Question 1

When the dollar depreciates,the prices of imported inputs

Accepted Answer

A)  fall and aggregate supply shifts outward. 
B)  fall and aggregate supply shifts inward. 
C)  rise and aggregate supply shifts outward. 
D)  rise and aggregate supply shifts inward. 
A)  fall and aggregate supply shifts outward. 
B)  fall and aggregate supply shifts inward. 
C)  rise and aggregate supply shifts outward. 
D)  rise and aggregate supply shifts inward.

Question 2

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

Accepted Answer

A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S. government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created. 
A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S. government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.

Question 3

How does a budget deficit lead to a trade deficit?

Accepted Answer

A)  The trade deficit triggers higher interest rates, which increase the budget deficit. 
B)  The budget deficit leads to higher interest rates and exchange rates, which shrink net exports. 
C)  The trade deficit causes lower interest rates, which leads to economic recession and a budget deficit. 
D)  The budget deficit causes lower exchange rates, which decrease net exports. 
A)  The trade deficit triggers higher interest rates, which increase the budget deficit. 
B)  The budget deficit leads to higher interest rates and exchange rates, which shrink net exports. 
C)  The trade deficit causes lower interest rates, which leads to economic recession and a budget deficit. 
D)  The budget deficit causes lower exchange rates, which decrease net exports.

Question 4

A currency appreciation

Accepted Answer

A)  reduces aggregate demand and increases aggregate supply. 
B)  reduces aggregate demand and aggregate supply. 
C)  increases aggregate demand and reduces aggregate supply. 
D)  increases aggregate demand and aggregate supply. 
A)  reduces aggregate demand and increases aggregate supply. 
B)  reduces aggregate demand and aggregate supply. 
C)  increases aggregate demand and reduces aggregate supply. 
D)  increases aggregate demand and aggregate supply.

Question 5

If the international value of the dollar rises,the

Accepted Answer

A)  aggregate demand curve will shift inward. 
B)  aggregate supply curve will shift outward. 
C)  U.S. price level will fall. 
D)  All of the above are correct. 
A)  aggregate demand curve will shift inward. 
B)  aggregate supply curve will shift outward. 
C)  U.S. price level will fall. 
D)  All of the above are correct.

Question 6

An increase in the price level in Japan relative to the price level in the United States would

Accepted Answer

A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand. 
A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Suppose that the Fed decides to increase 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 9

If the demand effect dominates during a currency depreciation,then

Accepted Answer

A)  real GDP should fall. 
B)  real GDP should increase. 
C)  the price level should fall. 
D)  net exports should decrease. 
A)  real GDP should fall. 
B)  real GDP should increase. 
C)  the price level should fall. 
D)  net exports should decrease.

Question 10

Figure 20-9
  
-Figure 20-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Accepted Answer

A)  smaller when net exports are fixed. 
B)  smaller when net exports are variable. 
C)  larger when net exports are variable. 
D)  the same whether net exports are fixed or variable. 
A)  smaller when net exports are fixed. 
B)  smaller when net exports are variable. 
C)  larger when net exports are variable. 
D)  the same whether net exports are fixed or variable.

Question 11

Expansionary fiscal policy in an open economy has a

Accepted Answer

A)  greater effect than in a closed economy. 
B)  similar effect in a closed economy. 
C)  smaller effect than in a closed economy. 
D)  greater effect than monetary policy. 
A)  greater effect than in a closed economy. 
B)  similar effect in a closed economy. 
C)  smaller effect than in a closed economy. 
D)  greater effect than monetary policy.

Question 12

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?

Accepted Answer

A)  Input prices will fall and supply will decrease. 
B)  Input prices will fall and supply will increase. 
C)  Input prices will rise and supply will decrease. 
D)  Input prices will rise and supply will increase. 
A)  Input prices will fall and supply will decrease. 
B)  Input prices will fall and supply will increase. 
C)  Input prices will rise and supply will decrease. 
D)  Input prices will rise and supply will increase.

Question 13

Figure 20-6
  
-In Figure 20-6,which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

Accepted Answer

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

Question 14

Table 20-1
Suppose the economy of Macroland is described by the following:
C = 200 + .8DI (DI = disposable income)
I = 300 + .2Y − 50r (Y = GDP)
(r, the interest rate, is measured in percentage points. For example, a 9 percent interest rate is r = 9).
For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate at
r = 5
G = 750
T = .25Y
X = 200
M = 150 + .2Y
Hint: DI = Y − T
-From Table 20-1,find the trade deficit or surplus.

Accepted Answer

A)  475 deficit 
B)  75 deficit 
C)  75 surplus 
D)  475 surplus 
A)  475 deficit 
B)  75 deficit 
C)  75 surplus 
D)  475 surplus

Question 15

An increase in the U.S.price level relative to the price level of other countries would

Accepted Answer

A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand. 
A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand.

Question 16

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

Accepted Answer

A)  shift up. 
B)  shift down. 
C)  get flatter. 
D)  get steeper. 
A)  shift up. 
B)  shift down. 
C)  get flatter. 
D)  get steeper.

Question 17

International capital flows strengthen

Accepted Answer

A)  monetary policy and have no effect on fiscal policy. 
B)  monetary policy but weaken fiscal policy. 
C)  monetary and fiscal policy. 
D)  fiscal policy but weaken monetary policy. 
A)  monetary policy and have no effect on fiscal policy. 
B)  monetary policy but weaken fiscal policy. 
C)  monetary and fiscal policy. 
D)  fiscal policy but weaken monetary policy.

Question 18

A recession abroad would

Accepted Answer

A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand. 
A)  increase U.S. net exports and increase aggregate demand. 
B)  increase U.S. net exports and increase aggregate supply. 
C)  reduce U.S. net exports and reduce aggregate demand. 
D)  reduce U.S. net exports and increase aggregate demand.

Question 19

In an open economy net exports must always be positive.

Accepted Answer

A) True 
 B)False

Question 20

A decline in interest rates tends to expand the economy by

Accepted Answer

A)  encouraging private investment and decrease in bank lending. 
B)  appreciating the currency and lowering the profitability criterion for investments. 
C)  decreasing the cost of capital and reducing net exports. 
D)  depreciating the currency and raising net exports. 
A)  encouraging private investment and decrease in bank lending. 
B)  appreciating the currency and lowering the profitability criterion for investments. 
C)  decreasing the cost of capital and reducing net exports. 
D)  depreciating the currency and raising net exports.

When the dollar depreciates,the prices of imported inputs

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

How does a budget deficit lead to a trade deficit?

A currency appreciation

If the international value of the dollar rises,the

An increase in the price level in Japan relative to the price level in the United States would

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

Suppose that the Fed decides to increase 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?

If the demand effect dominates during a currency depreciation,then

Figure 20-9 -Figure 20-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Expansionary fiscal policy in an open economy has a

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?

Figure 20-6 -In Figure 20-6,which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

An increase in the U.S.price level relative to the price level of other countries would

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

International capital flows strengthen

A recession abroad would

In an open economy net exports must always be positive.

A decline in interest rates tends to expand the economy by

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?

Filters

Exam 20: Exchange Rates and the Macroeconomy

When the dollar depreciates,the prices of imported inputs

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

How does a budget deficit lead to a trade deficit?

A currency appreciation

If the international value of the dollar rises,the

An increase in the price level in Japan relative to the price level in the United States would

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

Suppose that the Fed decides to increase 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?

If the demand effect dominates during a currency depreciation,then

Figure 20-9 -Figure 20-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Expansionary fiscal policy in an open economy has a

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?

Figure 20-6 -In Figure 20-6,which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

An increase in the U.S.price level relative to the price level of other countries would

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

International capital flows strengthen

A recession abroad would

In an open economy net exports must always be positive.

A decline in interest rates tends to expand the economy by

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?

Filters