Question 1

Protectionism may fail to reduce a current account deficit because it

Accepted Answer

A)  depreciates the dollar. 
B)  invites retaliation, which hurts exports. 
C)  encourages exports. 
D)  does not reduce imports. 
A)  depreciates the dollar. 
B)  invites retaliation, which hurts exports. 
C)  encourages exports. 
D)  does not reduce imports.

Question 2

If the U.S.government runs a budget deficit (G − T),that deficit must be financed by an excess of

Accepted Answer

A)  T over G. 
B)  C over T plus G. 
C)  investment by American businesses and individuals. 
D)  S over I by American businesses and individuals, or by borrowing from foreigners. 
A)  T over G. 
B)  C over T plus G. 
C)  investment by American businesses and individuals. 
D)  S over I by American businesses and individuals, or by borrowing from foreigners.

Question 3

An expansionary fiscal policy makes the exchange rate appreciate.

Accepted Answer

A) True 
 B)False

Question 4

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate

Accepted Answer

A fiscal expansion normally makes the ex

Question 5

Which of the following would lead to a depreciating dollar?

Accepted Answer

A)  a higher federal deficit 
B)  lower interest rates 
C)  higher interest rates 
D)  contractionary monetary policy 
A)  a higher federal deficit 
B)  lower interest rates 
C)  higher interest rates 
D)  contractionary monetary policy

Question 6

Table 20-2
  
-In Table 20-2,assume that exports rise to $900.What is the new equilibrium GDP?

Accepted Answer

A)  $5,000 
B)  $4,500 
C)  $4,000 
D)  $3,500 
A)  $5,000 
B)  $4,500 
C)  $4,000 
D)  $3,500

Question 7

Appreciation of the Japanese Yen would lead to

Accepted Answer

A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  downward shift in the aggregate demand curve for Japan. 
A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  downward shift in the aggregate demand curve for Japan.

Question 8

Table 20-2
  
-In Table 20-2,what are net exports when GDP = 3,500?

Accepted Answer

A)  400 
B)  300 
C)  200 
D)  100 
A)  400 
B)  300 
C)  200 
D)  100

Question 9

A rise in net exports shifts the aggregate

Accepted Answer

A)  demand curve inward. 
B)  demand curve outward. 
C)  supply curve outward. 
D)  supply curve inward. 
A)  demand curve inward. 
B)  demand curve outward. 
C)  supply curve outward. 
D)  supply curve inward.

Question 10

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?

Accepted Answer

This type of trade policy is commonly ca

Question 11

In an open economy,the government deficit is 400 and investment exceeds saving by 300,so in equilibrium the trade deficit (IM − X)must be

Accepted Answer

A) 100. 
B) 200. 
C) 300. 
D) 700. 
A) 100. 
B) 200. 
C) 300. 
D) 700.

Question 12

What are the economic effects of a currency appreciation?

Accepted Answer

A)  It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output may fall as well. 
A)  It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B)  It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C)  It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well. 
D)  It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output may fall as well.

Question 13

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

Accepted Answer

A) True 
 B)False

Question 14

A depreciation of the dollar will cause an increase in the Consumer Price Index.

Accepted Answer

A) True 
 B)False

Question 15

A currency appreciation should

Accepted Answer

A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand. 
A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand.

Question 16

Figure 20-5
  
-Which of the graphs in Figure 20-5 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?

Accepted Answer

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

Question 17

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Accepted Answer

A) True 
 B)False

Question 18

Figure 20-6
  
-In Figure 20-6,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

Accepted Answer

A)  B. 
B)  F. 
C)  J. 
D)  H. 
A)  B. 
B)  F. 
C)  J. 
D)  H.

Question 19

An expansionary fiscal policy will lead to

Accepted Answer

A)  higher interest rates, an appreciated dollar, and reduced net exports. 
B)  higher interest rates, an appreciated dollar, and increased net exports. 
C)  reduced interest rates, an appreciated dollar, and reduced net exports. 
D)  reduced interest rates, an appreciated dollar, and increased net exports. 
A)  higher interest rates, an appreciated dollar, and reduced net exports. 
B)  higher interest rates, an appreciated dollar, and increased net exports. 
C)  reduced interest rates, an appreciated dollar, and reduced net exports. 
D)  reduced interest rates, an appreciated dollar, and increased net exports.

Question 20

Interest rate increases lead to currency appreciation and increases in net exports.

Accepted Answer

A) True 
 B)False

Protectionism may fail to reduce a current account deficit because it

If the U.S.government runs a budget deficit (G − T),that deficit must be financed by an excess of

An expansionary fiscal policy makes the exchange rate appreciate.

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate

Which of the following would lead to a depreciating dollar?

Table 20-2 -In Table 20-2,assume that exports rise to $900.What is the new equilibrium GDP?

Appreciation of the Japanese Yen would lead to

Table 20-2 -In Table 20-2,what are net exports when GDP = 3,500?

A rise in net exports shifts the aggregate

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?

In an open economy,the government deficit is 400 and investment exceeds saving by 300,so in equilibrium the trade deficit (IM − X)must be

What are the economic effects of a currency appreciation?

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

A depreciation of the dollar will cause an increase in the Consumer Price Index.

A currency appreciation should

Figure 20-5 -Which of the graphs in Figure 20-5 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?

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Figure 20-6 -In Figure 20-6,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

An expansionary fiscal policy will lead to

Interest rate increases lead to currency appreciation and increases in 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

Protectionism may fail to reduce a current account deficit because it

If the U.S.government runs a budget deficit (G − T),that deficit must be financed by an excess of

An expansionary fiscal policy makes the exchange rate appreciate.

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate

Which of the following would lead to a depreciating dollar?

Table 20-2 -In Table 20-2,assume that exports rise to $900.What is the new equilibrium GDP?

Appreciation of the Japanese Yen would lead to

Table 20-2 -In Table 20-2,what are net exports when GDP = 3,500?

A rise in net exports shifts the aggregate

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?

In an open economy,the government deficit is 400 and investment exceeds saving by 300,so in equilibrium the trade deficit (IM − X)must be

What are the economic effects of a currency appreciation?

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

A depreciation of the dollar will cause an increase in the Consumer Price Index.

A currency appreciation should

Figure 20-5 -Which of the graphs in Figure 20-5 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?

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Figure 20-6 -In Figure 20-6,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

An expansionary fiscal policy will lead to

Interest rate increases lead to currency appreciation and increases in 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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