Question 1

If the government budget is balanced, and saving is greater than investment, then the

Accepted Answer

A) current account must be in surplus. 
B) current account must be in deficit. 
C) current account balance must be zero. 
D) capital account must be in surplus. 
A) current account must be in surplus. 
B) current account must be in deficit. 
C) current account balance must be zero. 
D) capital account must be in surplus.

Question 2

Define the following terms and explain their importance to the study of macroeconomics:
a.open economy
b.closed economy
c.budget deficits and trade deficits
d.international capital flows

Accepted Answer

a.An open economy is one that trades wit

Question 3

Currently, the United States imports more than it exports.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following usually leads to currency appreciation?

Accepted Answer

A) galloping inflation 
B) relatively low interest rates 
C) declining real GDP 
D) fixed exchange rates 
A) galloping inflation 
B) relatively low interest rates 
C) declining real GDP 
D) fixed exchange rates

Question 5

If the United States increased its budget deficit, and it is at or near full employment, the most likely effect is to crowd

Accepted Answer

A) in investment and crowd out net exports. 
B) out investment and crowd in net exports. 
C) in investment and crowd in net exports. 
D) out investment and crowd out net exports. 
A) in investment and crowd out net exports. 
B) out investment and crowd in net exports. 
C) in investment and crowd in net exports. 
D) out investment and crowd out net exports.

Question 6

International capital flows in an open economy have the effect of

Accepted Answer

A) reducing the power of monetary policy. 
B) increasing the power of monetary policy. 
C) increasing the power of monetary policy in an expansion and reducing it in a contraction. 
D) reducing the power of monetary policy in an expansion and increasing it in a contraction. 
A) reducing the power of monetary policy. 
B) increasing the power of monetary policy. 
C) increasing the power of monetary policy in an expansion and reducing it in a contraction. 
D) reducing the power of monetary policy in an expansion and increasing it in a contraction.

Question 7

What are the results of a contractionary monetary policy in an open economy with floating exchange rates and internationally mobile capital?

Accepted Answer

A) The dollar appreciates, which leads to an increase in exports and a decrease in imports.The country therefore winds up with a deficit in capital and a surplus in its balance of trade. 
B) The dollar appreciates, which attracts foreign capital.Also, imports rise and exports decline.The country therefore winds up with a surplus in capital and an increase in its trade deficit. 
C) The dollar depreciates, which attracts foreign capital.Also, exports rise and imports decline.The country therefore winds up with a deficit in capital and a surplus in its balance of trade. 
D) The dollar depreciates, which leads to a larger real GDP and a larger trade surplus. 
A) The dollar appreciates, which leads to an increase in exports and a decrease in imports.The country therefore winds up with a deficit in capital and a surplus in its balance of trade. 
B) The dollar appreciates, which attracts foreign capital.Also, imports rise and exports decline.The country therefore winds up with a surplus in capital and an increase in its trade deficit. 
C) The dollar depreciates, which attracts foreign capital.Also, exports rise and imports decline.The country therefore winds up with a deficit in capital and a surplus in its balance of trade. 
D) The dollar depreciates, which leads to a larger real GDP and a larger trade surplus.

Question 8

Protectionism may fail to reduce a current account deficit because it

Accepted Answer

A) depreciates the dollar. 
B) invites retaliation, which hurts exports. 
C) encourages exports. 
D) does not reduce imports. 
A) depreciates the dollar. 
B) invites retaliation, which hurts exports. 
C) encourages exports. 
D) does not reduce imports.

Question 9

In the mid-1990s, real interest rates fell in the United States.This was the result of budget deficit

Accepted Answer

A) increases and tighter monetary policy. 
B) increases and looser monetary policy. 
C) reductions and looser monetary policy. 
D) reductions and tighter monetary policy. 
A) increases and tighter monetary policy. 
B) increases and looser monetary policy. 
C) reductions and looser monetary policy. 
D) reductions and tighter monetary policy.

Question 10

What important lesson did American economists learn in the 1980s and again in 2001-2003?

Accepted Answer

A) Large tax cuts can lead to a balance of trade surplus. 
B) Large government budget deficits can crowd out consumption. 
C) Large government budget deficits can bankrupt the nation. 
D) Large government budget deficits can crowd out net exports. 
A) Large tax cuts can lead to a balance of trade surplus. 
B) Large government budget deficits can crowd out consumption. 
C) Large government budget deficits can bankrupt the nation. 
D) Large government budget deficits can crowd out net exports.

Question 11

Depreciation of the Japanese Yen would lead to

Accepted Answer

A) outward shift in the aggregate supply curve for Japan. 
B) upward shift in the aggregate demand curve for Japan. 
C) downward shift in the aggregate supply curve for Japan. 
D) inward shift in the aggregate demand curve for Japan. 
A) outward shift in the aggregate supply curve for Japan. 
B) upward shift in the aggregate demand curve for Japan. 
C) downward shift in the aggregate supply curve for Japan. 
D) inward shift in the aggregate demand curve for Japan.

Question 12

Explain how exchange rate changes affect aggregate demand.

Accepted Answer

A currency appreciation will decrease ag

Question 13

An exchange rate depreciation acts to reduce inflation.

Accepted Answer

A) True 
 B)False

Question 14

An increase in the U.S.price level relative to the price level of other countries would

Accepted Answer

A) increase U.S.net exports and increase aggregate demand. 
B) increase U.S.net exports and increase aggregate supply. 
C) reduce U.S.net exports and reduce aggregate demand. 
D) reduce U.S.net exports and increase aggregate demand. 
A) increase U.S.net exports and increase aggregate demand. 
B) increase U.S.net exports and increase aggregate supply. 
C) reduce U.S.net exports and reduce aggregate demand. 
D) reduce U.S.net exports and increase aggregate demand.

Question 15

Figure 20-8
  
-Which of the graphs in Figure 20-8 represents the effects of a currency appreciation?

Accepted Answer

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

Question 16

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

Accepted Answer

A) True 
 B)False

Question 17

A recession abroad would cause U.S.net exports to rise.

Accepted Answer

A) True 
 B)False

Question 18

In an open economy, aggregate supply consists of domestic production plus imports.

Accepted Answer

A) True 
 B)False

Question 19

A rise 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 20

-In Table 20-2, assume that exports rise to $900.What is the new equilibrium GDP?

Accepted Answer

A) $5,000 
B) $4,500 
C) $4,000 
D) $3,500 
A) $5,000 
B) $4,500 
C) $4,000 
D) $3,500

Exam 37: Exchange Rates and the Macroeconomy

If the government budget is balanced, and saving is greater than investment, then the

Define the following terms and explain their importance to the study of macroeconomics: a.open economy b.closed economy c.budget deficits and trade deficits d.international capital flows

Currently, the United States imports more than it exports.

Which of the following usually leads to currency appreciation?

If the United States increased its budget deficit, and it is at or near full employment, the most likely effect is to crowd

International capital flows in an open economy have the effect of

What are the results of a contractionary monetary policy in an open economy with floating exchange rates and internationally mobile capital?

Protectionism may fail to reduce a current account deficit because it

In the mid-1990s, real interest rates fell in the United States.This was the result of budget deficit

What important lesson did American economists learn in the 1980s and again in 2001-2003?

Depreciation of the Japanese Yen would lead to

Explain how exchange rate changes affect aggregate demand.

An exchange rate depreciation acts to reduce inflation.

An increase in the U.S.price level relative to the price level of other countries would

Figure 20-8 -Which of the graphs in Figure 20-8 represents the effects of a currency appreciation?

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

A recession abroad would cause U.S.net exports to rise.

In an open economy, aggregate supply consists of domestic production plus imports.

A rise in net exports shifts the aggregate

-In Table 20-2, assume that exports rise to $900.What is the new equilibrium GDP?

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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