Exam 36: Exchange Rates and the Macroeconomy

Figure 36-5 Which of the graphs in Figure 36-5 are consistent with a depreciation of the U.S. dollar and an increase in net exports caused by a decrease in U.S. interest rates?

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 B to A?

Appreciations or depreciations in currency change international relative prices.

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

International capital flows are purchases and sales of financial assets across national borders.

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

A country's trade deficit is the excess of its imports over its exports.

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 in an open economy have the effect of

A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports.

The dramatic rise in the dollar between 1981 and 1986 was the result of a(n)

A large tax cut in the United States should lead to an increase in the trade deficit.

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

Why is fiscal policy less effective in an open economy than in a closed economy?

A decrease in the price level in Japan will shift the U.S. aggregate demand curve outward.

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

Which of the following is correct?

In the 1990s, the United States eliminated its budget deficit and expanded the money supply. This should have led 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?

In the spring of 2002, the United States imposed tariffs on imported steel to protect the jobs of American steel workers and protect the production of the American steel industry. Why might this policy not work to increase overall employment in the United States?