Question 1

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

Accepted Answer

A) increase income and imports and lower the trade deficit. 
B) increase income and imports and raise the trade deficit. 
C) decrease income and imports and lower the trade deficit. 
D) decrease income and imports and raise the trade deficit. 
A) increase income and imports and lower the trade deficit. 
B) increase income and imports and raise the trade deficit. 
C) decrease income and imports and lower the trade deficit. 
D) decrease income and imports and raise the trade deficit.

Question 2

If an economy has a trade policy of a fixed exchange rate, then its monetary and fiscal policies are:

Accepted Answer

A) independent of the trade policy. 
B) independent of the trade regime. 
C) less restricted when dealing with domestic goals. 
D) more restricted when dealing with domestic goals. 
A) independent of the trade policy. 
B) independent of the trade regime. 
C) less restricted when dealing with domestic goals. 
D) more restricted when dealing with domestic goals.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Contractionary fiscal policy in the United States reduces domestic income, prices, and interest rates, so the exchange rate will decrease.

Accepted Answer

A) True 
 B)False

Question 5

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 6

When the euro rose relative to the dollar in the early 2000s, it:

Accepted Answer

A) encouraged European imports and exports. 
B) discouraged European imports and exports 
C) encouraged European imports and discouraged European exports. 
D) discouraged European imports and encouraged European exports. 
A) encouraged European imports and exports. 
B) discouraged European imports and exports 
C) encouraged European imports and discouraged European exports. 
D) discouraged European imports and encouraged European exports.

Question 7

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

Accepted Answer

A) be ambiguous with respect to the trade deficit. 
B) increase a trade surplus. 
C) decrease a trade deficit. 
D) increase a trade deficit. 
A) be ambiguous with respect to the trade deficit. 
B) increase a trade surplus. 
C) decrease a trade deficit. 
D) increase a trade deficit.

Question 8

If the value of the dollar falls relative to other currencies, the price of goods and services produced in the United States will appear:

Accepted Answer

A) more expensive to U.S.citizens. 
B) the same to foreigners. 
C) more expensive to foreigners. 
D) cheaper to foreigners. 
A) more expensive to U.S.citizens. 
B) the same to foreigners. 
C) more expensive to foreigners. 
D) cheaper to foreigners.

Question 9

An increase in a balance of trade surplus tends to:

Accepted Answer

A) exert an expansionary effect on the economy. 
B) exert a contractionary effect on the economy. 
C) occur when a country's exchange rate is too high. 
D) occur when a country's exports are too expensive. 
A) exert an expansionary effect on the economy. 
B) exert a contractionary effect on the economy. 
C) occur when a country's exchange rate is too high. 
D) occur when a country's exports are too expensive.

Question 10

The trade balance is:

Accepted Answer

A) exports less imports. 
B) imports less exports. 
C) total trade this year less total trade last year. 
D) sum of imports and exports. 
A) exports less imports. 
B) imports less exports. 
C) total trade this year less total trade last year. 
D) sum of imports and exports.

Question 11

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 12

Considering only its direct effect on income, the effect of monetary policy is that:

Accepted Answer

A) both expansionary and contractionary policies tend to increase the trade deficit. 
B) both expansionary and contractionary policies tend to decrease the trade deficit. 
C) expansionary policy tends to increase the trade deficit and contractionary policy tends to decrease it. 
D) expansionary policy tends to decrease the trade deficit and contractionary policy tends to increase it. 
A) both expansionary and contractionary policies tend to increase the trade deficit. 
B) both expansionary and contractionary policies tend to decrease the trade deficit. 
C) expansionary policy tends to increase the trade deficit and contractionary policy tends to decrease it. 
D) expansionary policy tends to decrease the trade deficit and contractionary policy tends to increase it.

Question 13

If the United States is experiencing inflation, then it will be most willing to engage in international policy coordination if coordination requires:

Accepted Answer

A) weakening the dollar. 
B) strengthening the dollar. 
C) expansionary U.S.fiscal policy. 
D) expansionary U.S.monetary policy. 
A) weakening the dollar. 
B) strengthening the dollar. 
C) expansionary U.S.fiscal policy. 
D) expansionary U.S.monetary policy.

Question 14

The likely effect of a contractionary monetary policy in Japan would be to:

Accepted Answer

A) decrease the value of the dollar and the U.S.trade deficit. 
B) increase the value of the dollar and the U.S.trade deficit. 
C) decrease the value of the dollar and increase the U.S.trade deficit. 
D) increase the value of the dollar and decrease the U.S.trade deficit. 
A) decrease the value of the dollar and the U.S.trade deficit. 
B) increase the value of the dollar and the U.S.trade deficit. 
C) decrease the value of the dollar and increase the U.S.trade deficit. 
D) increase the value of the dollar and decrease the U.S.trade deficit.

Question 15

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

Accepted Answer

A) its domestic goal and its international commitment simultaneously. 
B) its domestic goal but not its international commitment. 
C) none of its domestic goals. 
D) none of its international commitments. 
A) its domestic goal and its international commitment simultaneously. 
B) its domestic goal but not its international commitment. 
C) none of its domestic goals. 
D) none of its international commitments.

Question 16

Over the last 30 years, the value of the dollar has:

Accepted Answer

A) increased steadily. 
B) decreased steadily. 
C) changed little. 
D) fluctuated significantly. 
A) increased steadily. 
B) decreased steadily. 
C) changed little. 
D) fluctuated significantly.

Question 17

In the early 2000s, the dollar depreciated relative to other currencies.Foreign policy makers claimed that the U.S.government must curtail its spending and encourage its citizens to save more.What does the U.S.saving rate have to do with the value of the dollar?

Accepted Answer

A) Nothing; those who are giving this advice do not understand economics. 
B) More savings would mean more investment, and more investment would increase the value of the dollar. 
C) More domestic saving would increase the interest rate, attracting more funds to the United States and thereby raising the value of the dollar. 
D) More U.S.savings would reduce the consumption of foreign goods, reducing the trade deficit. 
A) Nothing; those who are giving this advice do not understand economics. 
B) More savings would mean more investment, and more investment would increase the value of the dollar. 
C) More domestic saving would increase the interest rate, attracting more funds to the United States and thereby raising the value of the dollar. 
D) More U.S.savings would reduce the consumption of foreign goods, reducing the trade deficit.

Question 18

When other countries threatened to limit Japanese imports, Japan took steps to:

Accepted Answer

A) increase the value of the yen and increase its trade surplus. 
B) increase the value of the yen and decrease its trade surplus. 
C) decrease the value of the yen and increase its trade surplus. 
D) decrease the value of the yen and decrease its trade surplus. 
A) increase the value of the yen and increase its trade surplus. 
B) increase the value of the yen and decrease its trade surplus. 
C) decrease the value of the yen and increase its trade surplus. 
D) decrease the value of the yen and decrease its trade surplus.

Question 19

In March 2009, China held $1.95 trillion in foreign reserves.Approximately 40 percent of China's reserves were in the form of U.S.Treasuries.This is an example of:

Accepted Answer

A) a crowding out effect. 
B) internationalizing the U.S.debt. 
C) policy conversion. 
D) the real debt. 
A) a crowding out effect. 
B) internationalizing the U.S.debt. 
C) policy conversion. 
D) the real debt.

Question 20

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.

Exam 36: Macro Policy in a Global Setting

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

If an economy has a trade policy of a fixed exchange rate, then its monetary and fiscal policies are:

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

Contractionary fiscal policy in the United States reduces domestic income, prices, and interest rates, so the exchange rate will decrease.

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

When the euro rose relative to the dollar in the early 2000s, it:

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

If the value of the dollar falls relative to other currencies, the price of goods and services produced in the United States will appear:

An increase in a balance of trade surplus tends to:

The trade balance is:

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:

Considering only its direct effect on income, the effect of monetary policy is that:

If the United States is experiencing inflation, then it will be most willing to engage in international policy coordination if coordination requires:

The likely effect of a contractionary monetary policy in Japan would be to:

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

Over the last 30 years, the value of the dollar has:

In the early 2000s, the dollar depreciated relative to other currencies.Foreign policy makers claimed that the U.S.government must curtail its spending and encourage its citizens to save more.What does the U.S.saving rate have to do with the value of the dollar?

When other countries threatened to limit Japanese imports, Japan took steps to:

In March 2009, China held $1.95 trillion in foreign reserves.Approximately 40 percent of China's reserves were in the form of U.S.Treasuries.This is an example of:

A trade surplus occurs when:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

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