.

One possible cure for the trade deficit is protectionism.

The trade deficits of the 1980s and 1990s reflects American desire for foreign

Booms and recessions are transmitted to other countries.

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

An increase in the value of the U.S.dollar relative to the Japanese yen will

If a currency appreciates,a country's net exports

In Table 20-2,what is equilibrium GDP?

When the dollar depreciates,the prices of imported inputs

Figure 20-4 -Which of the situations illustrated in Figure 20-4 shows a currency appreciation leading to disinflation?

Under a floating exchange rate system with mobile international capital,it is always true that current account

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

How does a budget deficit lead to a trade deficit?

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Which of the following is correct?

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

To eliminate the trade deficits in the late 1990s would have required,in addition to the reduction of the federal budget deficit,an increase in

An increase in the U.S.price level relative to the price level of other countries would

What are the economic effects of a currency depreciation?

If the dollar appreciates,American consumers will buy more foreign goods and services.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Filters

Exam 20: Exchange Rates and The Macroeconomy

An exchange rate appreciation will shift the aggregate demand curve inward.

One possible cure for the trade deficit is protectionism.

The trade deficits of the 1980s and 1990s reflects American desire for foreign

Booms and recessions are transmitted to other countries.

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

An increase in the value of the U.S.dollar relative to the Japanese yen will

If a currency appreciates,a country's net exports

In Table 20-2,what is equilibrium GDP?

When the dollar depreciates,the prices of imported inputs

Figure 20-4 -Which of the situations illustrated in Figure 20-4 shows a currency appreciation leading to disinflation?

Under a floating exchange rate system with mobile international capital,it is always true that current account

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

How does a budget deficit lead to a trade deficit?

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Which of the following is correct?

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

To eliminate the trade deficits in the late 1990s would have required,in addition to the reduction of the federal budget deficit,an increase in

An increase in the U.S.price level relative to the price level of other countries would

What are the economic effects of a currency depreciation?

If the dollar appreciates,American consumers will buy more foreign goods and services.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Filters