Question 1

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

Accepted Answer

A)  The balance on the financial account is positive. 
B)  The trade balance is positive. 
C)  Net foreign investment is positive. 
D)  The balance on the capital account is negative. 
A)  The balance on the financial account is positive. 
B)  The trade balance is positive. 
C)  Net foreign investment is positive. 
D)  The balance on the capital account is negative.

Question 2

How does expansionary monetary policy affect net exports?

Accepted Answer

A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports. 
A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports.

Question 3

Explain the relationship between net exports and net foreign investment.

Accepted Answer

Net exports equal net foreign investment

Question 4

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

Accepted Answer

A)  decrease net exports. 
B)  decrease the balance of trade. 
C)  increase the current account balance. 
D)  decrease the financial account. 
A)  decrease net exports. 
B)  decrease the balance of trade. 
C)  increase the current account balance. 
D)  decrease the financial account.

Question 5

The balance of trade includes trade in

Accepted Answer

A)  goods only. 
B)  services only. 
C)  both goods and services. 
D)  neither goods not services. 
A)  goods only. 
B)  services only. 
C)  both goods and services. 
D)  neither goods not services.

Question 6

If net exports are equal to net foreign investment,which of the following is not true?

Accepted Answer

A)  The balance of payments is zero. 
B)  The current account balance is equal to the negative of the financial account balance. 
C)  Net capital inflows are equal to imports minus exports. 
D)  The balance on the financial account is zero. 
A)  The balance of payments is zero. 
B)  The current account balance is equal to the negative of the financial account balance. 
C)  Net capital inflows are equal to imports minus exports. 
D)  The balance on the financial account is zero.

Question 7

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

Accepted Answer

A)  The real exchange rate will rise. 
B)  The real exchange rate will fall. 
C)  The real exchange rate will be unaffected. 
D)  The impact on the real exchange rate cannot be predicted. 
A)  The real exchange rate will rise. 
B)  The real exchange rate will fall. 
C)  The real exchange rate will be unaffected. 
D)  The impact on the real exchange rate cannot be predicted.

Question 8

While the Federal Reserve has kept interest rates at historic lows,many foreign central banks have begun to tighten monetary policy by raising interest rates.These actions will

Accepted Answer

A)  weaken these foreign currencies relative to each other. 
B)  cause the dollar to appreciate relative to these foreign currencies. 
C)  cause the foreign currencies to depreciate relative to the dollar. 
D)  strengthen these foreign currencies relative to the dollar. 
A)  weaken these foreign currencies relative to each other. 
B)  cause the dollar to appreciate relative to these foreign currencies. 
C)  cause the foreign currencies to depreciate relative to the dollar. 
D)  strengthen these foreign currencies relative to the dollar.

Question 9

How does an increase in a country's exchange rate affect its balance of trade?

Accepted Answer

A)  An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade. 
B)  An increase in the exchange rate reduces imports, raises exports, and reduces the balance of trade. 
C)  An increase in the exchange rate reduces imports, raises exports, and increases the balance of trade. 
D)  An increase in the exchange rate raises imports, reduces exports, and increases the balance of trade. 
A)  An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade. 
B)  An increase in the exchange rate reduces imports, raises exports, and reduces the balance of trade. 
C)  An increase in the exchange rate reduces imports, raises exports, and increases the balance of trade. 
D)  An increase in the exchange rate raises imports, reduces exports, and increases the balance of trade.

Question 10

The United States has a closed economy.

Accepted Answer

A) True 
 B)False

Question 11

If the Fed is using policy to combat inflation,what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

Accepted Answer

A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall. 
A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall.

Question 12

When the United States sends money to Indonesia to help tsunami survivors,in what account is this transaction recorded?

Accepted Answer

A)  the financial account 
B)  the capital account 
C)  the current account 
D)  the foreign exchange account 
A)  the financial account 
B)  the capital account 
C)  the current account 
D)  the foreign exchange account

Question 13

If net exports are positive,

Accepted Answer

A)  net foreign investment is also positive. 
B)  capital inflows must be greater than capital outflows. 
C)  net foreign investment is negative. 
D)  Both A and B are correct. 
A)  net foreign investment is also positive. 
B)  capital inflows must be greater than capital outflows. 
C)  net foreign investment is negative. 
D)  Both A and B are correct.

Question 14

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

Accepted Answer

A)  weaker; open; weaker; open 
B)  weaker; closed; weaker; closed 
C)  stronger; open; weaker; open 
D)  stronger; closed; weaker; open 
A)  weaker; open; weaker; open 
B)  weaker; closed; weaker; closed 
C)  stronger; open; weaker; open 
D)  stronger; closed; weaker; open

Question 15

The Federal Reserve's expansionary monetary policy implemented to deal with the recession of 2007-2009 has led to the

Accepted Answer

A)  demand for the U.S. dollar to decrease. 
B)  supply of the U.S. dollar to increase. 
C)  supply of U.S. Treasury securities to decrease. 
D)  supply of Japanese yen to decrease. 
A)  demand for the U.S. dollar to decrease. 
B)  supply of the U.S. dollar to increase. 
C)  supply of U.S. Treasury securities to decrease. 
D)  supply of Japanese yen to decrease.

Question 16

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

Accepted Answer

Higher incomes in the United States will

Question 17

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world.

Accepted Answer

A)  deficit; deficit 
B)  deficit; surplus 
C)  surplus; deficit 
D)  surplus; surplus 
E)  deficit; balance 
A)  deficit; deficit 
B)  deficit; surplus 
C)  surplus; deficit 
D)  surplus; surplus 
E)  deficit; balance

Question 18

If a country has a fixed exchange rate,

Accepted Answer

A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. 
A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency.

Question 19

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not included in the balance of the financial account of the United States?

Accepted Answer

A)  a purchase of Toyota stock by Ford 
B)  a purchase of GE stock by a firm in China 
C)  a purchase of U.S. car manufacturing plant by Toyota 
D)  a purchase of a German brewery by the U.S. company, Budweiser 
E)  a purchase of German financial services by Chase Manhattan bank 
A)  a purchase of Toyota stock by Ford 
B)  a purchase of GE stock by a firm in China 
C)  a purchase of U.S. car manufacturing plant by Toyota 
D)  a purchase of a German brewery by the U.S. company, Budweiser 
E)  a purchase of German financial services by Chase Manhattan bank

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

How does expansionary monetary policy affect net exports?

Explain the relationship between net exports and net foreign investment.

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

The balance of trade includes trade in

If net exports are equal to net foreign investment,which of the following is not true?

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

While the Federal Reserve has kept interest rates at historic lows,many foreign central banks have begun to tighten monetary policy by raising interest rates.These actions will

How does an increase in a country's exchange rate affect its balance of trade?

The United States has a closed economy.

If the Fed is using policy to combat inflation,what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

When the United States sends money to Indonesia to help tsunami survivors,in what account is this transaction recorded?

If net exports are positive,

Monetary policy has a effect on aggregate demand in a(n) economy,and fiscal policy has a effect on aggregate demand in a(n) economy.

The Federal Reserve's expansionary monetary policy implemented to deal with the recession of 2007-2009 has led to the

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

The United States has a trade with all its major trading partners and a trade with every region of the world.

If a country has a fixed exchange rate,

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Which of the following is not included in the balance of the financial account of the United States?

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 balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

How does expansionary monetary policy affect net exports?

Explain the relationship between net exports and net foreign investment.

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

The balance of trade includes trade in

If net exports are equal to net foreign investment,which of the following is not true?

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

While the Federal Reserve has kept interest rates at historic lows,many foreign central banks have begun to tighten monetary policy by raising interest rates.These actions will

How does an increase in a country's exchange rate affect its balance of trade?

The United States has a closed economy.

If the Fed is using policy to combat inflation,what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

When the United States sends money to Indonesia to help tsunami survivors,in what account is this transaction recorded?

If net exports are positive,

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

The Federal Reserve's expansionary monetary policy implemented to deal with the recession of 2007-2009 has led to the

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world.

If a country has a fixed exchange rate,

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Which of the following is not included in the balance of the financial account of the United States?

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

Monetary policy has a effect on aggregate demand in a(n) economy,and fiscal policy has a effect on aggregate demand in a(n) economy.

The United States has a trade with all its major trading partners and a trade with every region of the world.