Question 1

Foreign trade will have no impact on real GDP when

Accepted Answer

A) exports exceed imports. 
B) exports equal imports. 
C) imports exceed exports. 
D) exports equal zero. 
A) exports exceed imports. 
B) exports equal imports. 
C) imports exceed exports. 
D) exports equal zero. B

Question 2

A currency depreciation is usually inflationary.

Accepted Answer

A) True 
 B)False  True

Question 3

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?

Accepted Answer

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

Question 4

A fall in the domestic interest rate leads to capital

Accepted Answer

A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation. 
A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation.

Question 5

The trade deficit is the mirror image of
required capital inflows.

Accepted Answer

A) True 
 B)False

Question 6

In an open economy, an increase in (G − T) will

Accepted Answer

A) decrease (X − IM). 
B) increase (X − IM). 
C) leave (X − IM) unchanged. 
D) have an unpredictable effect on (X − IM). 
A) decrease (X − IM). 
B) increase (X − IM). 
C) leave (X − IM) unchanged. 
D) have an unpredictable effect on (X − IM).

Question 7

Which of the following is correct?

Accepted Answer

A) Current account surplus + capital account surplus = 1 
B) Current account surplus − capital account surplus = 0 
C) Current account surplus + capital account surplus = 0 
D) Current account surplus − capital account surplus = 1 
A) Current account surplus + capital account surplus = 1 
B) Current account surplus − capital account surplus = 0 
C) Current account surplus + capital account surplus = 0 
D) Current account surplus − capital account surplus = 1

Question 8

Figure 20-2
  
-Which of the following explains the movements in Figure 20-2?

Accepted Answer

A) an increase in U.S.imports 
B) a decrease in U.S.exports 
C) an increase in U.S.exports 
D) a decrease in U.S.net exports 
A) an increase in U.S.imports 
B) a decrease in U.S.exports 
C) an increase in U.S.exports 
D) a decrease in U.S.net exports

Question 9

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 10

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 11

An increase in the value of the U.S.dollar relative to the Japanese yen will

Accepted Answer

A) increase aggregate demand in the United States. 
B) decrease aggregate supply in the United States. 
C) increase aggregate demand in Japan. 
D) increase aggregate supply in Japan. 
A) increase aggregate demand in the United States. 
B) decrease aggregate supply in the United States. 
C) increase aggregate demand in Japan. 
D) increase aggregate supply in Japan.

Question 12

The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require

Accepted Answer

A) higher consumption in the future in order to increase imports. 
B) lower consumption in the future in order to repay interest and principal to foreigners. 
C) lower consumption in the future in order to finance increased investment. 
D) higher budget deficits in the future in order to increase the trade surplus. 
A) higher consumption in the future in order to increase imports. 
B) lower consumption in the future in order to repay interest and principal to foreigners. 
C) lower consumption in the future in order to finance increased investment. 
D) higher budget deficits in the future in order to increase the trade surplus.

Question 13

The dramatic rise in the dollar between 1981 and 1986 was the result of a(n)

Accepted Answer

A) a tight monetary and a tight fiscal policy. 
B) an expansive monetary and an expansive fiscal policy. 
C) an expansive monetary and a tight fiscal policy. 
D) a tight monetary and an expansive fiscal policy. 
A) a tight monetary and a tight fiscal policy. 
B) an expansive monetary and an expansive fiscal policy. 
C) an expansive monetary and a tight fiscal policy. 
D) a tight monetary and an expansive fiscal policy.

Question 14

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Accepted Answer

A) The trade deficit will fall; GDP will fall. 
B) The trade deficit will rise; GDP will rise. 
C) The trade deficit will fall; GDP will rise. 
D) The trade deficit will rise; GDP will fall. 
A) The trade deficit will fall; GDP will fall. 
B) The trade deficit will rise; GDP will rise. 
C) The trade deficit will fall; GDP will rise. 
D) The trade deficit will rise; GDP will fall.

Question 15

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

Accepted Answer

A) the federal budget must always be in balance. 
B) when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C) current account deficits should be avoided. 
D) trade deficits tend to be eliminated automatically. 
A) the federal budget must always be in balance. 
B) when a country exports more goods and services than it imports, it also imports assets equal to the difference. 
C) current account deficits should be avoided. 
D) trade deficits tend to be eliminated automatically.

Question 16

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

Accepted Answer

A) an increase in aggregate supply 
B) a decrease in aggregate supply 
C) a decrease in aggregate demand 
D) an increase in aggregate demand 
A) an increase in aggregate supply 
B) a decrease in aggregate supply 
C) a decrease in aggregate demand 
D) an increase in aggregate demand

Question 17

The expected effect of the Bush tax cuts would be a(n)

Accepted Answer

A) lower real interest rate. 
B) exchange rate depreciation. 
C) increased current account deficit. 
D) All of the above are correct. 
A) lower real interest rate. 
B) exchange rate depreciation. 
C) increased current account deficit. 
D) All of the above are correct.

Question 18

Which of the following would be cures for the U.S.trade deficit?

Accepted Answer

A) Americans saving less and spending more 
B) a severe recession in Europe and Asia 
C) a severe recession in the United States 
D) a tax cut 
E) All of the above are correct. 
A) Americans saving less and spending more 
B) a severe recession in Europe and Asia 
C) a severe recession in the United States 
D) a tax cut 
E) All of the above are correct.

Question 19

-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 20

The principal reason why Thailand, Indonesia, and South Korea feared the effects of appreciation of the U.S.dollar in 1995-1997 was that

Accepted Answer

A) it would increase exports from these countries and worsen Japanese. 
B) it would increase exports from these countries and worsen unemployment. 
C) it would decrease exports from these countries since their currencies were tied to the dollar. 
D) it would decrease imports to these countries since their currencies were tied to the dollar. 
A) it would increase exports from these countries and worsen Japanese. 
B) it would increase exports from these countries and worsen unemployment. 
C) it would decrease exports from these countries since their currencies were tied to the dollar. 
D) it would decrease imports to these countries since their currencies were tied to the dollar.

Exam 37: Exchange Rates and the Macroeconomy

Foreign trade will have no impact on real GDP when

A currency depreciation is usually inflationary.

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?

A fall in the domestic interest rate leads to capital

The trade deficit is the mirror image of required capital inflows.

In an open economy, an increase in (G − T) will

Which of the following is correct?

Figure 20-2 -Which of the following explains the movements in Figure 20-2?

What are the economic effects of a currency appreciation?

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?

An increase in the value of the U.S.dollar relative to the Japanese yen will

The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require

The dramatic rise in the dollar between 1981 and 1986 was the result of a(n)

Suppose that the Fed decides to decrease the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

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

The expected effect of the Bush tax cuts would be a(n)

Which of the following would be cures for the U.S.trade deficit?

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

The principal reason why Thailand, Indonesia, and South Korea feared the effects of appreciation of the U.S.dollar in 1995-1997 was that

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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