Question 1

International trade tends to lower the value of the multiplier because

Accepted Answer

A) imports fall as GDP increases. 
B) net exports fall as GDP increases. 
C) net exports tend to rise as GDP increases. 
D) exports fall as GDP increases. 
A) imports fall as GDP increases. 
B) net exports fall as GDP increases. 
C) net exports tend to rise as GDP increases. 
D) exports fall as GDP increases. B

Question 2

Figure 36-7
​  
-In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Accepted Answer

A) a European economic expansion 
B) A decrease in the money supply 
C) An increase in the interest rate 
D) An increase in the U.S.price level 
A) a European economic expansion 
B) A decrease in the money supply 
C) An increase in the interest rate 
D) An increase in the U.S.price level A

Question 3

Figure 36-9
​   ​
-Figure 36-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Accepted Answer

A) smaller when net exports are fixed. 
B) smaller when net exports are variable. 
C) larger when net exports are variable. 
D) the same whether net exports are fixed or variable. 
A) smaller when net exports are fixed. 
B) smaller when net exports are variable. 
C) larger when net exports are variable. 
D) the same whether net exports are fixed or variable. B

Question 4

A currency appreciation should

Accepted Answer

A) reduce net exports and therefore increase aggregate demand. 
B) raise net exports and therefore decrease aggregate demand. 
C) reduce net exports and therefore decrease aggregate demand. 
D) raise net exports and therefore increase aggregate demand. 
A) reduce net exports and therefore increase aggregate demand. 
B) raise net exports and therefore decrease aggregate demand. 
C) reduce net exports and therefore decrease aggregate demand. 
D) raise net exports and therefore increase aggregate demand.

Question 5

In an open economy, the government deficit is 400 and investment exceeds saving by 300, so in equilibrium the trade deficit (IM − X) must be

Accepted Answer

A) 100 
B) 200 
C) 300 
D) 700 
A) 100 
B) 200 
C) 300 
D) 700

Question 6

Because the United States is highly integrated with the international capital market, international capital flows tend to

Accepted Answer

A) counteract the negative effect on aggregate demand of lower interest rates. 
B) counteract the positive effect on aggregate demand of higher interest rates. 
C) strengthen the negative effects on aggregate demand of higher interest rates. 
D) strengthen the negative effects on aggregate demand of lower interest rates. 
A) counteract the negative effect on aggregate demand of lower interest rates. 
B) counteract the positive effect on aggregate demand of higher interest rates. 
C) strengthen the negative effects on aggregate demand of higher interest rates. 
D) strengthen the negative effects on aggregate demand of lower interest rates.

Question 7

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?

Accepted Answer

A) The trade deficit will fall; GDP will fall. 
B) The trade deficit will rise; GDP will rise. 
C) The trade deficit will fall; GDP will rise. 
D) The trade deficit will rise; GDP will fall. 
A) The trade deficit will fall; GDP will fall. 
B) The trade deficit will rise; GDP will rise. 
C) The trade deficit will fall; GDP will rise. 
D) The trade deficit will rise; GDP will fall.

Question 8

Figure 36-7
​  
-In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from B to A?

Accepted Answer

A) A recession in Southeast Asia 
B) An economic expansion in Japan 
C) A depreciation of the dollar 
D) An increase in the interest rate 
A) A recession in Southeast Asia 
B) An economic expansion in Japan 
C) A depreciation of the dollar 
D) An increase in the interest rate

Question 9

Figure 36-7
​  
-In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Accepted Answer

A) An increase in interest rates 
B) An appreciation of the dollar 
C) A depreciation of the dollar 
D) An increase in the U.S.price level 
A) An increase in interest rates 
B) An appreciation of the dollar 
C) A depreciation of the dollar 
D) An increase in the U.S.price level

Question 10

When the dollar depreciates, the prices of imported inputs

Accepted Answer

A) fall and aggregate supply shifts outward. 
B) fall and aggregate supply shifts inward. 
C) rise and aggregate supply shifts outward. 
D) rise and aggregate supply shifts inward. 
A) fall and aggregate supply shifts outward. 
B) fall and aggregate supply shifts inward. 
C) rise and aggregate supply shifts outward. 
D) rise and aggregate supply shifts inward.

Question 11

Expansionary fiscal policy in an open economy

Accepted Answer

A) leads to a balance of trade surplus. 
B) decreases America's capital account surplus and the current account deficit by the same amount. 
C) increases both America's capital account surplus and current account deficit by equal amounts. 
D) increases America's capital account surplus more than it increases the current account deficit. 
A) leads to a balance of trade surplus. 
B) decreases America's capital account surplus and the current account deficit by the same amount. 
C) increases both America's capital account surplus and current account deficit by equal amounts. 
D) increases America's capital account surplus more than it increases the current account deficit.

Question 12

An open economy is one that trades with other nations in goods and services, and perhaps also trades in financial assets.

Accepted Answer

A) True 
 B)False

Question 13

Figure 36-6
​  
-In Figure 36-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E.In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point

Accepted Answer

A) B. 
B) F. 
C) J. 
D) H. 
A) B. 
B) F. 
C) J. 
D) H.

Question 14

Which of the following is correct?

Accepted Answer

A) IM + X = G − T 
B) I + G + T = S + X − M 
C) I + G + X = S + T + IM 
D) I + T + G = S − X − IM 
A) IM + X = G − T 
B) I + G + T = S + X − M 
C) I + G + X = S + T + IM 
D) I + T + G = S − X − IM

Question 15

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate.

Accepted Answer

A fiscal expansion normally makes the ex

Question 16

A favorable supply shock abroad would

Accepted Answer

A) increase U.S.imports and decrease aggregate demand. 
B) decrease U.S.net exports and reduce aggregate supply. 
C) decrease U.S.net exports and decrease national income. 
D) increase U.S.net exports and increase aggregate demand. 
A) increase U.S.imports and decrease aggregate demand. 
B) decrease U.S.net exports and reduce aggregate supply. 
C) decrease U.S.net exports and decrease national income. 
D) increase U.S.net exports and increase aggregate demand.

Question 17

If a currency appreciates, a country's net exports

Accepted Answer

A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases. 
A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases.

Question 18

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

Accepted Answer

A) the federal budget must always be in balance. 
B) when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C) current account deficits should be avoided. 
D) trade deficits tend to be eliminated automatically. 
A) the federal budget must always be in balance. 
B) when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C) current account deficits should be avoided. 
D) trade deficits tend to be eliminated automatically.

Question 19

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

Accepted Answer

A) goods 
B) financial assets 
C) services 
D) commodities 
A) goods 
B) financial assets 
C) services 
D) commodities

Question 20

Booms or recessions in one country tend to be transmitted to other countries through international trade in goods and services.

Accepted Answer

A) True 
 B)False

Exam 36: Exchange Rates and the Macroeconomy

International trade tends to lower the value of the multiplier because

Figure 36-7 ​ -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Figure 36-9 ​ ​ -Figure 36-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

A currency appreciation should

In an open economy, the government deficit is 400 and investment exceeds saving by 300, so in equilibrium the trade deficit (IM − X) must be

Because the United States is highly integrated with the international capital market, international capital flows tend to

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?

Figure 36-7 ​ -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from B to A?

Figure 36-7 ​ -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

When the dollar depreciates, the prices of imported inputs

Expansionary fiscal policy in an open economy

An open economy is one that trades with other nations in goods and services, and perhaps also trades in financial assets.

Figure 36-6 ​ -In Figure 36-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E.In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point

Which of the following is correct?

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate.

A favorable supply shock abroad would

If a currency appreciates, a country's net exports

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

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

Booms or recessions in one country tend to be transmitted to other countries through international trade in goods and services.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 36-7 -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Figure 36-9 -Figure 36-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Figure 36-7 -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from B to A?

Figure 36-7 -In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Figure 36-6 -In Figure 36-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E.In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point