Question 1

Table 36-2
​  
-From Table 36-2, what can you conclude about net exports as GDP rises?

Accepted Answer

A) Net exports rise and then fall as GDP rises. 
B) Net exports are constant as GDP rises. 
C) Net exports rise as GDP rises. 
D) Net exports fall as GDP rises. 
A) Net exports rise and then fall as GDP rises. 
B) Net exports are constant as GDP rises. 
C) Net exports rise as GDP rises. 
D) Net exports fall as GDP rises.

Question 2

A nation's currency is said to appreciate when exchange rates change so that a unit of its currency can buy more units of foreign currency.

Accepted Answer

A) True 
 B)False

Question 3

Protectionism may reduce imports, and it will also

Accepted Answer

A) appreciate the dollar, reducing exports. 
B) appreciate the dollar, increasing exports. 
C) depreciate the dollar, increasing exports. 
D) depreciate the dollar, reducing exports. 
A) appreciate the dollar, reducing exports. 
B) appreciate the dollar, increasing exports. 
C) depreciate the dollar, increasing exports. 
D) depreciate the dollar, reducing exports.

Question 4

Appreciations or depreciations in currency change international relative prices.

Accepted Answer

A) True 
 B)False

Question 5

Since the U.S.economy expanded rapidly from 1992 to 2000, it must be true that

Accepted Answer

A) fiscal contraction overwhelmed monetary expansion. 
B) monetary expansion overwhelmed fiscal contraction. 
C) monetary expansion exactly offset fiscal contraction. 
D) monetary contraction overwhelmed fiscal expansion. 
A) fiscal contraction overwhelmed monetary expansion. 
B) monetary expansion overwhelmed fiscal contraction. 
C) monetary expansion exactly offset fiscal contraction. 
D) monetary contraction overwhelmed fiscal expansion.

Question 6

From 1992, America's trade performance was marked by a(n)

Accepted Answer

A) reduced current account deficit. 
B) increased current account deficit. 
C) reduced capital account surplus. 
D) increase in the growth of exports. 
A) reduced current account deficit. 
B) increased current account deficit. 
C) reduced capital account surplus. 
D) increase in the growth of exports.

Question 7

The trade deficits of the 1980s and 1990s reflect American desire for foreign

Accepted Answer

A) assets and foreign desire for American goods and services. 
B) goods and services and foreign assets. 
C) goods and services and foreign desire for American assets. 
D) assets now and foreign goods and services in the future. 
A) assets and foreign desire for American goods and services. 
B) goods and services and foreign assets. 
C) goods and services and foreign desire for American assets. 
D) assets now and foreign goods and services in the future.

Question 8

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

Accepted Answer

A) Trade deficits affect exchange rates, which can offset adverse interest rate effects. 
B) Borrowers can choose to use foreign capital, so that interest rate effects are stronger than expected. 
C) Interest rate changes affect exchange rates, so that capital flows reinforce the effect of monetary policy. 
D) Banks can choose to lend to foreigners, so that interest rate effects are essentially nullified. 
A) Trade deficits affect exchange rates, which can offset adverse interest rate effects. 
B) Borrowers can choose to use foreign capital, so that interest rate effects are stronger than expected. 
C) Interest rate changes affect exchange rates, so that capital flows reinforce the effect of monetary policy. 
D) Banks can choose to lend to foreigners, so that interest rate effects are essentially nullified.

Question 9

Because one country's imports are another country's exports, rapid (or sluggish) economic growth in one country contributes to rapid (or sluggish) growth in other countries.

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

The sum of current account surplus and capital account surplus is zero.

Accepted Answer

A) True 
 B)False

Question 12

The government budget deficit must be equal to the surplus

Accepted Answer

A) of saving over investment. 
B) in the current account in international trade. 
C) of saving over consumption. 
D) of saving over investment plus the trade deficit. 
A) of saving over investment. 
B) in the current account in international trade. 
C) of saving over consumption. 
D) of saving over investment plus the trade deficit.

Question 13

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 14

Expansionary fiscal policy in an open economy has a

Accepted Answer

A) greater effect than in a closed economy. 
B) similar effect as in a closed economy. 
C) smaller effect than in a closed economy. 
D) greater effect than monetary policy. 
A) greater effect than in a closed economy. 
B) similar effect as in a closed economy. 
C) smaller effect than in a closed economy. 
D) greater effect than monetary policy.

Question 15

A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports.Provide the reasoning behind this conclusion.

Accepted Answer

Interest rate differentials and capital

Question 16

A nation's currency is said to depreciate when exchange rates change so that a unit of its currency can buy fewer units of foreign currency.

Accepted Answer

A) True 
 B)False

Question 17

If U.S.interest rates rise while foreign interest rates remain unchanged,

Accepted Answer

A) GDP will not change since the shift in aggregate supply cancels the positive effects on aggregate demand. 
B) the dollar will depreciate and thus reduce prices and output. 
C) foreign capital will be attracted to the United States and the dollar will appreciate. 
D) net exports will increase and the economy will expand. 
A) GDP will not change since the shift in aggregate supply cancels the positive effects on aggregate demand. 
B) the dollar will depreciate and thus reduce prices and output. 
C) foreign capital will be attracted to the United States and the dollar will appreciate. 
D) net exports will increase and the economy will expand.

Question 18

A reduction in net exports shifts the aggregate

Accepted Answer

A) demand curve inward. 
B) demand curve outward. 
C) supply curve outward. 
D) supply curve inward. 
A) demand curve inward. 
B) demand curve outward. 
C) supply curve outward. 
D) supply curve inward.

Question 19

The exchange rate states the price, in terms of one currency, at which another currency can be bought.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the value of the U.S.dollar relative to the Japanese yen will

Accepted Answer

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

Exam 36: Exchange Rates and the Macroeconomy

Table 36-2 ​ -From Table 36-2, what can you conclude about net exports as GDP rises?

A nation's currency is said to appreciate when exchange rates change so that a unit of its currency can buy more units of foreign currency.

Protectionism may reduce imports, and it will also

Appreciations or depreciations in currency change international relative prices.

Since the U.S.economy expanded rapidly from 1992 to 2000, it must be true that

From 1992, America's trade performance was marked by a(n)

The trade deficits of the 1980s and 1990s reflect American desire for foreign

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

Because one country's imports are another country's exports, rapid (or sluggish) economic growth in one country contributes to rapid (or sluggish) growth in other countries.

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

The sum of current account surplus and capital account surplus is zero.

The government budget deficit must be equal to the surplus

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

Expansionary fiscal policy in an open economy has a

A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports.Provide the reasoning behind this conclusion.

A nation's currency is said to depreciate when exchange rates change so that a unit of its currency can buy fewer units of foreign currency.

If U.S.interest rates rise while foreign interest rates remain unchanged,

A reduction in net exports shifts the aggregate

The exchange rate states the price, in terms of one currency, at which another currency can be bought.

An increase in the value of the U.S.dollar relative to the Japanese yen will

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 -From Table 36-2, what can you conclude about net exports as GDP rises?