Question 1

When the dollar depreciates, the cost to Americans of foreign goods

Accepted Answer

A) rises and the CPI falls. 
B) rises and the CPI rises. 
C) falls and the CPI rises. 
D) falls and the CPI falls. 
A) rises and the CPI falls. 
B) rises and the CPI rises. 
C) falls and the CPI rises. 
D) falls and the CPI falls.

Question 2

Table 36-2
​  
-If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of

Accepted Answer

A) T over G. 
B) C over T plus G. 
C) investment by American businesses and individuals. 
D) S over I by American businesses and individuals, or by borrowing from foreigners. 
A) T over G. 
B) C over T plus G. 
C) investment by American businesses and individuals. 
D) S over I by American businesses and individuals, or by borrowing from foreigners.

Question 3

In an open economy, aggregate supply consists of domestic production

Accepted Answer

A) plus imports. 
B) plus exports. 
C) minus imports. 
D) minus exports. 
A) plus imports. 
B) plus exports. 
C) minus imports. 
D) minus exports.

Question 4

If the dollar falls in value compared to other currencies, what will happen in the United States?

Accepted Answer

A) A decrease in aggregate demand 
B) An increase in aggregate supply 
C) A decrease in aggregate supply 
D) A decrease in the U.S.price level 
A) A decrease in aggregate demand 
B) An increase in aggregate supply 
C) A decrease in aggregate supply 
D) A decrease in the U.S.price level

Question 5

The anticipated effect of contractionary monetary policy is

Accepted Answer

A) increase in aggregate demand. 
B) fall in interest rates. 
C) increased capital outflow. 
D) appreciation of the currency. 
A) increase in aggregate demand. 
B) fall in interest rates. 
C) increased capital outflow. 
D) appreciation of the currency.

Question 6

Theoretically, when a currency depreciates one can predict that

Accepted Answer

A) the price level will rise and real GDP will rise. 
B) the price level will fall and real GDP will fall. 
C) real GDP will rise, but price change is not predictable. 
D) the price level will rise, but real GDP change is not predictable. 
A) the price level will rise and real GDP will rise. 
B) the price level will fall and real GDP will fall. 
C) real GDP will rise, but price change is not predictable. 
D) the price level will rise, but real GDP change is not predictable.

Question 7

Following an expansionary monetary policy, we would expect lower interest rates, dollar

Accepted Answer

A) depreciation, and an increase in the current account deficit. 
B) depreciation, and a decrease in the current account deficit. 
C) appreciation, and an increase in the current account deficit. 
D) appreciation, and a decrease in the current account deficit. 
A) depreciation, and an increase in the current account deficit. 
B) depreciation, and a decrease in the current account deficit. 
C) appreciation, and an increase in the current account deficit. 
D) appreciation, and a decrease in the current account deficit.

Question 8

A rise in the domestic interest rate leads to capital

Accepted Answer

A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation. 
A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation.

Question 9

Figure 36-4
​  
-Which of the situations illustrated in Figure 36-4 shows a currency depreciation leading to inflation?

Accepted Answer

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

Question 10

The major difference between a closed economy and an open economy is that a(n)

Accepted Answer

A) closed economy balances budget, while an open economy does not. 
B) open economy is a market economy, while a closed economy relies on planning. 
C) open economy interacts with the rest of the world, while a closed economy does not. 
D) closed economy keeps political affairs secret, while an open economy does not. 
A) closed economy balances budget, while an open economy does not. 
B) open economy is a market economy, while a closed economy relies on planning. 
C) open economy interacts with the rest of the world, while a closed economy does not. 
D) closed economy keeps political affairs secret, while an open economy does not.

Question 11

What are some of the suggested remedies for the U.S.trade deficits? What remedies have been attempted? What remedies are left to try?

Accepted Answer

At certain points in the business cycle,

Question 12

The expected effects of an increased budget deficit are

Accepted Answer

A) higher real interest rates. 
B) exchange rate depreciation. 
C) lower inflation. 
D) All of these responses are correct. 
A) higher real interest rates. 
B) exchange rate depreciation. 
C) lower inflation. 
D) All of these responses are correct.

Question 13

For a major country with extensive capital flows, what is the effect of a decrease 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 14

In an open economy, an increase in (G − T) will

Accepted Answer

A) decrease (X − IM). 
B) increase (X − IM). 
C) leave (X − IM) unchanged. 
D) have an unpredictable effect on (X − IM). 
A) decrease (X − IM). 
B) increase (X − IM). 
C) leave (X − IM) unchanged. 
D) have an unpredictable effect on (X − IM).

Question 15

A closed economy is one that

Accepted Answer

A) uses tariffs. 
B) uses quotas to restrict trade. 
C) uses exchange controls. 
D) does not trade with other nations. 
A) uses tariffs. 
B) uses quotas to restrict trade. 
C) uses exchange controls. 
D) does not trade with other nations.

Question 16

A Japanese recession will be counteracted by an appreciation of the Japanese yen.

Accepted Answer

A) True 
 B)False

Question 17

A rise in the relative prices of a country's exports will decrease that country's net exports and reduce GDP.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the U.S.price level will increase U.S.net exports.

Accepted Answer

A) True 
 B)False

Question 19

The expected effects of monetary expansion are

Accepted Answer

A) lower real interest rates. 
B) exchange rate depreciation. 
C) higher inflation. 
D) All of these responses are correct. 
A) lower real interest rates. 
B) exchange rate depreciation. 
C) higher inflation. 
D) All of these responses are correct.

Question 20

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

Accepted Answer

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

Exam 36: Exchange Rates and the Macroeconomy

When the dollar depreciates, the cost to Americans of foreign goods

Table 36-2 ​ -If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of

In an open economy, aggregate supply consists of domestic production

If the dollar falls in value compared to other currencies, what will happen in the United States?

The anticipated effect of contractionary monetary policy is

Theoretically, when a currency depreciates one can predict that

Following an expansionary monetary policy, we would expect lower interest rates, dollar

A rise in the domestic interest rate leads to capital

Figure 36-4 ​ -Which of the situations illustrated in Figure 36-4 shows a currency depreciation leading to inflation?

The major difference between a closed economy and an open economy is that a(n)

What are some of the suggested remedies for the U.S.trade deficits? What remedies have been attempted? What remedies are left to try?

The expected effects of an increased budget deficit are

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

In an open economy, an increase in (G − T) will

A closed economy is one that

A Japanese recession will be counteracted by an appreciation of the Japanese yen.

A rise in the relative prices of a country's exports will decrease that country's net exports and reduce GDP.

An increase in the U.S.price level will increase U.S.net exports.

The expected effects of monetary expansion are

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

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 -If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of

Figure 36-4 -Which of the situations illustrated in Figure 36-4 shows a currency depreciation leading to inflation?

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