Question 1

The anticipated effect of contractionary monetary policy is

Accepted Answer

A)  increase in aggregate demand. 
B)  fall in interest rates. 
C)  increased capital outflow. 
D)  appreciation of the currency. 
A)  increase in aggregate demand. 
B)  fall in interest rates. 
C)  increased capital outflow. 
D)  appreciation of the currency.

Question 2

Appreciation of the Japanese yen will lead to a significant balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  a currency depreciation and increased net exports 
B)  a currency depreciation and reduced net exports 
C)  a currency appreciation and increased net exports 
D)  a currency appreciation and reduced net exports 
A)  a currency depreciation and increased net exports 
B)  a currency depreciation and reduced net exports 
C)  a currency appreciation and increased net exports 
D)  a currency appreciation and reduced net exports

Question 4

Following the economic crisis in 1994-1995,the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

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 5

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

Accepted Answer

A)  G + T = (S + I) + (X − IM) 
B)  G − T = (S + I) + (X + IM) 
C)  (X - IM) = (S - I) − (G - T) 
D)  (X - IM) = (S + I) − (G - T) 
A)  G + T = (S + I) + (X − IM) 
B)  G − T = (S + I) + (X + IM) 
C)  (X - IM) = (S - I) − (G - T) 
D)  (X - IM) = (S + I) − (G - T)

Question 6

Under a floating exchange rate system with mobile international capital,it is always t that current account

Accepted Answer

A)  deficit + capital account surplus = trade deficit. 
B)  surplus − capital account surplus = trade deficit. 
C)  surplus + capital account deficit = 0. 
D)  surplus − capital account surplus = 0. 
A)  deficit + capital account surplus = trade deficit. 
B)  surplus − capital account surplus = trade deficit. 
C)  surplus + capital account deficit = 0. 
D)  surplus − capital account surplus = 0.

Question 7

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with an expansionary monetary policy?

Accepted Answer

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

Question 8

The U.S.trade deficit is made possible,in part,because of foreigners' demand for U.S.financial assets.

Accepted Answer

A) True 
 B)False

Question 9

If the dollar appreciates,American consumers will buy more foreign goods and services.

Accepted Answer

A) True 
 B)False

Question 10

Explain how and why economic events in the U.S.affected the economies of Thailand,South Korea,and Indonesia and vice-versa.

Accepted Answer

Thailand,South Korea,and Indonesia fixed

Question 11

When the dollar appreciates,the cost to Americans of foreign goods

Accepted Answer

A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls. 
A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls.

Question 12

The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment

Accepted Answer

A)  increases generated by higher interest rates are offset by net export decreases. 
B)  decreases generated by higher interest rates are coupled with net export decreases. 
C)  decreases generated by higher interest rates are offset by net export increases. 
D)  increases generated by higher interest rates are coupled with net export increases. 
A)  increases generated by higher interest rates are offset by net export decreases. 
B)  decreases generated by higher interest rates are coupled with net export decreases. 
C)  decreases generated by higher interest rates are offset by net export increases. 
D)  increases generated by higher interest rates are coupled with net export increases.

Question 13

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 budget deficit or surplus for Macroland.

Accepted Answer

A) 125.50 
B) -93.75 
C) -126.25 
D) -154.75 
A) 125.50 
B) -93.75 
C) -126.25 
D) -154.75

Question 14

When the dollar depreciates,the cost to Americans of foreign goods

Accepted Answer

A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls. 
A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls.

Question 15

Figure 20-5
  
-Which of the graphs in Figure 20-5 are consistent with an appreciation of the U.S.dollar caused by an increase in U.S.interest rates?

Accepted Answer

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

Question 16

If (T − G)= (X − IM),then (S − I)

Accepted Answer

A)  is greater than zero. 
B)  is zero. 
C)  is less than zero. 
D)  cannot be calculated. 
A)  is greater than zero. 
B)  is zero. 
C)  is less than zero. 
D)  cannot be calculated.

Question 17

The elimination of the federal budget deficit in the 1990s put downward pressure on real interest rates.

Accepted Answer

A) True 
 B)False

Question 18

The growing federal budget deficit in the 1980s was accompanied by a

Accepted Answer

A)  growing trade surplus. 
B)  growing trade deficit. 
C)  shrinking trade deficit. 
D)  shrinking capital account surplus. 
A)  growing trade surplus. 
B)  growing trade deficit. 
C)  shrinking trade deficit. 
D)  shrinking capital account surplus.

Question 19

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

Accepted Answer

A)  closed economy balances budget, while an open economy does not. 
B)  open economy is a market economy, while a closed economy relies on planning. 
C)  open economy interacts with the rest of the world, while a closed economy does not. 
D)  closed economy keeps political affairs secret, while an open economy does not. 
A)  closed economy balances budget, while an open economy does not. 
B)  open economy is a market economy, while a closed economy relies on planning. 
C)  open economy interacts with the rest of the world, while a closed economy does not. 
D)  closed economy keeps political affairs secret, while an open economy does not.

Question 20

Following an expansionary monetary policy,we would expect lower interest rates,dollar

Accepted Answer

A)  depreciation, and an increase in the current account deficit. 
B)  depreciation, and a decrease in the current account deficit. 
C)  appreciation, and an increase in the current account deficit. 
D)  appreciation, and a decrease in the current account deficit. 
A)  depreciation, and an increase in the current account deficit. 
B)  depreciation, and a decrease in the current account deficit. 
C)  appreciation, and an increase in the current account deficit. 
D)  appreciation, and a decrease in the current account deficit.

The anticipated effect of contractionary monetary policy is

Appreciation of the Japanese yen will lead to a significant balance of trade surplus.

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

Following the economic crisis in 1994-1995,the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

Under a floating exchange rate system with mobile international capital,it is always t that current account

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with an expansionary monetary policy?

The U.S.trade deficit is made possible,in part,because of foreigners' demand for U.S.financial assets.

If the dollar appreciates,American consumers will buy more foreign goods and services.

Explain how and why economic events in the U.S.affected the economies of Thailand,South Korea,and Indonesia and vice-versa.

When the dollar appreciates,the cost to Americans of foreign goods

The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment

When the dollar depreciates,the cost to Americans of foreign goods

Figure 20-5 -Which of the graphs in Figure 20-5 are consistent with an appreciation of the U.S.dollar caused by an increase in U.S.interest rates?

If (T − G)= (X − IM),then (S − I)

The elimination of the federal budget deficit in the 1990s put downward pressure on real interest rates.

The growing federal budget deficit in the 1980s was accompanied by a

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

Following an expansionary monetary policy,we would expect lower interest rates,dollar

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

The anticipated effect of contractionary monetary policy is

Appreciation of the Japanese yen will lead to a significant balance of trade surplus.

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

Following the economic crisis in 1994-1995,the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

Under a floating exchange rate system with mobile international capital,it is always t that current account

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with an expansionary monetary policy?

The U.S.trade deficit is made possible,in part,because of foreigners' demand for U.S.financial assets.

If the dollar appreciates,American consumers will buy more foreign goods and services.

Explain how and why economic events in the U.S.affected the economies of Thailand,South Korea,and Indonesia and vice-versa.

When the dollar appreciates,the cost to Americans of foreign goods

The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment

When the dollar depreciates,the cost to Americans of foreign goods

Figure 20-5 -Which of the graphs in Figure 20-5 are consistent with an appreciation of the U.S.dollar caused by an increase in U.S.interest rates?

If (T − G)= (X − IM),then (S − I)

The elimination of the federal budget deficit in the 1990s put downward pressure on real interest rates.

The growing federal budget deficit in the 1980s was accompanied by a

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

Following an expansionary monetary policy,we would expect lower interest rates,dollar

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