Question 1

An expansionary monetary policy will

Accepted Answer

A) increase imports. 
B) decrease exports. 
C) increase a current account deficit. 
D) decrease a capital account surplus. 
A) increase imports. 
B) decrease exports. 
C) increase a current account deficit. 
D) decrease a capital account surplus.

Question 2

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

Accepted Answer

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

Question 3

A sizable appreciation of the U.S.dollar in the mid-1980s

Accepted Answer

A) raised U.S.exports and imports. 
B) raised U.S.exports and reduced imports. 
C) reduced U.S.exports and imports. 
D) reduced U.S.exports and raised imports. 
A) raised U.S.exports and imports. 
B) raised U.S.exports and reduced imports. 
C) reduced U.S.exports and imports. 
D) reduced U.S.exports and raised imports.

Question 4

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

Accepted Answer

A) Trade deficits automatically cause larger budget deficits. 
B) Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C) These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D) During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created. 
A) Trade deficits automatically cause larger budget deficits. 
B) Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C) These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D) During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.

Question 5

Table 36-2
​  
-In Table 36-2, assume that exports rise to $900.How large is the multiplier?

Accepted Answer

A) 5 
B) 4 
C) 2.5 
D) 2 
A) 5 
B) 4 
C) 2.5 
D) 2

Question 6

A reduction in G or an increase in T would lead to lower real interest rates in the United States, a depreciating dollar, and, eventually, a smaller trade deficit..

Accepted Answer

A) True 
 B)False

Question 7

Discuss the opposing points of view on U.S.trade deficit.

Accepted Answer

Those who worry about trade deficits poi

Question 8

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y rise, all of the following are expected to happen except

Accepted Answer

A) Country X will export more. 
B) Country Y will import more. 
C) net exports will rise for Country X. 
D) trade will boost the GDP of Country Y. 
A) Country X will export more. 
B) Country Y will import more. 
C) net exports will rise for Country X. 
D) trade will boost the GDP of Country Y.

Question 9

The dramatic rise in the dollar between 1981 and 1986 was the result of a(n)

Accepted Answer

A) tight monetary and tight fiscal policy. 
B) expansive monetary and expansive fiscal policy. 
C) expansive monetary and tight fiscal policy. 
D) tight monetary and expansive fiscal policy. 
A) tight monetary and tight fiscal policy. 
B) expansive monetary and expansive fiscal policy. 
C) expansive monetary and tight fiscal policy. 
D) tight monetary and expansive fiscal policy.

Question 10

The combined effects of a fiscal contraction and a monetary expansion are

Accepted Answer

A) higher real interest rates. 
B) exchange rate depreciation. 
C) increased current account deficit. 
D) All of these responses are correct. 
A) higher real interest rates. 
B) exchange rate depreciation. 
C) increased current account deficit. 
D) All of these responses are correct.

Question 11

How do the fluctuations in the exchange rate influence the domestic price level?

Accepted Answer

When a currency depreciates, the prices

Question 12

Figure 36-6
​  
-In Figure 36-6, which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

Accepted Answer

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

Question 13

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 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 14

If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in Mexico?

Accepted Answer

A) An increase in aggregate supply 
B) A decrease in aggregate supply 
C) A decrease in aggregate demand 
D) An increase in aggregate demand 
A) An increase in aggregate supply 
B) A decrease in aggregate supply 
C) A decrease in aggregate demand 
D) An increase in aggregate demand

Question 15

A country's trade surplus is the excess of its exports over its imports.

Accepted Answer

A) True 
 B)False

Question 16

An exchange rate appreciation will shift the aggregate demand curve inward.

Accepted Answer

A) True 
 B)False

Question 17

Figure 36-3
​  
-Which of the situations illustrated in Figure 36-3 shows the effects of a currency appreciation leading to real GDP growth?

Accepted Answer

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

Question 18

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

Accepted Answer

A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper. 
A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper.

Question 19

Compare the effectiveness of monetary policy in an open economy with mobile international capital with monetary policy in a closed economy.Why is it different? Use an appropriate diagram to illustrate your answer.

Accepted Answer

An appropriate diagram should resemble F

Question 20

If (T − G) = (X − IM), then (S − I)

Accepted Answer

A) is greater than zero. 
B) is zero. 
C) is less than zero. 
D) cannot be calculated. 
A) is greater than zero. 
B) is zero. 
C) is less than zero. 
D) cannot be calculated.

Exam 36: Exchange Rates and the Macroeconomy

An expansionary monetary policy will

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

A sizable appreciation of the U.S.dollar in the mid-1980s

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

Table 36-2 ​ -In Table 36-2, assume that exports rise to $900.How large is the multiplier?

A reduction in G or an increase in T would lead to lower real interest rates in the United States, a depreciating dollar, and, eventually, a smaller trade deficit..

Discuss the opposing points of view on U.S.trade deficit.

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y rise, all of the following are expected to happen except

The dramatic rise in the dollar between 1981 and 1986 was the result of a(n)

The combined effects of a fiscal contraction and a monetary expansion are

How do the fluctuations in the exchange rate influence the domestic price level?

Figure 36-6 ​ -In Figure 36-6, which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

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 C to B?

If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in Mexico?

A country's trade surplus is the excess of its exports over its imports.

An exchange rate appreciation will shift the aggregate demand curve inward.

Figure 36-3 ​ -Which of the situations illustrated in Figure 36-3 shows the effects of a currency appreciation leading to real GDP growth?

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

Compare the effectiveness of monetary policy in an open economy with mobile international capital with monetary policy in a closed economy.Why is it different? Use an appropriate diagram to illustrate your answer.

If (T − G) = (X − IM), then (S − I)

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

Table 36-2 -In Table 36-2, assume that exports rise to $900.How large is the multiplier?

Figure 36-6 -In Figure 36-6, which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

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 C to B?

Figure 36-3 -Which of the situations illustrated in Figure 36-3 shows the effects of a currency appreciation leading to real GDP growth?