Question 1

If a country wants maximum flexibility to pursue its domestic macroeconomic goals, it:

Accepted Answer

A) does not matter what type of exchange rate system it uses. 
B) should use a flexible exchange rate. 
C) should use a fixed exchange rate. 
D) should use the gold standard. 
A) does not matter what type of exchange rate system it uses. 
B) should use a flexible exchange rate. 
C) should use a fixed exchange rate. 
D) should use the gold standard.

Question 2

The economic goals about which there is a substantial agreement include all of the following except:

Accepted Answer

A) a high level of employment. 
B) a low rate of inflation. 
C) a high rate of economic growth. 
D) a large trade surplus. 
A) a high level of employment. 
B) a low rate of inflation. 
C) a high rate of economic growth. 
D) a large trade surplus.

Question 3

Suppose the U.S. economy is going into a recession. Considering the effect of monetary policy on trade through its impact on income only, the domestic problem calls for:

Accepted Answer

A) contractionary monetary policy, which will increase the U.S. trade deficit. 
B) contractionary monetary policy, which will decrease the U.S. trade deficit. 
C) expansionary monetary policy, which will increase the U.S. trade deficit. 
D) expansionary monetary policy, which will decrease the U.S. trade deficit. 
A) contractionary monetary policy, which will increase the U.S. trade deficit. 
B) contractionary monetary policy, which will decrease the U.S. trade deficit. 
C) expansionary monetary policy, which will increase the U.S. trade deficit. 
D) expansionary monetary policy, which will decrease the U.S. trade deficit.

Question 4

Which of the following best explains a government's motive for reducing the value of its currency?

Accepted Answer

A) Increase the trade balance and prevent the price level from falling further. 
B) Increase the trade balance and prevent the price level from rising further. 
C) Decrease the trade balance and prevent the price level from rising further. 
D) Decrease the trade balance and prevent the price level from falling further. 
A) Increase the trade balance and prevent the price level from falling further. 
B) Increase the trade balance and prevent the price level from rising further. 
C) Decrease the trade balance and prevent the price level from rising further. 
D) Decrease the trade balance and prevent the price level from falling further.

Question 5

A weaker dollar:

Accepted Answer

A) raises inflation and contracts the economy. 
B) reduces inflation and contracts the economy. 
C) raises inflation and expands the economy. 
D) reduces inflation and expands the economy. 
A) raises inflation and contracts the economy. 
B) reduces inflation and contracts the economy. 
C) raises inflation and expands the economy. 
D) reduces inflation and expands the economy.

Question 6

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

Accepted Answer

A) decrease imports. 
B) increase exports. 
C) increase imports. 
D) decrease the trade deficit. 
A) decrease imports. 
B) increase exports. 
C) increase imports. 
D) decrease the trade deficit.

Question 7

In 2015 the euro depreciated more than 30 percent against the dollar. As a result, European:

Accepted Answer

A) exports rose, boosting the economy. 
B) imports rose, boosting the economy. 
C) exports declined, dragging down the economy. 
D) imports declined, dragging down the economy. 
A) exports rose, boosting the economy. 
B) imports rose, boosting the economy. 
C) exports declined, dragging down the economy. 
D) imports declined, dragging down the economy.

Question 8

Expansionary fiscal policy increases income, which increases imports, and this in turn increases the size of the trade deficit.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the United States is going into a recession. To prevent the recession from worsening, the United States could do all the following except asking:

Accepted Answer

A) Japan to adopt policies that reduce its trade surplus with the United States. 
B) China to reduce trade barriers to U.S. exports. 
C) Japan to adopt a more expansionary fiscal policy. 
D) the European Union to adopt a more contractionary monetary policy. 
A) Japan to adopt policies that reduce its trade surplus with the United States. 
B) China to reduce trade barriers to U.S. exports. 
C) Japan to adopt a more expansionary fiscal policy. 
D) the European Union to adopt a more contractionary monetary policy.

Question 10

In the short run, the net effect of an expansionary monetary policy is a lower trade deficit.

Accepted Answer

A) True 
 B)False

Question 11

Domestic goals dominate international goals for all of the following reasons except:

Accepted Answer

A) international goals are ambiguous. 
B) international goals affect a country's population indirectly. 
C) countries are becoming more economically integrated. 
D) in politics, indirect effects take a back seat. 
A) international goals are ambiguous. 
B) international goals affect a country's population indirectly. 
C) countries are becoming more economically integrated. 
D) in politics, indirect effects take a back seat.

Question 12

Imagine that Canada and the U.S.only trade internationally with each other.The Canadian government has recently undertaken an expansionary monetary policy.What impact will this have on the Canadian dollar exchange rate and Canada's trade balance? What impact will this have on the U.S.dollar exchange rate and U.S.trade balance? Briefly explain.

Accepted Answer

Expansionary monetary policy in Canada w

Question 13

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

Accepted Answer

A) increase U.S. exports and expand the U.S. economy. 
B) increase U.S. imports and expand the U.S. economy. 
C) reduce U.S. exports and slow the U.S. economy. 
D) reduce U.S. imports and slow the U.S. economy. 
A) increase U.S. exports and expand the U.S. economy. 
B) increase U.S. imports and expand the U.S. economy. 
C) reduce U.S. exports and slow the U.S. economy. 
D) reduce U.S. imports and slow the U.S. economy.

Question 14

A country can have a trade deficit as long as it can:

Accepted Answer

A) purchase foreign assets. 
B) make loans to other countries. 
C) borrow from or sell assets to foreigners. 
D) produce more than it consumes. 
A) purchase foreign assets. 
B) make loans to other countries. 
C) borrow from or sell assets to foreigners. 
D) produce more than it consumes.

Question 15

Which of the following combinations would be most likely to increase U.S. imports from Japan and reduce U.S. exports to Japan?

Accepted Answer

A) Contractionary monetary policy in both the United States and Japan 
B) Expansionary monetary policy in both the United States and Japan 
C) Contractionary monetary policy in the United States and expansionary monetary policy in Japan 
D) Expansionary monetary policy in the United States and contractionary monetary policy in Japan 
A) Contractionary monetary policy in both the United States and Japan 
B) Expansionary monetary policy in both the United States and Japan 
C) Contractionary monetary policy in the United States and expansionary monetary policy in Japan 
D) Expansionary monetary policy in the United States and contractionary monetary policy in Japan

Question 16

Explain the effect of an expansionary monetary policy on the trade balance.

Accepted Answer

Expansionary monetary policy increases i

Question 17

What effect does a high exchange rate have on a country's exports and imports?

Accepted Answer

A high exchange rate makes exp

Question 18

What are the benefits and costs of a trade deficit?

Accepted Answer

A trade deficit has short-run benefits a

Question 19

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

Accepted Answer

A) be ambiguous with respect to the exchange rate, while decreasing the trade deficit. 
B) be ambiguous with respect to the trade deficit, while increasing the exchange rate. 
C) decrease the exchange rate and increase a trade deficit. 
D) increase the exchange rate and decrease a trade deficit. 
A) be ambiguous with respect to the exchange rate, while decreasing the trade deficit. 
B) be ambiguous with respect to the trade deficit, while increasing the exchange rate. 
C) decrease the exchange rate and increase a trade deficit. 
D) increase the exchange rate and decrease a trade deficit.

Question 20

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

Accepted Answer

A) increase income and imports, shifting the U.S. trade balance in the direction of a deficit. 
B) increase income and imports, shifting the U.S. trade balance in the direction of a surplus. 
C) decrease income and imports, shifting the U.S. trade balance in the direction of a deficit. 
D) decrease income and imports, shifting the U.S. trade balance in the direction of a surplus. 
A) increase income and imports, shifting the U.S. trade balance in the direction of a deficit. 
B) increase income and imports, shifting the U.S. trade balance in the direction of a surplus. 
C) decrease income and imports, shifting the U.S. trade balance in the direction of a deficit. 
D) decrease income and imports, shifting the U.S. trade balance in the direction of a surplus.

Exam 36: Macro Policy in a Global Setting

If a country wants maximum flexibility to pursue its domestic macroeconomic goals, it:

The economic goals about which there is a substantial agreement include all of the following except:

Suppose the U.S. economy is going into a recession. Considering the effect of monetary policy on trade through its impact on income only, the domestic problem calls for:

Which of the following best explains a government's motive for reducing the value of its currency?

A weaker dollar:

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

In 2015 the euro depreciated more than 30 percent against the dollar. As a result, European:

Expansionary fiscal policy increases income, which increases imports, and this in turn increases the size of the trade deficit.

Suppose the United States is going into a recession. To prevent the recession from worsening, the United States could do all the following except asking:

In the short run, the net effect of an expansionary monetary policy is a lower trade deficit.

Domestic goals dominate international goals for all of the following reasons except:

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

A country can have a trade deficit as long as it can:

Which of the following combinations would be most likely to increase U.S. imports from Japan and reduce U.S. exports to Japan?

Explain the effect of an expansionary monetary policy on the trade balance.

What effect does a high exchange rate have on a country's exports and imports?

What are the benefits and costs of a trade deficit?

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

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

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters