Question 1

If New Yorkers decrease their purchases of French champagne, assuming all else remains constant, this will ________ of the United States.

Accepted Answer

A)  increase the balance of trade 
B)  decrease net exports 
C)  decrease the current account balance 
D)  increase the trade deficit 
E)  increase the balance of payments 
A)  increase the balance of trade 
B)  decrease net exports 
C)  decrease the current account balance 
D)  increase the trade deficit 
E)  increase the balance of payments

Question 2

Expansionary monetary policy will have what effect on the components of aggregate demand?

Accepted Answer

A)  Consumption, investment, and net exports will rise. 
B)  Consumption and investment will rise, but net exports will fall. 
C)  Consumption will rise, but investment and net exports will fall. 
D)  Consumption will fall, but investment and net exports will rise. 
A)  Consumption, investment, and net exports will rise. 
B)  Consumption and investment will rise, but net exports will fall. 
C)  Consumption will rise, but investment and net exports will fall. 
D)  Consumption will fall, but investment and net exports will rise.

Question 3

What is the relationship between the balance of trade and the current account balance?

Accepted Answer

The balance of trade measures the differ

Question 4

Net foreign investment minus net foreign portfolio investment is equal to

Accepted Answer

A)  capital outflows. 
B)  net foreign financial investment. 
C)  the balance of trade. 
D)  net foreign direct investment. 
A)  capital outflows. 
B)  net foreign financial investment. 
C)  the balance of trade. 
D)  net foreign direct investment.

Question 5

If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion, what is the balance on the capital account, assuming no statistical discrepancy?

Accepted Answer

A)  $1,445 billion 
B)  $239 billion 
C)  $0 
D)  -$239 billion 
A)  $1,445 billion 
B)  $239 billion 
C)  $0 
D)  -$239 billion

Question 6

If the dollar depreciates against the Indian rupee

Accepted Answer

A)  Indian imports to the U.S. become less expensive. 
B)  U.S. exports to India become less expensive. 
C)  U.S. exports to India become more expensive. 
D)  The value of Indian imports to the United States does not change. 
A)  Indian imports to the U.S. become less expensive. 
B)  U.S. exports to India become less expensive. 
C)  U.S. exports to India become more expensive. 
D)  The value of Indian imports to the United States does not change.

Question 7

Figure 29-2  
-Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

Accepted Answer

A)  decreased; 0.46 
B)  increased; 2.17 
C)  decreased; 2.00 
D)  increased; 0.50 
A)  decreased; 0.46 
B)  increased; 2.17 
C)  decreased; 2.00 
D)  increased; 0.50

Question 8

If the current account is in deficit and the capital account is zero, then

Accepted Answer

A)  the financial account must be in surplus. 
B)  the balance of trade must be in surplus. 
C)  the balance of payments must be in surplus. 
D)  there is a capital outflow. 
E)  the balance of services must be in surplus. 
A)  the financial account must be in surplus. 
B)  the balance of trade must be in surplus. 
C)  the balance of payments must be in surplus. 
D)  there is a capital outflow. 
E)  the balance of services must be in surplus.

Question 9

When the United States sends money to Indonesia to help tsunami survivors, in what account is this transaction recorded?

Accepted Answer

A)  the financial account 
B)  the capital account 
C)  the current account 
D)  the foreign exchange account 
A)  the financial account 
B)  the capital account 
C)  the current account 
D)  the foreign exchange account

Question 10

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

Accepted Answer

Investment in the United States was grea

Question 11

Which of the following would decrease the current account balance of the United States?

Accepted Answer

A)  a decrease in imports 
B)  a decrease in the amount of money the U.S. government sends in foreign aid to other countries 
C)  a decrease in the balance of trade 
D)  a decrease in the amount of income U.S. companies pay out to foreigners who own investments in the U.S. 
A)  a decrease in imports 
B)  a decrease in the amount of money the U.S. government sends in foreign aid to other countries 
C)  a decrease in the balance of trade 
D)  a decrease in the amount of income U.S. companies pay out to foreigners who own investments in the U.S.

Question 12

Which of the following transactions would be included in Japan's current account?

Accepted Answer

A)  A Japanese citizen purchases 50 shares of Google stock. 
B)  An American citizen purchases 50 shares of Toshiba stock. 
C)  A Japanese citizen purchases a new Toyota made in Japan. 
D)  An American citizen purchases a new Toyota made in Japan. 
A)  A Japanese citizen purchases 50 shares of Google stock. 
B)  An American citizen purchases 50 shares of Toshiba stock. 
C)  A Japanese citizen purchases a new Toyota made in Japan. 
D)  An American citizen purchases a new Toyota made in Japan.

Question 13

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

Accepted Answer

No. In an open economy, the sa

Question 14

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

Accepted Answer

Higher incomes in the United States will

Question 15

The balance of trade includes trade in

Accepted Answer

A)  goods only. 
B)  services only. 
C)  both goods and services. 
D)  neither goods nor services. 
A)  goods only. 
B)  services only. 
C)  both goods and services. 
D)  neither goods nor services.

Question 16

How is the impact of contractionary monetary policy different in an open economy than in a closed economy?

Accepted Answer

In an open economy, the higher interest

Question 17

Suppose that Federal Reserve policy leads to higher interest rates in the United States. How will this policy affect real GDP in the short run if the United States is a closed economy, and how will it affect real GDP in the short run if the United States is an open economy?

Accepted Answer

For a closed economy, higher interest ra

Question 18

If the dollar appreciates, how will aggregate demand in the United States be affected?

Accepted Answer

A)  Aggregate demand will increase as exports increase and imports decrease. 
B)  Aggregate demand will increase as imports increase and exports decrease. 
C)  Aggregate demand will decrease as imports increase and exports decrease. 
D)  Aggregate demand will decrease as exports increase and imports decrease. 
A)  Aggregate demand will increase as exports increase and imports decrease. 
B)  Aggregate demand will increase as imports increase and exports decrease. 
C)  Aggregate demand will decrease as imports increase and exports decrease. 
D)  Aggregate demand will decrease as exports increase and imports decrease.

Question 19

Why is the balance of payments always zero?

Accepted Answer

If a country spends more on goods and se

Question 20

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

Accepted Answer

In a closed economy, an expansionary fis

Exam 29: Macroeconomics in an Open Economy

If New Yorkers decrease their purchases of French champagne, assuming all else remains constant, this will ________ of the United States.

Expansionary monetary policy will have what effect on the components of aggregate demand?

What is the relationship between the balance of trade and the current account balance?

Net foreign investment minus net foreign portfolio investment is equal to

If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion, what is the balance on the capital account, assuming no statistical discrepancy?

If the dollar depreciates against the Indian rupee

Figure 29-2 -Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

If the current account is in deficit and the capital account is zero, then

When the United States sends money to Indonesia to help tsunami survivors, in what account is this transaction recorded?

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

Which of the following would decrease the current account balance of the United States?

Which of the following transactions would be included in Japan's current account?

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

The balance of trade includes trade in

How is the impact of contractionary monetary policy different in an open economy than in a closed economy?

Suppose that Federal Reserve policy leads to higher interest rates in the United States. How will this policy affect real GDP in the short run if the United States is a closed economy, and how will it affect real GDP in the short run if the United States is an open economy?

If the dollar appreciates, how will aggregate demand in the United States be affected?

Why is the balance of payments always zero?

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

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

Figure 29-2 -Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has to dollars per pound.