Question 1

Because the United States is highly integrated with the international capital market, international capital flows tend to

Accepted Answer

A) counteract the negative effect on aggregate demand of lower interest rates. 
B) counteract the positive effect on aggregate demand of higher interest rates. 
C) strengthen the negative effects on aggregate demand of higher interest rates. 
D) strengthen the negative effects on aggregate demand of lower interest rates. 
A) counteract the negative effect on aggregate demand of lower interest rates. 
B) counteract the positive effect on aggregate demand of higher interest rates. 
C) strengthen the negative effects on aggregate demand of higher interest rates. 
D) strengthen the negative effects on aggregate demand of lower interest rates.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

An exchange rate depreciation appears to consumers as a markdown on foreign products.

Accepted Answer

A) True 
 B)False

Question 4

If a currency depreciates, a country's net exports

Accepted Answer

A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases. 
A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases.

Question 5

The depreciation of the Japanese yen in 2002 would ease their problems with regard to recession.

Accepted Answer

A) True 
 B)False

Question 6

As the international value of the dollar rises, AS shifts outward and AD shifts inward.

Accepted Answer

A) True 
 B)False

Question 7

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, compute equilibrium GDP for Macroland.

Accepted Answer

A) 3,000 
B) 2,950 
C) 2,625 
D) 2,525 
A) 3,000 
B) 2,950 
C) 2,625 
D) 2,525

Question 8

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

Accepted Answer

A) True 
 B)False

Question 9

When the dollar depreciates, the prices of imported inputs

Accepted Answer

A) fall and aggregate supply shifts outward. 
B) fall and aggregate supply shifts inward. 
C) rise and aggregate supply shifts outward. 
D) rise and aggregate supply shifts inward. 
A) fall and aggregate supply shifts outward. 
B) fall and aggregate supply shifts inward. 
C) rise and aggregate supply shifts outward. 
D) rise and aggregate supply shifts inward.

Question 10

Do you agree that currency depreciation will lead to an increase in the debt burden of the companies that borrow in foreign currency?
 Explain with an example.

Accepted Answer

Companies that borrow in foreign currenc

Question 11

-From Table 20-2, what can you conclude about net exports as GDP rises?

Accepted Answer

A) Net exports rise and then fall as GDP rises. 
B) Net exports are constant as GDP rises. 
C) Net exports rise as GDP rises. 
D) Net exports fall as GDP rises. 
A) Net exports rise and then fall as GDP rises. 
B) Net exports are constant as GDP rises. 
C) Net exports rise as GDP rises. 
D) Net exports fall as GDP rises.

Question 12

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 13

A reduction 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 14

Explain how exchange rates affect the level of aggregate economic activity and the price level.Use appropriate AS/AD diagrams to illustrate your answer.

Accepted Answer

A currency appreciation will shift AD in

Question 15

Theoretically, when a currency depreciates one can predict that

Accepted Answer

A) the price level will rise and real GDP will rise. 
B) the price level will fall and real GDP will fall. 
C) real GDP will rise, but price change is not predictable. 
D) the price level will rise, but real GDP change is not predictable. 
A) the price level will rise and real GDP will rise. 
B) the price level will fall and real GDP will fall. 
C) real GDP will rise, but price change is not predictable. 
D) the price level will rise, but real GDP change is not predictable.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

If the international value of the dollar rises, the

Accepted Answer

A) aggregate demand curve will shift inward. 
B) aggregate supply curve will shift outward. 
C) U.S.price level will fall. 
D) All of the above are correct. 
A) aggregate demand curve will shift inward. 
B) aggregate supply curve will shift outward. 
C) U.S.price level will fall. 
D) All of the above are correct.

Question 18

Figure 20-7
  
-In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Accepted Answer

A) an increase in interest rates 
B) an appreciation of the dollar 
C) a depreciation of the dollar 
D) an increase in the U.S.price level 
A) an increase in interest rates 
B) an appreciation of the dollar 
C) a depreciation of the dollar 
D) an increase in the U.S.price level

Question 19

Figure 20-7
  
-In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from C to B?

Accepted Answer

A) a European economic expansion 
B) an appreciation of the dollar 
C) a depreciation of the dollar 
D) an increase in the money supply 
A) a European economic expansion 
B) an appreciation of the dollar 
C) a depreciation of the dollar 
D) an increase in the money supply

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 37: Exchange Rates and the Macroeconomy

Because the United States is highly integrated with the international capital market, international capital flows tend to

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

An exchange rate depreciation appears to consumers as a markdown on foreign products.

If a currency depreciates, a country's net exports

The depreciation of the Japanese yen in 2002 would ease their problems with regard to recession.

As the international value of the dollar rises, AS shifts outward and AD shifts inward.

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

When the dollar depreciates, the prices of imported inputs

Do you agree that currency depreciation will lead to an increase in the debt burden of the companies that borrow in foreign currency? Explain with an example.

-From Table 20-2, what can you conclude about net exports as GDP rises?

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

A reduction in net exports shifts the aggregate

Explain how exchange rates affect the level of aggregate economic activity and the price level.Use appropriate AS/AD diagrams to illustrate your answer.

Theoretically, when a currency depreciates one can predict that

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

If the international value of the dollar rises, the

Figure 20-7 -In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?

Figure 20-7 -In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from C to B?

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

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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