Exam 36: Macro Policy in a Global Setting

The Chinese government slowly increased the value of the yuan from 8.1 yuan per dollar in January 2006 to 7.69 yuan per dollar in May 2007. The Chinese government's objective in increasing the value of its currency was to:

An effective way for a country to keep its currency fixed at a desirable level is to:

Considering only its direct effect on income, an expansionary monetary policy tends to:

In order to pay foreigners interest on the debt, the United States must:

For each of the following situations,state for each what aggregate demand policy the country was most likely following: (a)The economy has been growing and experiencing inflation.At the same time interest rates have been declining while the trade deficit has worsened. (b)The economy has been growing and experiencing inflation.At the same time interest rates have been rising while the trade deficit has worsened.In this case,rising interest rates failed to attract significant capital inflow. (c)Inflation has subsided while the exchange rate has risen. (d)The economy's competitiveness has eroded due to a rising exchange rate and domestic inflation and interest rates have risen.Still,the economy has been enjoying healthy growth.In this case,exchange rates have risen because rising interest rates attracted significant capital inflow.

An earlier chapter discussed the issue of crowding out.Crowding out refers to the idea that a budget deficit will add government borrowing to other demands for loans,driving up the interest rate,which will reduce private investment.How do international considerations (the possibility that the debt is purchased by foreigners)affect this issue? Is it possible to internationalize the debt? Does that mean that crowding out is not a problem in this case?

Explain two different types of reasons domestic economic policy goals tend to get more attention than international economic policy goals.

If Japan adopts an expansionary monetary policy, the value of the dollar would:

When other countries threatened to limit Japanese imports, Japan took steps to:

The U.S. exchange rate has:

In the mid-1960s, the United States was running an expansionary fiscal policy to support the war effort in Vietnam. This likely:

A key reason that the value of the dollar did not change relative to the Chinese yuan in the early 2000s was:

Is it desirable for countries to coordinate their monetary and fiscal policies,or does it work better to have each country decide its own policies independently? Explain.

Without considering the effect that a change in the value of a currency might have on trade, the net effect of a contractionary fiscal policy is:

Considering only its direct effect on income, contractionary monetary policy tends to:

Considering an economy with a current trade surplus and considering only the direct effect of income, an expansionary monetary policy tends to:

An increase in a balance of trade surplus tends to:

A weaker dollar would be a good policy if the U.S. government wanted to:

A trade deficit allows a country to:

When a country internationalizes its debt, it: