Exam 36: Macro Policy in a Global Setting

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

A low exchange rate for the dollar makes foreign currencies:

The large budget deficits of the U.S. government in the 2000s have not increased domestic interest rates because:

International goals become primary goals when:

A large trade deficit that the United States has with China would be narrowed by a:

What is the primary benefit to the United States of a high price for the dollar in the foreign exchange market?

If a country's trade deficit increases, then:

In the 1980s, Japan had a significant trade surplus. The G-7 nations wanted Japan to reduce its trade surplus, and therefore they pressured the Japanese government to:

If Japan has a trade surplus and the United States has a trade deficit, the trade gap could be eliminated by:

As special adviser for international economic policy,you have been called in to advise the President.For domestic reasons,the President has decided to attempt to stimulate the economy with a combination of increased deficit spending (expansionary fiscal policy)and loose money (expansionary monetary policy).Domestic considerations are the dominant factor in this decision,but your advice is sought as to the likely international consequences of this action.Of particular interest is the effect of this policy initiative on exchange rates and the trade balance.Give a complete explanation of the likely net effect of this policy.Include in your discussion the most important ways expansionary fiscal and monetary policy can affect exchange rates and the trade balance and also the separate net effects of expansionary fiscal and monetary policy respectively.

A higher exchange rate value of the dollar reduces inflation but has a contractionary effect on the economy.

What will be the effect of a contractionary monetary policy on the trade balance?

For most countries, international goals are generally:

As domestic income decreases, the trade balance:

Which of the following statements best describes the relationship between exchange rates and aggregate demand for U.S. output?

Using the supply and demand diagram for euros,explain verbally and demonstrate graphically the effect of each of the following scenarios on the exchange rate for euros: (1)An increase in income in Europe; (2)An increase in the price level in the U.S. ; (3)A decrease in the interest rate in Europe.

Suppose the U.S wants to increase the value of the dollar relative to the Japanese yen.How might the U.S.achieve its goal without undertaking domestic policy changes,but rather by getting the Japanese to undertake some domestic policy?

During 2007, the United States and Japan announced possible limits on Chinese imports through higher tariffs on Chinese products. To avoid these limits, China would have had to:

If Canada is growing too rapidly, and at the same time is agreeing to work toward reducing its trade surplus, Canada could forsake:

Why is there a significant debate about our international macroeconomic goals with respect to exchange rates and the trade deficit?