Question 1

To eliminate the trade deficits in the late 1990s would have required, in addition to the reduction of the federal budget deficit, an increase in

Accepted Answer

A)  investment spending. 
B)  the exchange value of the dollar. 
C)  the U.S.price level. 
D)  the saving rate. 
A)  investment spending. 
B)  the exchange value of the dollar. 
C)  the U.S.price level. 
D)  the saving rate.

Question 2

Increases in stock market wealth have caused Americans to increase their saving rate.

Accepted Answer

A) True 
 B)False

Question 3

When the dollar depreciates, the cost to Americans of foreign goods

Accepted Answer

A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls. 
A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls.

Question 4

Theoretically, when a currency depreciates one can predict that

Accepted Answer

A)  the price level will rise and real GDP will rise. 
B)  the price level will fall and real GDP will fall. 
C)  real GDP will rise, but price change is not predictable. 
D)  the price level will rise, but real GDP change is not predictable. 
A)  the price level will rise and real GDP will rise. 
B)  the price level will fall and real GDP will fall. 
C)  real GDP will rise, but price change is not predictable. 
D)  the price level will rise, but real GDP change is not predictable.

Question 5

The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require

Accepted Answer

A)  higher consumption in the future in order to increase imports. 
B)  lower consumption in the future in order to repay interest and principal to foreigners. 
C)  lower consumption in the future in order to finance increased investment. 
D)  higher budget deficits in the future in order to increase the trade surplus. 
A)  higher consumption in the future in order to increase imports. 
B)  lower consumption in the future in order to repay interest and principal to foreigners. 
C)  lower consumption in the future in order to finance increased investment. 
D)  higher budget deficits in the future in order to increase the trade surplus.

Question 6

Depreciation of the Japanese Yen would lead to

Accepted Answer

A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  inward shift in the aggregate demand curve for Japan. 
A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  inward shift in the aggregate demand curve for Japan.

Question 7

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall, which of the following is expected to happen?

Accepted Answer

A)  Country X will export more. 
B)  Economy of Country X will be depressed. 
C)  Net exports will rise for Country X. 
D)  Country Y will import more. 
A)  Country X will export more. 
B)  Economy of Country X will be depressed. 
C)  Net exports will rise for Country X. 
D)  Country Y will import more.

Question 8

The principal danger to Japan in 2001 when the yen was appreciating was that this would

Accepted Answer

A)  increase aggregate demand and make inflation worse. 
B)  decrease aggregate demand and make the recession worse. 
C)  decrease aggregate demand and make inflation worse. 
D)  increase aggregate demand and make the recession worse. 
A)  increase aggregate demand and make inflation worse. 
B)  decrease aggregate demand and make the recession worse. 
C)  decrease aggregate demand and make inflation worse. 
D)  increase aggregate demand and make the recession worse.

Question 9

Figure 20-7
  
-In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X - IM) for an open economy.Which of the following would cause a movement from C to B?

Accepted Answer

A)  a European economic expansion 
B)  an appreciation of the dollar 
C)  a depreciation of the dollar 
D)  an increase in the money supply 
A)  a European economic expansion 
B)  an appreciation of the dollar 
C)  a depreciation of the dollar 
D)  an increase in the money supply

Question 10

International capital flows in an open economy have the effect of

Accepted Answer

A)  reducing the power of monetary policy. 
B)  increasing the power of monetary policy. 
C)  increasing the power of monetary policy in an expansion and reducing it in a contraction. 
D)  reducing the power of monetary policy in an expansion and increasing it in a contraction. 
A)  reducing the power of monetary policy. 
B)  increasing the power of monetary policy. 
C)  increasing the power of monetary policy in an expansion and reducing it in a contraction. 
D)  reducing the power of monetary policy in an expansion and increasing it in a contraction.

Question 11

What are the economic effects of a currency depreciation?

Accepted Answer

A)  It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output may fall as well. 
A)  It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output may fall as well.

Question 12

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with an expansionary monetary policy?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 13

A large tax cut in the United States should lead to an increase in the trade deficit.

Accepted Answer

A) True 
 B)False

Question 14

A recession abroad would cause U.S.net exports to rise.

Accepted Answer

A) True 
 B)False

Question 15

In an open economy, aggregate supply consists of domestic production plus imports.

Accepted Answer

A) True 
 B)False

Question 16

Figure 20-4
  
-Which of the situations illustrated in Figure 20-4 shows a currency appreciation leading to disinflation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 17

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 18

An appreciation of the Japanese yen relative to the U.S.dollar will

Accepted Answer

A)  increase aggregate demand in the United States. 
B)  increase aggregate supply in the United States. 
C)  increase aggregate demand in Japan. 
D)  decrease aggregate supply in Japan. 
A)  increase aggregate demand in the United States. 
B)  increase aggregate supply in the United States. 
C)  increase aggregate demand in Japan. 
D)  decrease aggregate supply in Japan.

Question 19

In the mid-1990s, real interest rates fell in the United States.This was the result of budget deficit

Accepted Answer

A)  increases and tighter monetary policy. 
B)  increases and looser monetary policy. 
C)  reductions and looser monetary policy. 
D)  reductions and tighter monetary policy. 
A)  increases and tighter monetary policy. 
B)  increases and looser monetary policy. 
C)  reductions and looser monetary policy. 
D)  reductions and tighter monetary policy.

Question 20

The principal reason why Thailand, Indonesia, and South Korea feared the effects of appreciation of the U.S.dollar in 1995-1997 was that

Accepted Answer

A)  it would increase exports from these countries and worsen Japanese. 
B)  it would increase exports from these countries and worsen unemployment. 
C)  it would decrease exports from these countries since their currencies were tied to the dollar. 
D)  it would decrease imports to these countries since their currencies were tied to the dollar. 
A)  it would increase exports from these countries and worsen Japanese. 
B)  it would increase exports from these countries and worsen unemployment. 
C)  it would decrease exports from these countries since their currencies were tied to the dollar. 
D)  it would decrease imports to these countries since their currencies were tied to the dollar.

Exam 37: Exchange Rates and the Macroeconomy

To eliminate the trade deficits in the late 1990s would have required, in addition to the reduction of the federal budget deficit, an increase in

Increases in stock market wealth have caused Americans to increase their saving rate.

When the dollar depreciates, the cost to Americans of foreign goods

Theoretically, when a currency depreciates one can predict that

The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require

Depreciation of the Japanese Yen would lead to

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall, which of the following is expected to happen?

The principal danger to Japan in 2001 when the yen was appreciating was that this would

Figure 20-7 -In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X - IM) for an open economy.Which of the following would cause a movement from C to B?

International capital flows in an open economy have the effect of

What are the economic effects of a currency depreciation?

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with an expansionary monetary policy?

A large tax cut in the United States should lead to an increase in the trade deficit.

A recession abroad would cause U.S.net exports to rise.

In an open economy, aggregate supply consists of domestic production plus imports.

Figure 20-4 -Which of the situations illustrated in Figure 20-4 shows a currency appreciation leading to disinflation?

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?

An appreciation of the Japanese yen relative to the U.S.dollar will

In the mid-1990s, real interest rates fell in the United States.This was the result of budget deficit

The principal reason why Thailand, Indonesia, and South Korea feared the effects of appreciation of the U.S.dollar in 1995-1997 was that

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

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