Question 1

If (X − IM) < 0, then capital inflows

Accepted Answer

A) will be zero. 
B) will be greater than zero. 
C) will be less than zero. 
D) can be zero, positive, or negative. 
A) will be zero. 
B) will be greater than zero. 
C) will be less than zero. 
D) can be zero, positive, or negative.

Question 2

-In Table 20-2, assume that exports rise to $900.How large is the multiplier?

Accepted Answer

A) 5 
B) 4 
C) 2.5 
D) 2 
A) 5 
B) 4 
C) 2.5 
D) 2

Question 3

In an open economy net exports must always be positive.

Accepted Answer

A) True 
 B)False

Question 4

Increases in stock market wealth have caused Americans to increase their saving rate.

Accepted Answer

A) True 
 B)False

Question 5

Figure 20-8
  
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

Accepted Answer

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

Question 6

An expansionary fiscal policy makes the exchange rate appreciate.

Accepted Answer

A) True 
 B)False

Question 7

Figure 20-6
  
-In Figure 20-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E.In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point

Accepted Answer

A) B. 
B) F. 
C) J. 
D) H. 
A) B. 
B) F. 
C) J. 
D) H.

Question 8

How do the fluctuations in the exchange rate influence the domestic price level?

Accepted Answer

When a currency depreciates the prices o

Question 9

International capital flows tend to reduce the impact of fiscal policy.

Accepted Answer

A) True 
 B)False

Question 10

An appreciation of the Japanese yen relative to the U.S.dollar will

Accepted Answer

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

Question 11

Which of the following is correct?

Accepted Answer

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

Question 12

Despite the elimination of the federal budget deficit in the late 1990s, the trade deficit increased due to

Accepted Answer

A) increased household saving. 
B) decreased household saving. 
C) a depreciation of the dollar. 
D) an increase in inflation rates. 
A) increased household saving. 
B) decreased household saving. 
C) a depreciation of the dollar. 
D) an increase in inflation rates.

Question 13

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 14

Between 1981 and 1986, as the federal budget deficit increased,

Accepted Answer

A) consumption spending fell. 
B) investment spending was crowded out. 
C) net exports increased. 
D) net exports were crowded out. 
A) consumption spending fell. 
B) investment spending was crowded out. 
C) net exports increased. 
D) net exports were crowded out.

Question 15

What effect did the decrease in the value of the dollar have on the U.S.trade deficit in the period from 2006 to 2009?

Accepted Answer

A) It decreased the trade deficit as Americans bought more U.S.capital goods. 
B) It decreased the trade deficit as foreigners were attracted to the increased value of U.S.products and Americans bought fewer imports. 
C) It increased the trade deficit as U.S.investors bought more domestic financial assets. 
D) It increased the trade deficit as Americans bought more imports and foreigners bought fewer U.S.products. 
A) It decreased the trade deficit as Americans bought more U.S.capital goods. 
B) It decreased the trade deficit as foreigners were attracted to the increased value of U.S.products and Americans bought fewer imports. 
C) It increased the trade deficit as U.S.investors bought more domestic financial assets. 
D) It increased the trade deficit as Americans bought more imports and foreigners bought fewer U.S.products.

Question 16

If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of

Accepted Answer

A) T over G. 
B) C over T plus G. 
C) investment by American businesses and individuals. 
D) S over I by American businesses and individuals, or by borrowing from foreigners. 
A) T over G. 
B) C over T plus G. 
C) investment by American businesses and individuals. 
D) S over I by American businesses and individuals, or by borrowing from foreigners.

Question 17

An expansionary fiscal policy will lead to

Accepted Answer

A) higher interest rates, an appreciated dollar, and reduced net exports. 
B) higher interest rates, an appreciated dollar, and increased net exports. 
C) reduced interest rates, an appreciated dollar, and reduced net exports. 
D) reduced interest rates, an appreciated dollar, and increased net exports. 
A) higher interest rates, an appreciated dollar, and reduced net exports. 
B) higher interest rates, an appreciated dollar, and increased net exports. 
C) reduced interest rates, an appreciated dollar, and reduced net exports. 
D) reduced interest rates, an appreciated dollar, and increased net exports.

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) a European economic expansion 
B) a decrease in the money supply 
C) an increase in the interest rate 
D) an increase in the U.S.price level 
A) a European economic expansion 
B) a decrease in the money supply 
C) an increase in the interest rate 
D) an increase in the U.S.price level

Question 19

Figure 20-9
  
-Figure 20-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

Accepted Answer

A) smaller when net exports are fixed. 
B) smaller when net exports are variable. 
C) larger when net exports are variable. 
D) the same whether net exports are fixed or variable. 
A) smaller when net exports are fixed. 
B) smaller when net exports are variable. 
C) larger when net exports are variable. 
D) the same whether net exports are fixed or variable.

Question 20

If U.S.interest rates rise while foreign interest rates remain unchanged,

Accepted Answer

A) GDP will not change since the shift in aggregate supply cancels the positive effects on aggregate demand. 
B) the dollar will depreciate and thus reduce prices and output. 
C) foreign capital will be attracted to the United States and the dollar will appreciate. 
D) net exports will increase and the economy will expand. 
A) GDP will not change since the shift in aggregate supply cancels the positive effects on aggregate demand. 
B) the dollar will depreciate and thus reduce prices and output. 
C) foreign capital will be attracted to the United States and the dollar will appreciate. 
D) net exports will increase and the economy will expand.

Exam 37: Exchange Rates and the Macroeconomy

If (X − IM) < 0, then capital inflows

-In Table 20-2, assume that exports rise to $900.How large is the multiplier?

In an open economy net exports must always be positive.

Increases in stock market wealth have caused Americans to increase their saving rate.

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

An expansionary fiscal policy makes the exchange rate appreciate.

Figure 20-6 -In Figure 20-6, an expansive fiscal policy in a closed economy results in an equilibrium at point E.In an open economy, allowing for the effects of the induced change in the currency value, the final equilibrium would be point

How do the fluctuations in the exchange rate influence the domestic price level?

International capital flows tend to reduce the impact of fiscal policy.

An appreciation of the Japanese yen relative to the U.S.dollar will

Which of the following is correct?

Despite the elimination of the federal budget deficit in the late 1990s, the trade deficit increased due to

If (T − G) = (X − IM), then (S − I)

Between 1981 and 1986, as the federal budget deficit increased,

What effect did the decrease in the value of the dollar have on the U.S.trade deficit in the period from 2006 to 2009?

If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of

An expansionary fiscal policy will lead to

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 20-9 -Figure 20-9 shows aggregate expenditures when net exports are fixed and aggregate expenditures are variable.The autonomous spending multiplier is

If U.S.interest rates rise while foreign interest rates remain unchanged,

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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