Exam 37: Exchange Rates and the Macroeconomy

Suppose that the Fed decides to increase the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Table 20-1 Suppose the economy of Macroland is described by the following: C = 200 + .8DI (DI = disposable income) I = 300 + .2Y - 50r (Y = GDP) (r, the interest rate, is measured in percentage points.For example, a 9 percent interest rate is r = 9). For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate at r = 5 G = 750 T = .25Y X = 200 M = 150 + .2Y Hint: DI = Y - T -From Table 20-1, compute equilibrium GDP for Macroland.

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

A favorable supply shock abroad would

In an open economy net exports must always be positive.

Why is monetary policy more effective in an open economy than in a closed economy?

A rise in the domestic interest rate leads to capital

One of the results of the strong economic growth in the United States relative to the rest of the world is a

If a currency depreciates, a country's net exports

What effect did the decrease in the value of the dollar have on the U.S.trade deficit in the period from 2006 to 2009?

In the 1990s the United States eliminated its budget deficit and expanded the money supply.This should have led to

A currency appreciation is disinflationary and contractionary if the

An increase in the price level in the economies of U.S.trading partners will cause the aggregate expenditures function in the United States to

If a country tries to stimulate the economy with fiscal policy, the effects will be exchange rate

International capital flows are purchases and sales of ____ across national borders.

Figure 20-9 -In Figure 20-9, the C + I + G + (X - IM)₁ line is flatter than the C + I + G + (X - IM)₀ line because the

The expected effects of a tighter monetary policy are

Figure 20-1 -Which of the graphs in Figure 20-1 best illustrates the behavior of exports and imports in relation to U.S.real GDP?

The expected effects of monetary expansion are

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?