Question 1

Explain how a government budget's deficit and a current account deficit can be related.

Accepted Answer

A government budget deficit occurs when

Question 2

A contractionary monetary policy tends to lower interest rates.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A)  An expansionary monetary policy tends to raise interest rates. 
B)  An expansionary monetary policy tends to lead to an appreciation of the currency. 
C)  An expansionary monetary policy tends to lead to a current account deficit. 
D)  A contractionary monetary policy tends to lead to a depreciation of the currency. 
E)  An expansionary monetary policy tends to lead to an increase in aggregate demand. 
A)  An expansionary monetary policy tends to raise interest rates. 
B)  An expansionary monetary policy tends to lead to an appreciation of the currency. 
C)  An expansionary monetary policy tends to lead to a current account deficit. 
D)  A contractionary monetary policy tends to lead to a depreciation of the currency. 
E)  An expansionary monetary policy tends to lead to an increase in aggregate demand.

Question 4

With flexible exchange rates, fiscal policy is not very effective in changing exchange rates and interest rates.

Accepted Answer

A) True 
 B)False

Question 5

Government spending on goods and services is typically 45 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 6

In a closed economy, a contractionary fiscal policy:

Accepted Answer

A)  leads to an increase in both real GDP and the price level. 
B)  leads to a decrease in both real GDP and the price level. 
C)  leads to an increase in real GDP and a decrease in the price level. 
D)  leads to a decrease in real GDP and an increase in the price level. 
E)  does not change either real GDP or the price level. 
A)  leads to an increase in both real GDP and the price level. 
B)  leads to a decrease in both real GDP and the price level. 
C)  leads to an increase in real GDP and a decrease in the price level. 
D)  leads to a decrease in real GDP and an increase in the price level. 
E)  does not change either real GDP or the price level.

Question 7

An expansionary monetary policy:

Accepted Answer

A)  puts upward pressure on interest rates causing the currency to appreciate. 
B)  puts upward pressure on interest rates causing the currency to depreciate. 
C)  puts downward pressure on interest rates causing the currency to appreciate. 
D)  puts no pressure on interest rates and does not change the exchange rate. 
E)  puts downward pressure on interest rates causing the currency to depreciate. 
A)  puts upward pressure on interest rates causing the currency to appreciate. 
B)  puts upward pressure on interest rates causing the currency to depreciate. 
C)  puts downward pressure on interest rates causing the currency to appreciate. 
D)  puts no pressure on interest rates and does not change the exchange rate. 
E)  puts downward pressure on interest rates causing the currency to depreciate.

Question 8

A contractionary monetary policy will lead to lower real GDP and the price level when exchange rates are free to find their equilibrium. Explain why this is true.

Accepted Answer

A contractionary monetary policy involve

Question 9

A higher government budget deficit will lead to increased government borrowing if the government chooses not to cover the deficit by printing money.

Accepted Answer

A) True 
 B)False

Question 10

Everything else equal, which government policy would cause a country's currency to depreciate?

Accepted Answer

A)  expansionary monetary policy 
B)  contractionary monetary policy 
C)  expansionary fiscal policy 
D)  contractionary exchange rate policy 
E)  a combination of higher taxes and lower spending. 
A)  expansionary monetary policy 
B)  contractionary monetary policy 
C)  expansionary fiscal policy 
D)  contractionary exchange rate policy 
E)  a combination of higher taxes and lower spending.

Question 11

If a government wanted a current account surplus, then a government budget deficit would be helpful in achieving that goal. Explain why this statement is true.

Accepted Answer

The statement that a government budget d

Question 12

A contractionary monetary policy usually causes an appreciation of the country's currency.

Accepted Answer

A) True 
 B)False

Question 13

In an open economy, an expansionary fiscal policy:

Accepted Answer

A)  is very effective in changing real GDP. 
B)  is not effective in changing real GDP. 
C)  is not effective in changing the exchange rate. 
D)  is not effective in changing capital flows between countries. 
E)  greatly increases the price level. 
A)  is very effective in changing real GDP. 
B)  is not effective in changing real GDP. 
C)  is not effective in changing the exchange rate. 
D)  is not effective in changing capital flows between countries. 
E)  greatly increases the price level.

Question 14

In an open economy, a contractionary fiscal policy:

Accepted Answer

A)  is very effective in changing real GDP. 
B)  is not effective in changing real GDP. 
C)  is not effective in changing the exchange rate. 
D)  is not effective in changing capital flows between countries. 
E)  leaves interest rates unchanged. 
A)  is very effective in changing real GDP. 
B)  is not effective in changing real GDP. 
C)  is not effective in changing the exchange rate. 
D)  is not effective in changing capital flows between countries. 
E)  leaves interest rates unchanged.

Question 15

An expansionary fiscal policy and a contractionary monetary policy are consistent in their effects on the exchange rate and capital flows.

Accepted Answer

A) True 
 B)False

Question 16

In an open economy with flexible exchange rates, expansionary fiscal policy is highly effective in changing real GDP.

Accepted Answer

A) True 
 B)False

Question 17

External balance is usually considered to be more important to a country than internal balance.

Accepted Answer

A) True 
 B)False

Question 18

Monetary policy is most effect when exchange rates are flexible.

Accepted Answer

A) True 
 B)False

Question 19

An expansionary fiscal policy and an expansionary monetary policy are consistent in their effects on the exchange rate and capital flows.

Accepted Answer

A) True 
 B)False

Question 20

How are lower interest rates caused by an expansionary monetary policy related to an increase in exports and a decrease in imports? What does this have to do with the level of aggregate demand?

Accepted Answer

Lower interest rates caused by an expans

Explain how a government budget's deficit and a current account deficit can be related.

A contractionary monetary policy tends to lower interest rates.

Which of the following statements is true?

With flexible exchange rates, fiscal policy is not very effective in changing exchange rates and interest rates.

Government spending on goods and services is typically 45 percent of GDP.

In a closed economy, a contractionary fiscal policy:

An expansionary monetary policy:

A contractionary monetary policy will lead to lower real GDP and the price level when exchange rates are free to find their equilibrium. Explain why this is true.

A higher government budget deficit will lead to increased government borrowing if the government chooses not to cover the deficit by printing money.

Everything else equal, which government policy would cause a country's currency to depreciate?

If a government wanted a current account surplus, then a government budget deficit would be helpful in achieving that goal. Explain why this statement is true.

A contractionary monetary policy usually causes an appreciation of the country's currency.

In an open economy, an expansionary fiscal policy:

In an open economy, a contractionary fiscal policy:

An expansionary fiscal policy and a contractionary monetary policy are consistent in their effects on the exchange rate and capital flows.

In an open economy with flexible exchange rates, expansionary fiscal policy is highly effective in changing real GDP.

External balance is usually considered to be more important to a country than internal balance.

Monetary policy is most effect when exchange rates are flexible.

An expansionary fiscal policy and an expansionary monetary policy are consistent in their effects on the exchange rate and capital flows.

How are lower interest rates caused by an expansionary monetary policy related to an increase in exports and a decrease in imports? What does this have to do with the level of aggregate demand?

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters

Exam 17: Macroeconomic Policy and Floating Exchange Rates

Explain how a government budget's deficit and a current account deficit can be related.

A contractionary monetary policy tends to lower interest rates.

Which of the following statements is true?

With flexible exchange rates, fiscal policy is not very effective in changing exchange rates and interest rates.

Government spending on goods and services is typically 45 percent of GDP.

In a closed economy, a contractionary fiscal policy:

An expansionary monetary policy:

A contractionary monetary policy will lead to lower real GDP and the price level when exchange rates are free to find their equilibrium. Explain why this is true.

A higher government budget deficit will lead to increased government borrowing if the government chooses not to cover the deficit by printing money.

Everything else equal, which government policy would cause a country's currency to depreciate?

If a government wanted a current account surplus, then a government budget deficit would be helpful in achieving that goal. Explain why this statement is true.

A contractionary monetary policy usually causes an appreciation of the country's currency.

In an open economy, an expansionary fiscal policy:

In an open economy, a contractionary fiscal policy:

An expansionary fiscal policy and a contractionary monetary policy are consistent in their effects on the exchange rate and capital flows.

In an open economy with flexible exchange rates, expansionary fiscal policy is highly effective in changing real GDP.

External balance is usually considered to be more important to a country than internal balance.

Monetary policy is most effect when exchange rates are flexible.

An expansionary fiscal policy and an expansionary monetary policy are consistent in their effects on the exchange rate and capital flows.

How are lower interest rates caused by an expansionary monetary policy related to an increase in exports and a decrease in imports? What does this have to do with the level of aggregate demand?

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Fixed Exchange Rates and Currency Unions

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters