Question 1

Figure 36-6
​  
-In Figure 36-6, which point represents equilibrium at the lowest exchange rate?

Accepted Answer

A) E 
B) F 
C) G 
D) H 
A) E 
B) F 
C) G 
D) H

Question 2

Figure 36-8
​  
-Which of the graphs in Figure 36-8 represents the effects of a currency appreciation?

Accepted Answer

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

Question 3

Explain how exchange rates affect the level of aggregate economic activity and the price level.Use appropriate AS/AD diagrams to illustrate your answer.

Accepted Answer

A currency appreciation will shift AD in

Question 4

Despite the monetary expansion of the 1992-2000 period, the inflation rate

Accepted Answer

A) rose due to adverse supply shocks. 
B) rose due to large increases in aggregate demand. 
C) fell despite adverse supply shocks. 
D) fell due to favorable supply shocks. 
A) rose due to adverse supply shocks. 
B) rose due to large increases in aggregate demand. 
C) fell despite adverse supply shocks. 
D) fell due to favorable supply shocks.

Question 5

A currency depreciation

Accepted Answer

A) reduces aggregate demand and increases aggregate supply. 
B) reduces aggregate demand and aggregate supply. 
C) increases aggregate demand and reduces aggregate supply. 
D) increases aggregate demand and aggregate supply. 
A) reduces aggregate demand and increases aggregate supply. 
B) reduces aggregate demand and aggregate supply. 
C) increases aggregate demand and reduces aggregate supply. 
D) increases aggregate demand and aggregate supply.

Question 6

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?

Accepted Answer

A) It decreased the trade deficit as Americans bought more U.S.capital goods. 
B) It decreased the trade deficit as foreigners were attracted to the increased value of U.S.products and Americans bought fewer imports. 
C) It increased the trade deficit as U.S.investors bought more domestic financial assets. 
D) It increased the trade deficit as Americans bought more imports and foreigners bought fewer U.S.products. 
A) It decreased the trade deficit as Americans bought more U.S.capital goods. 
B) It decreased the trade deficit as foreigners were attracted to the increased value of U.S.products and Americans bought fewer imports. 
C) It increased the trade deficit as U.S.investors bought more domestic financial assets. 
D) It increased the trade deficit as Americans bought more imports and foreigners bought fewer U.S.products.

Question 7

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

Accepted Answer

A) A currency depreciation and increased net exports 
B) A currency depreciation and reduced net exports 
C) A currency appreciation and increased net exports 
D) A currency appreciation and reduced net exports 
A) A currency depreciation and increased net exports 
B) A currency depreciation and reduced net exports 
C) A currency appreciation and increased net exports 
D) A currency appreciation and reduced net exports

Question 8

One unpleasant cure for the U.S.trade deficit of the 1990s would be for foreigners who hold U.S.financial assets to demand

Accepted Answer

A) lower interest rates to stimulate U.S.growth rates. 
B) higher interest rates and generate a recession in the United States. 
C) higher interest rates and generate an appreciation of the dollar. 
D) lower interest rates and generate a depreciation of the dollar. 
A) lower interest rates to stimulate U.S.growth rates. 
B) higher interest rates and generate a recession in the United States. 
C) higher interest rates and generate an appreciation of the dollar. 
D) lower interest rates and generate a depreciation of the dollar.

Question 9

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

Accepted Answer

A) Congress removed all tariffs and trade restrictions on imports. 
B) NAFTA was introduced and Mexican exports flooded the United States. 
C) the international value of the dollar fell during the 1990s, which encouraged U.S.exports. 
D) the international value of the dollar rose in the last half of the 1990s, which encouraged U.S.imports and damaged U.S.exports. 
A) Congress removed all tariffs and trade restrictions on imports. 
B) NAFTA was introduced and Mexican exports flooded the United States. 
C) the international value of the dollar fell during the 1990s, which encouraged U.S.exports. 
D) the international value of the dollar rose in the last half of the 1990s, which encouraged U.S.imports and damaged U.S.exports.

Question 10

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 11

If European economies experience a strong economic recovery, U.S.net exports will

Accepted Answer

A) increase and AD will shift outward. 
B) increase and AD will shift inward. 
C) decrease and AD will shift inward. 
D) decrease and AD will shift outward. 
A) increase and AD will shift outward. 
B) increase and AD will shift inward. 
C) decrease and AD will shift inward. 
D) decrease and AD will shift outward.

Question 12

The U.S.trade deficit is made possible, in part, because of foreigners' demand for U.S.financial assets.

Accepted Answer

A) True 
 B)False

Question 13

Appreciation 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) downward 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) downward shift in the aggregate demand curve for Japan.

Question 14

The main input into the production of Starbuck's coffee is imported coffee beans.If the dollar depreciates, how will this affect the U.S.retail coffee market?

Accepted Answer

A) Input prices will fall and supply will decrease. 
B) Input prices will fall and supply will increase. 
C) Input prices will rise and supply will decrease. 
D) Input prices will rise and supply will increase. 
A) Input prices will fall and supply will decrease. 
B) Input prices will fall and supply will increase. 
C) Input prices will rise and supply will decrease. 
D) Input prices will rise and supply will increase.

Question 15

Foreign trade will have no impact on real GDP when

Accepted Answer

A) exports exceed imports. 
B) exports equal imports. 
C) imports exceed exports. 
D) exports equal zero. 
A) exports exceed imports. 
B) exports equal imports. 
C) imports exceed exports. 
D) exports equal zero.

Question 16

A rise in the domestic interest rate leads to capital inflows, which make the exchange rate appreciate.

Accepted Answer

A) True 
 B)False

Question 17

A fall in the relative prices of a country's exports tends to increase that country's net exports, and, thereby, to raise its real GDP.

Accepted Answer

A) True 
 B)False

Question 18

A currency depreciation is inflationary and probably also expansionary.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) depreciation, lower interest rates, and a small increase in aggregate demand. 
B) depreciation, higher interest rates, and a small decrease in aggregate demand. 
C) appreciation, lower interest rates, and a small increase in aggregate demand. 
D) appreciation, higher interest rates, and a small increase in aggregate demand. 
A) depreciation, lower interest rates, and a small increase in aggregate demand. 
B) depreciation, higher interest rates, and a small decrease in aggregate demand. 
C) appreciation, lower interest rates, and a small increase in aggregate demand. 
D) appreciation, higher interest rates, and a small increase in aggregate demand.

Question 20

The U.S.trade deficits of the late 1990s were due primarily to low saving rates.

Accepted Answer

A) True 
 B)False

Exam 36: Exchange Rates and the Macroeconomy

Figure 36-6 ​ -In Figure 36-6, which point represents equilibrium at the lowest exchange rate?

Figure 36-8 ​ -Which of the graphs in Figure 36-8 represents the effects of a currency appreciation?

Explain how exchange rates affect the level of aggregate economic activity and the price level.Use appropriate AS/AD diagrams to illustrate your answer.

Despite the monetary expansion of the 1992-2000 period, the inflation rate

A currency depreciation

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?

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

One unpleasant cure for the U.S.trade deficit of the 1990s would be for foreigners who hold U.S.financial assets to demand

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

What are the economic effects of a currency depreciation?

If European economies experience a strong economic recovery, U.S.net exports will

The U.S.trade deficit is made possible, in part, because of foreigners' demand for U.S.financial assets.

Appreciation of the Japanese yen would lead to

The main input into the production of Starbuck's coffee is imported coffee beans.If the dollar depreciates, how will this affect the U.S.retail coffee market?

Foreign trade will have no impact on real GDP when

A rise in the domestic interest rate leads to capital inflows, which make the exchange rate appreciate.

A fall in the relative prices of a country's exports tends to increase that country's net exports, and, thereby, to raise its real GDP.

A currency depreciation is inflationary and probably also expansionary.

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

The U.S.trade deficits of the late 1990s were due primarily to low saving rates.

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 36-6 -In Figure 36-6, which point represents equilibrium at the lowest exchange rate?

Figure 36-8 -Which of the graphs in Figure 36-8 represents the effects of a currency appreciation?