Question 1

Assuming the United States is the "domestic" country, if the real exchange rate between the United States and France increases from 1.5 to 1.8

Accepted Answer

A)  the prices of U.S. goods and services have increased by 53% relative to France. 
B)  the prices of U.S. goods and services have increased by 3% relative to France. 
C)  the prices of U.S. goods and services have decreased by 16% relative to France. 
D)  the prices of U.S. goods and services have increased by 20% relative to France. 
A)  the prices of U.S. goods and services have increased by 53% relative to France. 
B)  the prices of U.S. goods and services have increased by 3% relative to France. 
C)  the prices of U.S. goods and services have decreased by 16% relative to France. 
D)  the prices of U.S. goods and services have increased by 20% relative to France.

Question 2

National saving equals

Accepted Answer

A)  income - taxes - consumption. 
B)  taxes - government spending. 
C)  income - consumption - government spending. 
D)  private saving + public saving - net foreign investment. 
A)  income - taxes - consumption. 
B)  taxes - government spending. 
C)  income - consumption - government spending. 
D)  private saving + public saving - net foreign investment.

Question 3

Expansionary fiscal policy should raise the exchange rate of the dollar.

Accepted Answer

A) True 
 B)False

Question 4

Figure 29-1  
-Refer to Figure 29-1. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

Accepted Answer

A)  Supply would decrease, demand would decrease and the economy moves from B to C to D. 
B)  Supply would increase, demand would decrease and the economy moves from C to B to A. 
C)  Supply would decrease, demand would increase and the economy moves from A to D to C. 
D)  Supply would increase, demand would increase and the economy moves from D to A to B. 
A)  Supply would decrease, demand would decrease and the economy moves from B to C to D. 
B)  Supply would increase, demand would decrease and the economy moves from C to B to A. 
C)  Supply would decrease, demand would increase and the economy moves from A to D to C. 
D)  Supply would increase, demand would increase and the economy moves from D to A to B.

Question 5

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

Accepted Answer

When the government runs a budget defici

Question 6

If the nominal exchange rate between the American dollar and the New Zealand dollar is 1.36 New Zealand dollars per American dollar, how many American dollars are required to buy a product that costs 3.50 New Zealand dollars?

Accepted Answer

A)  $2.14 
B)  $2.24 
C)  $2.57 
D)  $4.76 
A)  $2.14 
B)  $2.24 
C)  $2.57 
D)  $4.76

Question 7

If net foreign investment is negative, which of the following must be true?

Accepted Answer

A)  Capital outflows are greater than capital inflows. 
B)  Domestic investment must be greater than national saving. 
C)  Net exports are positive. 
D)  Private saving is greater than public saving. 
A)  Capital outflows are greater than capital inflows. 
B)  Domestic investment must be greater than national saving. 
C)  Net exports are positive. 
D)  Private saving is greater than public saving.

Question 8

If net exports are negative

Accepted Answer

A)  net foreign investment is also negative. 
B)  capital inflows must be less than capital outflows. 
C)  net foreign investment is positive. 
D)  Both A and B are correct. 
A)  net foreign investment is also negative. 
B)  capital inflows must be less than capital outflows. 
C)  net foreign investment is positive. 
D)  Both A and B are correct.

Question 9

In recent decades the United States has incurred overall balance of payments deficits.

Accepted Answer

A) True 
 B)False

Question 10

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso, then

Accepted Answer

A)  both the peso and dollar have appreciated. 
B)  both the peso and dollar have depreciated. 
C)  the peso has appreciated and the dollar has depreciated. 
D)  the peso has depreciated and the dollar has appreciated. 
A)  both the peso and dollar have appreciated. 
B)  both the peso and dollar have depreciated. 
C)  the peso has appreciated and the dollar has depreciated. 
D)  the peso has depreciated and the dollar has appreciated.

Question 11

Holding all else constant, a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Accepted Answer

A) True 
 B)False

Question 12

Following a tax cut by government, domestic investment will ________ and net exports will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 13

How does expansionary monetary policy affect net exports?

Accepted Answer

A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports. 
A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports.

Question 14

The purchase of foreign stocks and bonds by a U.S. brokerage firm is an example of capital inflows to the United States.

Accepted Answer

A) True 
 B)False

Question 15

Net foreign investment is a measure of net capital outflows, equal to capital outflows minus capital inflows in a given period of accounting.

Accepted Answer

A) True 
 B)False

Question 16

The balance of trade is defined as

Accepted Answer

A)  the difference between the balance of the current account and the balance of the capital account. 
B)  the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C)  the difference between the value of the goods a country exports and the value of the goods a country imports. 
D)  the difference between the balance of the current account and the balance of the financial account. 
A)  the difference between the balance of the current account and the balance of the capital account. 
B)  the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C)  the difference between the value of the goods a country exports and the value of the goods a country imports. 
D)  the difference between the balance of the current account and the balance of the financial account.

Question 17

The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by

Accepted Answer

A)  federal budget deficits. 
B)  "flight to quality" as foreign investors favored U.S. investments. 
C)  a sharp decline in private saving. 
D)  Both B and C are correct. 
A)  federal budget deficits. 
B)  "flight to quality" as foreign investors favored U.S. investments. 
C)  a sharp decline in private saving. 
D)  Both B and C are correct.

Question 18

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Accepted Answer

In a closed economy, expansionary fiscal

Question 19

A federal budget deficit ________ interest rates, which ________ exchange rates (foreign currency per domestic currency), and ________ the balance of trade.

Accepted Answer

A)  raises; raises; reduces 
B)  reduces; raises; reduces 
C)  raises; reduces; reduces 
D)  reduces; reduces; raises 
A)  raises; raises; reduces 
B)  reduces; raises; reduces 
C)  raises; reduces; reduces 
D)  reduces; reduces; raises

Question 20

How would an increase in the U.S. federal budget deficit affect the exchange rate in the market for dollars?

Accepted Answer

A)  The exchange rate will increase. 
B)  The exchange rate will decrease. 
C)  The exchange rate will not be affected by a change in the federal budget deficit. 
D)  The impact of the increase in the federal budget deficit on the exchange rate cannot be predicted. 
A)  The exchange rate will increase. 
B)  The exchange rate will decrease. 
C)  The exchange rate will not be affected by a change in the federal budget deficit. 
D)  The impact of the increase in the federal budget deficit on the exchange rate cannot be predicted.

Exam 29: Macroeconomics in an Open Economy

Assuming the United States is the "domestic" country, if the real exchange rate between the United States and France increases from 1.5 to 1.8

National saving equals

Expansionary fiscal policy should raise the exchange rate of the dollar.

Figure 29-1 -Refer to Figure 29-1. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

If the nominal exchange rate between the American dollar and the New Zealand dollar is 1.36 New Zealand dollars per American dollar, how many American dollars are required to buy a product that costs 3.50 New Zealand dollars?

If net foreign investment is negative, which of the following must be true?

If net exports are negative

In recent decades the United States has incurred overall balance of payments deficits.

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso, then

Holding all else constant, a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Following a tax cut by government, domestic investment will ________ and net exports will ________.

How does expansionary monetary policy affect net exports?

The purchase of foreign stocks and bonds by a U.S. brokerage firm is an example of capital inflows to the United States.

Net foreign investment is a measure of net capital outflows, equal to capital outflows minus capital inflows in a given period of accounting.

The balance of trade is defined as

The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

A federal budget deficit ________ interest rates, which ________ exchange rates (foreign currency per domestic currency), and ________ the balance of trade.

How would an increase in the U.S. federal budget deficit affect the exchange rate in the market for dollars?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

The International Financial System

Filters

Following a tax cut by government, domestic investment will and net exports will .

A federal budget deficit interest rates, which exchange rates (foreign currency per domestic currency), and the balance of trade.