Exam 20: Exchange Rates and The Macroeconomy

Why is monetary policy more effective in an open economy than in a closed economy?

As the international value of the dollar rises,AS shifts outward and AD shifts inward.

What are the economic effects of a currency appreciation?

In an open economy,the government deficit is 600 and saving exceeds investment by 500,so in equilibrium the trade deficit (IM − X)must be

If the government budget is balanced,and saving is greater than investment,then the

If (X − IM)< 0,then capital inflows

A depreciating currency makes foreign inputs cheaper and shifts the aggregate supply curve outward.

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

When the dollar appreciates,the prices of imported inputs

In an open economy,an increase in (G − T)will

If the U.S.government runs a budget deficit (G − T),that deficit must be financed by an excess of

The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require

Appreciation of the Japanese yen will lead to a significant balance of trade surplus.

Because monetary stimulus overwhelmed fiscal contraction in the United States during the 1992- 2000 period,

If European economies experience a period of sustained recession and the United States does not,what will happen in the United States?

Between 1981 and 1986,as the federal budget deficit increased,

The principal danger to Japan in 2001 when the yen was appreciating was that this would

The depreciation of the Japanese yen in 2002 would ease their problems with regard to recession.

The worst remedy for curing the U.S.trade deficit is to

Appreciation of the Japanese Yen would lead to