Exam 20: Exchange Rates and the Macroeconomy

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

Figure 20-1 -Which of the graphs in Figure 20-1 best illustrates the behavior of exports and imports in relation to U.S.real GDP?

A rise in the domestic interest rate leads to capital outflows and makes the currency depreciate.

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

An expansionary monetary policy will

The monetary expansion of the mid-1990s was expected to lead to a currency appreciation.

In an open economy,the government deficit is 600 and saving exceeds investment by 500,so in equilibrium the trade deficit (IM − X)must be

If European economies experience a period of sustained recession and the United States does not,what will happen in the United States?

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

In an open economy,aggregate supply consists of domestic production plus imports.

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 B to A?

Figure 20-8 -Which of the graphs in Figure 20-8 represents the effects of a currency appreciation?

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

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