Question 1

What is international economic policy coordination?

Accepted Answer

International economic policy coordination is the attempt to significantly modify national policies in recognition of international economic interdependence. Nations regularly consult with each other in the context of the IMF, OECD, Bank for International Settlements, and Group of Seven. The Plaza Agreement and Louvre Accord are examples of international economic policy coordination.

Question 2

Under a fixed exchange-rate system and high capital mobility, an expansion in the domestic money supply leads to:

Accepted Answer

A)  Trade-account deficit and a capital-account surplus 
B)  Trade-account deficit and a capital-account deficit 
C)  Trade-account surplus and a capital-account surplus 
D)  Trade-account surplus and a capital-account deficit 
A)  Trade-account deficit and a capital-account surplus 
B)  Trade-account deficit and a capital-account deficit 
C)  Trade-account surplus and a capital-account surplus 
D)  Trade-account surplus and a capital-account deficit B

Question 3

A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:

Accepted Answer

A)  Expansionary fiscal policy 
B)  Expansionary monetary policy 
C)  Contractionary fiscal policy 
D)  Contractionary monetary policy 
A)  Expansionary fiscal policy 
B)  Expansionary monetary policy 
C)  Contractionary fiscal policy 
D)  Contractionary monetary policy B

Question 4

Direct controls may take the form of

Accepted Answer

A)  Tariffs 
B)  Export subsidies 
C)  Export quotas 
D)  All of the above 
A)  Tariffs 
B)  Export subsidies 
C)  Export quotas 
D)  All of the above

Question 5

Policy coordination is complicated by

Accepted Answer

A)  Different economic objectives 
B)  Different national institutions 
C)  Different phases in the business cycle 
D)  All of the above 
A)  Different economic objectives 
B)  Different national institutions 
C)  Different phases in the business cycle 
D)  All of the above

Question 6

Given an open economy with high capital mobility, monetary policy is strengthened under fixed exchange rates.

Accepted Answer

A) True 
 B)False

Question 7

Given an open economy with high capital mobility and fixed exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy cause aggregate demand to increase, thus strengthening the policy's expansionary effect.

Accepted Answer

A) True 
 B)False

Question 8

When a nation realizes external balance

Accepted Answer

A)  it can have a current account deficit 
B)  it can have a current account surplus 
C)  it has neither a current account deficit nor a current account surplus 
D)  Both a and b 
A)  it can have a current account deficit 
B)  it can have a current account surplus 
C)  it has neither a current account deficit nor a current account surplus 
D)  Both a and b

Question 9

All of the following are obstacles to international economic policy coordination $\underline {  \text { except }  }$

Accepted Answer

A)  Different national objectives and institutions 
B)  Different national political climates 
C)  Different phases in the business cycle 
D)  Different national currencies 
A)  Different national objectives and institutions 
B)  Different national political climates 
C)  Different phases in the business cycle 
D)  Different national currencies

Question 10

Expenditure-switching policies alter the level of total spending (aggregate demand) for goods and services produced domestically and those imported.

Accepted Answer

A) True 
 B)False

Question 11

The appropriate expenditure-$\underline {   \text { switching } }$ policy to correct a current account $\underline {   \text { deficit } }$ is:

Accepted Answer

A)  Contractionary monetary policy 
B)  Expansionary fiscal policy 
C)  Currency devaluation 
D)  Currency revaluation 
A)  Contractionary monetary policy 
B)  Expansionary fiscal policy 
C)  Currency devaluation 
D)  Currency revaluation

Question 12

What policy instrument should be used when demand-pull inflation exists?

Accepted Answer

With demand-pull inflation, in

Question 13

Currency devaluation and revaluation primarily affect the economy's current account and have secondary effects on domestic employment and inflation.

Accepted Answer

A) True 
 B)False

Question 14

Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency. This causes the

Accepted Answer

A)  domestic money supply to decrease and a decline in aggregate demand 
B)  domestic money supply to increase and a decline in aggregate demand 
C)  domestic money supply to decrease and a rise in aggregate demand 
D)  domestic money supply to increase and a fall in aggregate demand 
A)  domestic money supply to decrease and a decline in aggregate demand 
B)  domestic money supply to increase and a decline in aggregate demand 
C)  domestic money supply to decrease and a rise in aggregate demand 
D)  domestic money supply to increase and a fall in aggregate demand

Question 16

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

Accepted Answer

A)  Recession to become less severe--deficit to become less severe 
B)  Recession to become more severe--deficit to become less severe 
C)  Recession to become less severe--deficit to become more severe 
D)  Recession to become more severe--deficit to become more severe 
A)  Recession to become less severe--deficit to become less severe 
B)  Recession to become more severe--deficit to become less severe 
C)  Recession to become less severe--deficit to become more severe 
D)  Recession to become more severe--deficit to become more severe

Question 17

Under a fixed exchange-rate system and high capital mobility, an$\underline {   \text { expansionary }  }$ fiscal policy leads to a:

Accepted Answer

A)  Trade-account deficit and a capital-account surplus 
B)  Trade-account deficit and a capital-account deficit 
C)  Trade-account surplus and a capital-account surplus 
D)  Trade-account surplus and a capital-account deficit 
A)  Trade-account deficit and a capital-account surplus 
B)  Trade-account deficit and a capital-account deficit 
C)  Trade-account surplus and a capital-account surplus 
D)  Trade-account surplus and a capital-account deficit

Question 18

Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause

Accepted Answer

A)  the dollar to appreciate and will decrease U.S. net exports 
B)  the dollar to appreciate and will increase U.S. net exports 
C)  the dollar to depreciate and will increase U.S. net exports 
D)  the dollar to depreciate and will decrease U.S. net exports 
A)  the dollar to appreciate and will decrease U.S. net exports 
B)  the dollar to appreciate and will increase U.S. net exports 
C)  the dollar to depreciate and will increase U.S. net exports 
D)  the dollar to depreciate and will decrease U.S. net exports

Question 19

Given fixed exchange rates, assume Mexico initiates $\underline {   \text { expansionary } }$monetary and fiscal policies to combat recession. These policies will also:

Accepted Answer

A)  Increase both imports and exports 
B)  Increase exports and reduce imports 
C)  Reduce a balance-of-payments surplus 
D)  Reduce a balance-of-payments deficit 
A)  Increase both imports and exports 
B)  Increase exports and reduce imports 
C)  Reduce a balance-of-payments surplus 
D)  Reduce a balance-of-payments deficit

Question 20

Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

Accepted Answer

A) True 
 B)False

What is international economic policy coordination?

Under a fixed exchange-rate system and high capital mobility, an expansion in the domestic money supply leads to:

A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:

Direct controls may take the form of

Policy coordination is complicated by

Given an open economy with high capital mobility, monetary policy is strengthened under fixed exchange rates.

Given an open economy with high capital mobility and fixed exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy cause aggregate demand to increase, thus strengthening the policy's expansionary effect.

When a nation realizes external balance

All of the following are obstacles to international economic policy coordination $\underline { \text { except } }$

Expenditure-switching policies alter the level of total spending (aggregate demand) for goods and services produced domestically and those imported.

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account $\underline { \text { deficit } }$ is:

What policy instrument should be used when demand-pull inflation exists?

Currency devaluation and revaluation primarily affect the economy's current account and have secondary effects on domestic employment and inflation.

Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency. This causes the

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

Under a fixed exchange-rate system and high capital mobility, an $\underline { \text { expansionary } }$ fiscal policy leads to a:

Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause

Given fixed exchange rates, assume Mexico initiates $\underline { \text { expansionary } }$ monetary and fiscal policies to combat recession. These policies will also:

Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Exchange-Rate Systems and Currency Crises

International Banking: Reserves, Debt, and Risk

Filters

Exam 16: Macroeconomic Policy in an Open Economy

What is international economic policy coordination?

Under a fixed exchange-rate system and high capital mobility, an expansion in the domestic money supply leads to:

A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:

Direct controls may take the form of

Policy coordination is complicated by

Given an open economy with high capital mobility, monetary policy is strengthened under fixed exchange rates.

Given an open economy with high capital mobility and fixed exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy cause aggregate demand to increase, thus strengthening the policy's expansionary effect.

When a nation realizes external balance

All of the following are obstacles to international economic policy coordination except ‾\underline { \text { except } } except ​

Expenditure-switching policies alter the level of total spending (aggregate demand) for goods and services produced domestically and those imported.

The appropriate expenditure- switching ‾\underline { \text { switching } } switching ​ policy to correct a current account deficit ‾\underline { \text { deficit } } deficit ​ is:

What policy instrument should be used when demand-pull inflation exists?

Currency devaluation and revaluation primarily affect the economy's current account and have secondary effects on domestic employment and inflation.

Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency. This causes the

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

Under a fixed exchange-rate system and high capital mobility, an expansionary ‾\underline { \text { expansionary } } expansionary ​ fiscal policy leads to a:

Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause

Given fixed exchange rates, assume Mexico initiates expansionary ‾\underline { \text { expansionary } } expansionary ​ monetary and fiscal policies to combat recession. These policies will also:

Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Exchange-Rate Systems and Currency Crises

International Banking: Reserves, Debt, and Risk

Filters

All of the following are obstacles to international economic policy coordination $\underline { \text { except } }$

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account $\underline { \text { deficit } }$ is:

Under a fixed exchange-rate system and high capital mobility, an $\underline { \text { expansionary } }$ fiscal policy leads to a:

Given fixed exchange rates, assume Mexico initiates $\underline { \text { expansionary } }$ monetary and fiscal policies to combat recession. These policies will also: