Question 1

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

Accepted Answer

A)  both the euro and dollar have appreciated. 
B)  both the euro and dollar have depreciated. 
C)  the euro has appreciated and the dollar has depreciated. 
D)  the euro has depreciated and the dollar has appreciated. 
A)  both the euro and dollar have appreciated. 
B)  both the euro and dollar have depreciated. 
C)  the euro has appreciated and the dollar has depreciated. 
D)  the euro has depreciated and the dollar has appreciated.

Question 2

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

Accepted Answer

A)  Real GDP will fall. 
B)  Real GDP will rise. 
C)  Real GDP will be unaffected by the depreciation of the dollar. 
D)  Real GDP will be unchanged, but nominal GDP will rise. 
A)  Real GDP will fall. 
B)  Real GDP will rise. 
C)  Real GDP will be unaffected by the depreciation of the dollar. 
D)  Real GDP will be unchanged, but nominal GDP will rise.

Question 3

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

Accepted Answer

A)  1.19% 
B)  3.8% 
C)  27.8% 
D)  44.2% 
A)  1.19% 
B)  3.8% 
C)  27.8% 
D)  44.2%

Question 4

Based on the following information,what is the balance on the current account?
Exports of goods and services = $5 billion
Imports of goods and services= $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S.holdings of assets in foreign countries = -$1 billion

Accepted Answer

A)  -$2 billion 
B)  $1 billion 
C)  $3 billion 
D)  $4 billion 
A)  -$2 billion 
B)  $1 billion 
C)  $3 billion 
D)  $4 billion

Question 5

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

Accepted Answer

When the government runs a budget defici

Question 6

An increase in United States net foreign direct investment would occur if

Accepted Answer

A)  United States citizens have increased the value of foreign stocks and bonds they own. 
B)  United States citizens have increased their building or purchasing of facilities in foreign countries. 
C)  net foreign investment increases. 
D)  net capital flows decrease. 
A)  United States citizens have increased the value of foreign stocks and bonds they own. 
B)  United States citizens have increased their building or purchasing of facilities in foreign countries. 
C)  net foreign investment increases. 
D)  net capital flows decrease.

Question 7

Suppose the Fed pursues a policy that leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is an open economy? This policy

Accepted Answer

A)  reduces investment spending, consumption spending and net exports, all of which reduce GDP. 
B)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports rise which increases GDP. 
C)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports fall which increases GDP. 
D)  increases investment spending, consumption spending, and net exports, all of which increase GDP. 
A)  reduces investment spending, consumption spending and net exports, all of which reduce GDP. 
B)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports rise which increases GDP. 
C)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports fall which increases GDP. 
D)  increases investment spending, consumption spending, and net exports, all of which increase GDP.

Question 8

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

Accepted Answer

A)  euro decreased relative to the British pound. 
B)  British pound increased relative to the U.S. dollar. 
C)  U.S. dollar increased relative to most other currencies. 
D)  U.S. dollar decreased relative to the Japanese yen. 
A)  euro decreased relative to the British pound. 
B)  British pound increased relative to the U.S. dollar. 
C)  U.S. dollar increased relative to most other currencies. 
D)  U.S. dollar decreased relative to the Japanese yen.

Question 9

If the dollar appreciates,how will aggregate demand in the United States be affected?

Accepted Answer

A)  Aggregate demand will shift to the right as exports increase. 
B)  Aggregate demand will shift to the right as imports increase. 
C)  Aggregate demand will shift to the left as imports increase. 
D)  Aggregate demand will shift to the left as exports increase. 
A)  Aggregate demand will shift to the right as exports increase. 
B)  Aggregate demand will shift to the right as imports increase. 
C)  Aggregate demand will shift to the left as imports increase. 
D)  Aggregate demand will shift to the left as exports increase.

Question 10

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Accepted Answer

A)  the dollar has depreciated. 
B)  the dollar has appreciated. 
C)  the British pound has depreciated. 
D)  the British pound has stayed constant in value. 
A)  the dollar has depreciated. 
B)  the dollar has appreciated. 
C)  the British pound has depreciated. 
D)  the British pound has stayed constant in value.

Question 11

You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera,but cameras in Ireland are all priced in euros.If the exchange rate is 0.85 euros per dollar,what's the highest price in euros you'd be willing to pay for a camera?

Accepted Answer

A)  105 euros 
B)  106.25 euros 
C)  110.15 euros 
D)  147 euros 
A)  105 euros 
B)  106.25 euros 
C)  110.15 euros 
D)  147 euros

Question 12

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

Accepted Answer

A)  Contractionary fiscal policy reduces the deficit, which raises the interest rate, which raises the foreign exchange value of the dollar, which increases net exports. 
B)  Contractionary fiscal policy increases the deficit, which raises the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
C)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
D)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which decreases net exports. 
A)  Contractionary fiscal policy reduces the deficit, which raises the interest rate, which raises the foreign exchange value of the dollar, which increases net exports. 
B)  Contractionary fiscal policy increases the deficit, which raises the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
C)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
D)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which decreases net exports.

Question 13

When exchange rates are not determined in the market but are instead set by a country's central bank,we say that the country's exchange rate is

Accepted Answer

A)  flexible. 
B)  fixed. 
C)  a nominal exchange rate. 
D)  a real exchange rate. 
A)  flexible. 
B)  fixed. 
C)  a nominal exchange rate. 
D)  a real exchange rate.

Question 14

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Accepted Answer

In a closed economy,expansionary fiscal

Question 15

Ceteris paribus,an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.

Accepted Answer

A) True 
 B)False

Question 16

Figure 29-1
  
-Refer to Figure 29-1.The depreciation of the dollar is represented as a movement from ________.

Accepted Answer

A)  B to A 
B)  D to C 
C)  B to C 
D)  A to C 
E)  A to B 
A)  B to A 
B)  D to C 
C)  B to C 
D)  A to C 
E)  A to B

Question 17

If the current account is in deficit and the capital account is zero,then

Accepted Answer

A)  the financial account must be in surplus. 
B)  the balance of trade must be in surplus. 
C)  the balance of payments must be in surplus. 
D)  there is a capital outflow. 
E)  the balance of services must be in surplus. 
A)  the financial account must be in surplus. 
B)  the balance of trade must be in surplus. 
C)  the balance of payments must be in surplus. 
D)  there is a capital outflow. 
E)  the balance of services must be in surplus.

Question 18

If the dollar appreciates against the Mexican peso,

Accepted Answer

A)  Mexican imports to the U.S. become more expensive. 
B)  U.S. exports to Mexico become less expensive. 
C)  U.S. exports to Mexico become more expensive. 
D)  The value of Mexican imports to the United States does not change. 
A)  Mexican imports to the U.S. become more expensive. 
B)  U.S. exports to Mexico become less expensive. 
C)  U.S. exports to Mexico become more expensive. 
D)  The value of Mexican imports to the United States does not change.

Question 19

When a foreign investor buys a bond issued in the United States,

Accepted Answer

A)  the balance on the capital account increases. 
B)  the balance on the current account increases. 
C)  the balance on the financial account increases. 
D)  the balance of trade increases. 
A)  the balance on the capital account increases. 
B)  the balance on the current account increases. 
C)  the balance on the financial account increases. 
D)  the balance of trade increases.

Question 20

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

Accepted Answer

A)  $1.32 
B)  $2.23 
C)  $2.75 
D)  $2.81 
A)  $1.32 
B)  $2.23 
C)  $2.75 
D)  $2.81

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

An increase in United States net foreign direct investment would occur if

Suppose the Fed pursues a policy that leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is an open economy? This policy

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

If the dollar appreciates,how will aggregate demand in the United States be affected?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

When exchange rates are not determined in the market but are instead set by a country's central bank,we say that the country's exchange rate is

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Ceteris paribus,an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.

Figure 29-1 -Refer to Figure 29-1.The depreciation of the dollar is represented as a movement from ________.

If the current account is in deficit and the capital account is zero,then

If the dollar appreciates against the Mexican peso,

When a foreign investor buys a bond issued in the United States,

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

The International Financial System

Filters

Exam 18: Macroeconomics in an Open Economy

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

An increase in United States net foreign direct investment would occur if

Suppose the Fed pursues a policy that leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is an open economy? This policy

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

If the dollar appreciates,how will aggregate demand in the United States be affected?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

When exchange rates are not determined in the market but are instead set by a country's central bank,we say that the country's exchange rate is

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Ceteris paribus,an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.

Figure 29-1 -Refer to Figure 29-1.The depreciation of the dollar is represented as a movement from ________.

If the current account is in deficit and the capital account is zero,then

If the dollar appreciates against the Mexican peso,

When a foreign investor buys a bond issued in the United States,

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

The International Financial System

Filters