Question 1

A country must adjust its economy, to maintain an exchange rate, when it is using:

Accepted Answer

A) fiscal policy. 
B) flexible exchange rates. 
C) monetary policy. 
D) fixed exchange rates. 
A) fiscal policy. 
B) flexible exchange rates. 
C) monetary policy. 
D) fixed exchange rates.

Question 2

Using a supply and demand diagram for British Pounds,demonstrate graphically and explain in words how Great Britain can decrease the exchange rate value of the Pound by influencing the private supply of its currency.

Accepted Answer

Britain can use expansionary monetary an

Question 3

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

Accepted Answer

A) increase income and imports, lowering the trade deficit. 
B) increase income and imports, raising the trade deficit. 
C) decrease income and imports, lowering the trade deficit. 
D) decrease income and imports, raising the trade deficit. 
A) increase income and imports, lowering the trade deficit. 
B) increase income and imports, raising the trade deficit. 
C) decrease income and imports, lowering the trade deficit. 
D) decrease income and imports, raising the trade deficit.

Question 4

What does internationalizing the debt mean? What is the potential problem with internationalizing the debt?

Accepted Answer

Internationalizing the debt occurs when

Question 5

Contractionary fiscal policy in the United States will increase the Japanese trade surplus.

Accepted Answer

A) True 
 B)False

Question 6

In the short run, a trade deficit allows more consumption, but in the long run, a trade deficit is a problem because the:

Accepted Answer

A) country eventually will consume more and produce less. 
B) country eventually will sell all its financial assets to foreigners. 
C) domestic currency will appreciate. 
D) country eventually has to produce more than it consumes in order to pay foreigners their profits. 
A) country eventually will consume more and produce less. 
B) country eventually will sell all its financial assets to foreigners. 
C) domestic currency will appreciate. 
D) country eventually has to produce more than it consumes in order to pay foreigners their profits.

Question 7

What has happened to the U.S.trade balance and exchange rate over the past 30 years? What happened to the size of the trade deficits after 2000?

Accepted Answer

The U.S.exchange rate fluctuated signifi

Question 8

In the early 2000s, the George Bush administration passed a series of tax cuts and spending increases to fight a recession. This combination of policies most likely:

Accepted Answer

A) increased the U.S. trade deficit. 
B) decreased the U.S. trade deficit. 
C) had no effect on the trade deficit. 
D) had an unpredictable effect on the trade deficit. 
A) increased the U.S. trade deficit. 
B) decreased the U.S. trade deficit. 
C) had no effect on the trade deficit. 
D) had an unpredictable effect on the trade deficit.

Question 9

Considering its direct effect on income, which of the following policies is most likely to reduce a country's trade deficit?

Accepted Answer

A) An increase in the money supply 
B) A cut in taxes 
C) An increase in government spending 
D) An increase in taxes 
A) An increase in the money supply 
B) A cut in taxes 
C) An increase in government spending 
D) An increase in taxes

Question 10

A trade surplus occurs when:

Accepted Answer

A) imports exceed exports, so that a country is consuming more than it is producing. 
B) imports exceed exports, so that a country is producing more than it is consuming. 
C) exports exceed imports, so that a country is producing more than it is consuming. 
D) exports exceed imports, so that a country is consuming more than it is producing. 
A) imports exceed exports, so that a country is consuming more than it is producing. 
B) imports exceed exports, so that a country is producing more than it is consuming. 
C) exports exceed imports, so that a country is producing more than it is consuming. 
D) exports exceed imports, so that a country is consuming more than it is producing.

Question 11

In the short run, crowding out could be avoided if foreigners:

Accepted Answer

A) sold the U.S. debt at a higher interest rate. 
B) sold the U.S. debt at the existing interest rate. 
C) bought the U.S. debt at a higher interest rate. 
D) bought the U.S. debt at the existing interest rate. 
A) sold the U.S. debt at a higher interest rate. 
B) sold the U.S. debt at the existing interest rate. 
C) bought the U.S. debt at a higher interest rate. 
D) bought the U.S. debt at the existing interest rate.

Question 12

If foreigners decide that they no longer want to acquire U.S. financial assets, we can expect the value of the dollar to:

Accepted Answer

A) fall and the trade deficit to fall. 
B) fall and the trade deficit to rise. 
C) rise and the trade deficit to fall. 
D) rise and the trade deficit to rise. 
A) fall and the trade deficit to fall. 
B) fall and the trade deficit to rise. 
C) rise and the trade deficit to fall. 
D) rise and the trade deficit to rise.

Question 13

Since 1970, the U.S. trade balance has:

Accepted Answer

A) been in surplus in almost every year. 
B) been in deficit in almost every year. 
C) been close to zero in almost every year. 
D) fluctuated between deficit and surplus frequently. 
A) been in surplus in almost every year. 
B) been in deficit in almost every year. 
C) been close to zero in almost every year. 
D) fluctuated between deficit and surplus frequently.

Question 14

The reason that domestic goals tend to dominate the political agenda is that:

Accepted Answer

A) there are no real international goals. 
B) there is complete agreement on international goals, but domestic goals are uncertain. 
C) inflation, unemployment, and growth affect a country's citizens more directly. 
D) trade deficits and exchange rates affect a country's citizens more directly. 
A) there are no real international goals. 
B) there is complete agreement on international goals, but domestic goals are uncertain. 
C) inflation, unemployment, and growth affect a country's citizens more directly. 
D) trade deficits and exchange rates affect a country's citizens more directly.

Exam 36: Macro Policy in a Global Setting

A country must adjust its economy, to maintain an exchange rate, when it is using:

Using a supply and demand diagram for British Pounds,demonstrate graphically and explain in words how Great Britain can decrease the exchange rate value of the Pound by influencing the private supply of its currency.

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

What does internationalizing the debt mean? What is the potential problem with internationalizing the debt?

Contractionary fiscal policy in the United States will increase the Japanese trade surplus.

In the short run, a trade deficit allows more consumption, but in the long run, a trade deficit is a problem because the:

What has happened to the U.S.trade balance and exchange rate over the past 30 years? What happened to the size of the trade deficits after 2000?

In the early 2000s, the George Bush administration passed a series of tax cuts and spending increases to fight a recession. This combination of policies most likely:

Considering its direct effect on income, which of the following policies is most likely to reduce a country's trade deficit?

A trade surplus occurs when:

In the short run, crowding out could be avoided if foreigners:

If foreigners decide that they no longer want to acquire U.S. financial assets, we can expect the value of the dollar to:

Since 1970, the U.S. trade balance has:

The reason that domestic goals tend to dominate the political agenda is that:

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

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