Exam 36: Exchange Rates and the Macroeconomy

Figure 36-6 In Figure 36-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E. In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point

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

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

Economic theory shows that the current account deficit is always equal to the capital account surplus. This means that

A rise in net exports shifts the aggregate

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.

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?

Expansionary fiscal policy in an open economy has a

An appreciation of the dollar makes imported inputs cheaper and shifts the U.S. aggregate supply curve outward, thus pushing American prices down.

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

Foreign trade will have no impact on real GDP when

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

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

Figure 36-2 Which of the following explains the movements in Figure 36-2?

Protectionism may reduce imports, and it will also

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 A to B?

Table 36-2 In Table 36-2, assume that exports rise to $900. What is the new equilibrium GDP?

The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment

The expected effects of a tighter monetary policy are

If a currency appreciates, a country's net exports