Question 1

Figure 36-1  
-Which of the graphs in Figure 36-1 best illustrates the behavior of exports and imports in relation to U.S.real GDP?

Accepted Answer

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

Question 2

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

Accepted Answer

A) U.S.imports to increase 
B) U.S.exports to increase. 
C) Japanese exports to increase. 
D) Japanese net exports to increase. 
A) U.S.imports to increase 
B) U.S.exports to increase. 
C) Japanese exports to increase. 
D) Japanese net exports to increase.

Question 3

The worst remedy for curing the U.S.trade deficit is to

Accepted Answer

A) increase U.S.personal saving. 
B) reduce the budget deficit. 
C) encourage all nations to lower trade barriers. 
D) limit imports by imposing tariffs, quotas, and other trade restrictions. 
A) increase U.S.personal saving. 
B) reduce the budget deficit. 
C) encourage all nations to lower trade barriers. 
D) limit imports by imposing tariffs, quotas, and other trade restrictions.

Question 4

The growing federal budget deficit in the 1980s was accompanied by a

Accepted Answer

A) growing trade surplus. 
B) growing trade deficit. 
C) shrinking trade deficit. 
D) shrinking capital account surplus. 
A) growing trade surplus. 
B) growing trade deficit. 
C) shrinking trade deficit. 
D) shrinking capital account surplus.

Question 5

Because monetary stimulus overwhelmed fiscal contraction in the United States during the 1992-2000 period,

Accepted Answer

A) real GDP grew. 
B) real GDP decreased. 
C) the rate of inflation increased. 
D) the budget deficit increased. 
A) real GDP grew. 
B) real GDP decreased. 
C) the rate of inflation increased. 
D) the budget deficit increased.

Question 6

A decline in interest rates tends to expand the economy by depreciating the currency and raising net exports.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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

Accepted Answer

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

Question 9

What important lesson did American economists learn in the 1980s and again in 2001-2003?

Accepted Answer

A) Large tax cuts can lead to a balance of trade surplus. 
B) Large government budget deficits can crowd out consumption. 
C) Large government budget deficits can bankrupt the nation. 
D) Large government budget deficits can crowd out net exports. 
A) Large tax cuts can lead to a balance of trade surplus. 
B) Large government budget deficits can crowd out consumption. 
C) Large government budget deficits can bankrupt the nation. 
D) Large government budget deficits can crowd out net exports.

Question 10

A fall in the domestic interest rate leads to capital outflows, which make the exchange rate depreciate.The monetary expansion of the mid-1990s was expected to lead to a currency appreciation.

Accepted Answer

A) True 
 B)False

Question 11

The international trade response to a contractionary monetary policy will cause aggregate demand to shift ____ and aggregate supply to shift ____.

Accepted Answer

A) outward; outward 
B) inward; outward 
C) outward; inward 
D) inward; inward 
A) outward; outward 
B) inward; outward 
C) outward; inward 
D) inward; inward

Question 12

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 13

Which of the following is correct?

Accepted Answer

A) Current account surplus + capital account surplus = 1 
B) Current account surplus − capital account surplus = 0 
C) Current account surplus + capital account surplus = 0 
D) Current account surplus − capital account surplus = 1 
A) Current account surplus + capital account surplus = 1 
B) Current account surplus − capital account surplus = 0 
C) Current account surplus + capital account surplus = 0 
D) Current account surplus − capital account surplus = 1

Question 14

Under a floating exchange rate system with mobile international capital, it is always true that current account

Accepted Answer

A) deficit + capital account surplus = trade deficit. 
B) surplus − capital account surplus = trade deficit. 
C) surplus + capital account deficit = 0. 
D) surplus − capital account surplus = 0. 
A) deficit + capital account surplus = trade deficit. 
B) surplus − capital account surplus = trade deficit. 
C) surplus + capital account deficit = 0. 
D) surplus − capital account surplus = 0.

Question 15

Do you agree that currency depreciation will lead to an increase in the debt burden of the companies that borrow in foreign currency? Explain with an example.

Accepted Answer

Companies that borrow in foreign currenc

Question 16

International capital flows increase the power of monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

The sequence of events following an increase in the federal deficit would be higher interest rates, a(n)

Accepted Answer

A) depreciating dollar, and a larger current account deficit. 
B) depreciating dollar, and a smaller current account deficit. 
C) appreciating dollar, and a larger current account deficit. 
D) appreciating dollar, and a smaller current account deficit. 
A) depreciating dollar, and a larger current account deficit. 
B) depreciating dollar, and a smaller current account deficit. 
C) appreciating dollar, and a larger current account deficit. 
D) appreciating dollar, and a smaller current account deficit.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Figure 36-6
​  
-In Figure 36-6, an expansive monetary policy in a closed economy results in an equilibrium at point E.In our open economy, allowing for the induced change in the currency exchange rate, the final equilibrium will be at a point like

Accepted Answer

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

Question 20

The sequence of events following a contractionary monetary policy would be higher interest rates followed by dollar

Accepted Answer

A) depreciation, higher exports, and lower imports. 
B) depreciation, lower exports, and higher imports. 
C) appreciation, lower exports, and higher imports. 
D) appreciation, higher exports, and lower imports. 
A) depreciation, higher exports, and lower imports. 
B) depreciation, lower exports, and higher imports. 
C) appreciation, lower exports, and higher imports. 
D) appreciation, higher exports, and lower imports.

Exam 36: Exchange Rates and the Macroeconomy

Figure 36-1 -Which of the graphs in Figure 36-1 best illustrates the behavior of exports and imports in relation to U.S.real GDP?

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

The worst remedy for curing the U.S.trade deficit is to

The growing federal budget deficit in the 1980s was accompanied by a

Because monetary stimulus overwhelmed fiscal contraction in the United States during the 1992-2000 period,

A decline in interest rates tends to expand the economy by depreciating the currency and raising net exports.

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

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

What important lesson did American economists learn in the 1980s and again in 2001-2003?

A fall in the domestic interest rate leads to capital outflows, which make the exchange rate depreciate.The monetary expansion of the mid-1990s was expected to lead to a currency appreciation.

The international trade response to a contractionary monetary policy will cause aggregate demand to shift ____ and aggregate supply to shift ____.

International capital flows in an open economy have the effect of

Which of the following is correct?

Under a floating exchange rate system with mobile international capital, it is always true that current account

Do you agree that currency depreciation will lead to an increase in the debt burden of the companies that borrow in foreign currency? Explain with an example.

International capital flows increase the power of monetary policy.

The sequence of events following an increase in the federal deficit would be higher interest rates, a(n)

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

Figure 36-6 ​ -In Figure 36-6, an expansive monetary policy in a closed economy results in an equilibrium at point E.In our open economy, allowing for the induced change in the currency exchange rate, the final equilibrium will be at a point like

The sequence of events following a contractionary monetary policy would be higher interest rates followed by dollar

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 of the following will cause a movement from equilibrium at point D to equilibrium at point B?

The international trade response to a contractionary monetary policy will cause aggregate demand to shift and aggregate supply to shift .

Figure 36-6 -In Figure 36-6, an expansive monetary policy in a closed economy results in an equilibrium at point E.In our open economy, allowing for the induced change in the currency exchange rate, the final equilibrium will be at a point like