Question 1

If a currency depreciates,a country's net exports

Accepted Answer

A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases. 
A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases. B

Question 2

Appreciation of the dollar will make imported goods more expensive and shift the aggregate demand curve outward.

Accepted Answer

A) True 
 B)False  False

Question 3

When the U.S.dollar appreciates,

Accepted Answer

A)  U.S. exports rise. 
B)  U.S. imports decline. 
C)  aggregate demand shifts inward. 
D)  aggregate demand shifts outward. 
A)  U.S. exports rise. 
B)  U.S. imports decline. 
C)  aggregate demand shifts inward. 
D)  aggregate demand shifts outward. C

Question 4

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 5

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

Accepted Answer

A)  lower real interest rates 
B)  a drop in the exchange rate 
C)  an increase in net exports 
D)  All of the above are correct. 
A)  lower real interest rates 
B)  a drop in the exchange rate 
C)  an increase in net exports 
D)  All of the above are correct.

Question 6

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 7

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

Accepted Answer

A)  Congress removed all tariffs and trade restrictions on imports. 
B)  NAFTA was introduced and Mexican exports flooded the United States. 
C)  the international value of the dollar fell during the 1990s, which encouraged U.S. exports. 
D)  the international value of the dollar rose in the last half of the 1990s, which encouraged U.S. imports and damaged U.S. exports. 
A)  Congress removed all tariffs and trade restrictions on imports. 
B)  NAFTA was introduced and Mexican exports flooded the United States. 
C)  the international value of the dollar fell during the 1990s, which encouraged U.S. exports. 
D)  the international value of the dollar rose in the last half of the 1990s, which encouraged U.S. imports and damaged U.S. exports.

Question 8

Figure 20-6
  
-In Figure 20-6,which point represents equilibrium at the lowest exchange rate?

Accepted Answer

A)  E 
B)  F 
C)  G 
D)  H 
A)  E 
B)  F 
C)  G 
D)  H

Question 9

Figure 20-7
  
-In Figure 20-7,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?

Accepted Answer

A)  a European economic expansion 
B)  a decrease in the money supply 
C)  an increase in the interest rate 
D)  an increase in the U.S. price level 
A)  a European economic expansion 
B)  a decrease in the money supply 
C)  an increase in the interest rate 
D)  an increase in the U.S. price level

Question 10

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 11

Discuss the opposing points of view on U.S.trade deficit.

Accepted Answer

Those who worry about trade deficits poi

Question 12

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Accepted Answer

A)  The trade deficit will fall; GDP will fall. 
B)  The trade deficit will rise; GDP will rise. 
C)  The trade deficit will fall; GDP will rise. 
D)  The trade deficit will rise; GDP will fall. 
A)  The trade deficit will fall; GDP will fall. 
B)  The trade deficit will rise; GDP will rise. 
C)  The trade deficit will fall; GDP will rise. 
D)  The trade deficit will rise; GDP will fall.

Question 13

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 14

Expansionary fiscal policy in an open economy

Accepted Answer

A)  leads to a balance of trade surplus. 
B)  decreases America's capital account surplus and the current account deficit by the same amount. 
C)  increases both America's capital account surplus and current account deficit by equal amounts. 
D)  increases America's capital account surplus more than it increases the current account deficit. 
A)  leads to a balance of trade surplus. 
B)  decreases America's capital account surplus and the current account deficit by the same amount. 
C)  increases both America's capital account surplus and current account deficit by equal amounts. 
D)  increases America's capital account surplus more than it increases the current account deficit.

Question 15

Figure 20-2
  
-Which of the following explains the movements in Figure 20-2?

Accepted Answer

A)  an increase in the U.S. price level 
B)  a decrease in the U.S. price level 
C)  an appreciation of the U.S. dollar 
D)  an expansionary monetary policy 
A)  an increase in the U.S. price level 
B)  a decrease in the U.S. price level 
C)  an appreciation of the U.S. dollar 
D)  an expansionary monetary policy

Question 16

International capital flows tend to reduce the impact of monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  the federal budget must always be in balance. 
B)  when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C)  current account deficits should be avoided. 
D)  trade deficits tend to be eliminated automatically. 
A)  the federal budget must always be in balance. 
B)  when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C)  current account deficits should be avoided. 
D)  trade deficits tend to be eliminated automatically.

Question 18

Which of the following usually leads to currency appreciation?

Accepted Answer

A)  galloping inflation 
B)  relatively low interest rates 
C)  declining real GDP 
D)  fixed exchange rates 
A)  galloping inflation 
B)  relatively low interest rates 
C)  declining real GDP 
D)  fixed exchange rates

Question 19

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

Accepted Answer

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

Question 20

If a currency appreciates,a country's net exports

Accepted Answer

A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases. 
A)  fall and AD increases. 
B)  rise and AD increases. 
C)  fall and AD decreases. 
D)  rise and AD decreases.

If a currency depreciates,a country's net exports

Appreciation of the dollar will make imported goods more expensive and shift the aggregate demand curve outward.

When the U.S.dollar appreciates,

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

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

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

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

Figure 20-6 -In Figure 20-6,which point represents equilibrium at the lowest exchange rate?

Figure 20-7 -In Figure 20-7,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?

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.

Discuss the opposing points of view on U.S.trade deficit.

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Protectionism may reduce imports,and it will also

Expansionary fiscal policy in an open economy

Figure 20-2 -Which of the following explains the movements in Figure 20-2?

International capital flows tend to reduce the impact of monetary policy.

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

Which of the following usually leads to currency appreciation?

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

If a currency appreciates,a country's net exports

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

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?

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Exam 20: Exchange Rates and the Macroeconomy

If a currency depreciates,a country's net exports

Appreciation of the dollar will make imported goods more expensive and shift the aggregate demand curve outward.

When the U.S.dollar appreciates,

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

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

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

A main reason why the U.S.trade deficit grew so large from 1997 to 2000 was that

Figure 20-6 -In Figure 20-6,which point represents equilibrium at the lowest exchange rate?

Figure 20-7 -In Figure 20-7,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?

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.

Discuss the opposing points of view on U.S.trade deficit.

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Protectionism may reduce imports,and it will also

Expansionary fiscal policy in an open economy

Figure 20-2 -Which of the following explains the movements in Figure 20-2?

International capital flows tend to reduce the impact of monetary policy.

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

Which of the following usually leads to currency appreciation?

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

If a currency appreciates,a country's net exports

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

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?

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