Question 1

International capital flows strengthen

Accepted Answer

A) monetary policy and have no effect on fiscal policy. 
B) monetary policy but weaken fiscal policy. 
C) monetary and fiscal policy. 
D) fiscal policy but weaken monetary policy. 
A) monetary policy and have no effect on fiscal policy. 
B) monetary policy but weaken fiscal policy. 
C) monetary and fiscal policy. 
D) fiscal policy but weaken monetary policy.

Question 2

When the dollar appreciates, 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 3

If Japan experiences a period of deflation 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 4

What is the impact of expansionary fiscal policy on the exchange rate?
 Explain the process through which expansionary fiscal policy affects the exchange rate

Accepted Answer

A fiscal expansion normally makes the ex

Question 5

For those nations who fixed their currencies' exchange rates to the U.S.dollar, the rise of the dollar during the 90's was very good news, ​

Accepted Answer

A) True 
 B)False

Question 6

One possible cure for the trade deficit is protectionism.

Accepted Answer

A) True 
 B)False

Question 7

The expected effects of a tighter monetary policy are

Accepted Answer

A) lower real interest rates. 
B) exchange rate depreciation. 
C) lower inflation. 
D) All of the above are correct. 
A) lower real interest rates. 
B) exchange rate depreciation. 
C) lower inflation. 
D) All of the above are correct.

Question 8

An increase in the price level in the economies of U.S.trading partners will cause the aggregate expenditures function in the United States to

Accepted Answer

A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper. 
A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper.

Question 9

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

Accepted Answer

A) U.S.imports to increase 
B) U.S.exports to increase. 
C) Japanese exports to increase. 
D) Japanese net exports to increase. 
A) U.S.imports to increase 
B) U.S.exports to increase. 
C) Japanese exports to increase. 
D) Japanese net exports to increase.

Question 10

The U.S.trade deficits of the late 1990s were due primarily to low saving rates.

Accepted Answer

A) True 
 B)False

Question 11

International trade tends to lower the value of the multiplier because

Accepted Answer

A) imports fall as GDP increases. 
B) net exports fall as GDP increases. 
C) net exports tend to rise as GDP increases. 
D) exports fall as GDP increases. 
A) imports fall as GDP increases. 
B) net exports fall as GDP increases. 
C) net exports tend to rise as GDP increases. 
D) exports fall as GDP increases.

Question 12

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, find the budget deficit or surplus for Macroland.

Accepted Answer

A) 125.50 
B) −93.75 
C) −126.25 
D) −154.75 
A) 125.50 
B) −93.75 
C) −126.25 
D) −154.75

Question 13

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

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 14

If Asian economies suffer a serious economic slump, U.S.net exports will

Accepted Answer

A) increase and AD will shift outward. 
B) increase and AD will shift inward. 
C) decrease and AD will shift inward. 
D) decrease and AD will shift outward. 
A) increase and AD will shift outward. 
B) increase and AD will shift inward. 
C) decrease and AD will shift inward. 
D) decrease and AD will shift outward.

Question 15

Figure 20-4
  
-Which of the situations illustrated in Figure 20-4 shows a currency depreciation leading to inflation?

Accepted Answer

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

Question 16

The government budget deficit must be equal to the surplus

Accepted Answer

A) of saving over investment. 
B) in the current account in international trade. 
C) of saving over consumption. 
D) of saving over investment plus the trade deficit. 
A) of saving over investment. 
B) in the current account in international trade. 
C) of saving over consumption. 
D) of saving over investment plus the trade deficit.

Question 17

What are the economic effects of a currency depreciation?

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 18

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

Accepted Answer

A) Trade deficits automatically cause larger budget deficits. 
B) Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C) These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D) During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created. 
A) Trade deficits automatically cause larger budget deficits. 
B) Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S.government. 
C) These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D) During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.

Question 19

An increase in the U.S.price level will increase U.S.net exports.

Accepted Answer

A) True 
 B)False

Question 20

Under a floating exchange rate system with mobile international capital, it is always true that current account

Accepted Answer

A) deficit + capital account surplus = trade deficit. 
B) surplus − capital account surplus = trade deficit. 
C) surplus + capital account deficit = 0. 
D) surplus − capital account surplus = 0. 
A) deficit + capital account surplus = trade deficit. 
B) surplus − capital account surplus = trade deficit. 
C) surplus + capital account deficit = 0. 
D) surplus − capital account surplus = 0.

Exam 37: Exchange Rates and the Macroeconomy

International capital flows strengthen

When the dollar appreciates, the prices of imported inputs

If Japan experiences a period of deflation and the United States does not, what will happen in the United States?

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate

For those nations who fixed their currencies' exchange rates to the U.S.dollar, the rise of the dollar during the 90's was very good news, ​

One possible cure for the trade deficit is protectionism.

The expected effects of a tighter monetary policy are

An increase in the price level in the economies of U.S.trading partners will cause the aggregate expenditures function in the United States to

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

The U.S.trade deficits of the late 1990s were due primarily to low saving rates.

International trade tends to lower the value of the multiplier because

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

If Asian economies suffer a serious economic slump, U.S.net exports will

Figure 20-4 -Which of the situations illustrated in Figure 20-4 shows a currency depreciation leading to inflation?

The government budget deficit must be equal to the surplus

What are the economic effects of a currency depreciation?

The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?

An increase in the U.S.price level will increase U.S.net exports.

Under a floating exchange rate system with mobile international capital, it is always true that current account

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

Filters

For those nations who fixed their currencies' exchange rates to the U.S.dollar, the rise of the dollar during the 90's was very good news,