Question 1

Which of the following would decrease net exports in the United States?

Accepted Answer

A) An American party planner purchases 350 piñatas from Mexico. 
B) The government of Mexico purchases 2,000 Dell laptop computers from the United States. 
C) A Mexican citizen purchases 100 shares of stock in IBM. 
D) The U.S.government donates $25 million to Mexico to help victims of a hurricane in Mexico. 
A) An American party planner purchases 350 piñatas from Mexico. 
B) The government of Mexico purchases 2,000 Dell laptop computers from the United States. 
C) A Mexican citizen purchases 100 shares of stock in IBM. 
D) The U.S.government donates $25 million to Mexico to help victims of a hurricane in Mexico.

Question 2

National saving equals

Accepted Answer

A) income - taxes - consumption. 
B) taxes - government spending. 
C) income - consumption - government spending. 
D) private saving + public saving - net foreign investment. 
A) income - taxes - consumption. 
B) taxes - government spending. 
C) income - consumption - government spending. 
D) private saving + public saving - net foreign investment.

Question 3

Figure 18-3  
-Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be

Accepted Answer

A) an increase in U.S.real income. 
B) speculators expect the dollar to depreciate in value in the near future. 
C) an economic expansion in the United States. 
D) a decrease in Japanese interest rates. 
A) an increase in U.S.real income. 
B) speculators expect the dollar to depreciate in value in the near future. 
C) an economic expansion in the United States. 
D) a decrease in Japanese interest rates.

Question 4

Ceteris paribus,a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________; i.e.,the dollar ________ in value against the yen.

Accepted Answer

A) increase; appreciates 
B) increase; depreciates 
C) decrease; depreciates 
D) decrease; appreciates 
A) increase; appreciates 
B) increase; depreciates 
C) decrease; depreciates 
D) decrease; appreciates

Question 5

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero.)

Accepted Answer

A) the United States must be exporting less than it is importing 
B) net capital flows must be positive 
C) national saving is greater than domestic investment 
D) net foreign investment must be negative 
A) the United States must be exporting less than it is importing 
B) net capital flows must be positive 
C) national saving is greater than domestic investment 
D) net foreign investment must be negative

Question 6

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

Accepted Answer

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

Question 7

A country which incurs a current account deficit will most likely have a financial or capital account surplus.

Accepted Answer

A) True 
 B)False

Question 8

The current account includes records of a country's

Accepted Answer

A) net exports. 
B) net investment income. 
C) net transfers. 
D) All of the above are included in an economy's current account. 
A) net exports. 
B) net investment income. 
C) net transfers. 
D) All of the above are included in an economy's current account.

Question 9

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would decrease the balance on the current account?

Accepted Answer

A) a decrease in foreign direct investment 
B) a decrease in the amount of aid money the government sends abroad 
C) a decrease in imports 
D) None of the above will decrease the balance on the current account. 
A) a decrease in foreign direct investment 
B) a decrease in the amount of aid money the government sends abroad 
C) a decrease in imports 
D) None of the above will decrease the balance on the current account.

Question 11

How might a budget deficit affect the balance of trade?

Accepted Answer

A) A budget deficit raises interest rates,which raises exchange rates and increases the balance of trade. 
B) A budget deficit raises interest rates,which raises exchange rates and reduces the balance of trade. 
C) A budget deficit reduces interest rates,which raises exchange rates and reduces the balance of trade. 
D) A budget deficit reduces interest rates,which reduces exchange rates and reduces the balance of trade. 
A) A budget deficit raises interest rates,which raises exchange rates and increases the balance of trade. 
B) A budget deficit raises interest rates,which raises exchange rates and reduces the balance of trade. 
C) A budget deficit reduces interest rates,which raises exchange rates and reduces the balance of trade. 
D) A budget deficit reduces interest rates,which reduces exchange rates and reduces the balance of trade.

Question 12

Figure 18-1  
-Refer to Figure 18-1.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

Accepted Answer

A) Supply would decrease,demand would decrease and the economy moves from B to C to D. 
B) Supply would increase,demand would decrease and the economy moves from C to B to A. 
C) Demand would increase and the economy moves from A to B. 
D) Demand would decrease and the economy moves from B to A. 
A) Supply would decrease,demand would decrease and the economy moves from B to C to D. 
B) Supply would increase,demand would decrease and the economy moves from C to B to A. 
C) Demand would increase and the economy moves from A to B. 
D) Demand would decrease and the economy moves from B to A.

Question 13

How will an interest rate decrease in the United States affect equilibrium in the foreign exchange market?

Accepted Answer

A) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded cannot be determined. 
B) The equilibrium exchange rate will decrease,and the equilibrium quantity of dollars traded cannot be determined. 
C) The equilibrium exchange rate cannot be determined,and the equilibrium quantity of dollars traded will increase. 
D) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded will increase. 
A) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded cannot be determined. 
B) The equilibrium exchange rate will decrease,and the equilibrium quantity of dollars traded cannot be determined. 
C) The equilibrium exchange rate cannot be determined,and the equilibrium quantity of dollars traded will increase. 
D) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded will increase.

Question 14

The current account deficits incurred by the United States in the 1980s were caused,in the opinion of many economists,by

Accepted Answer

A) federal budget deficits. 
B) "flight to quality" as foreign investors favored U.S.investments. 
C) a sharp decline in private saving. 
D) Both B and C are correct. 
A) federal budget deficits. 
B) "flight to quality" as foreign investors favored U.S.investments. 
C) a sharp decline in private saving. 
D) Both B and C are correct.

Question 15

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

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 19

The saving and investment equation holds only when the federal budget is balanced.

Accepted Answer

A) True 
 B)False

Question 20

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

Accepted Answer

In a closed economy,an expansionary fisc

Which of the following would decrease net exports in the United States?

National saving equals

Figure 18-3 -Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be

Ceteris paribus,a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ; i.e.,the dollar in value against the yen.

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero.)

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

A country which incurs a current account deficit will most likely have a financial or capital account surplus.

The current account includes records of a country's

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Which of the following would decrease the balance on the current account?

How might a budget deficit affect the balance of trade?

Figure 18-1 -Refer to Figure 18-1.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

How will an interest rate decrease in the United States affect equilibrium in the foreign exchange market?

The current account deficits incurred by the United States in the 1980s were caused,in the opinion of many economists,by

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

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.

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

The saving and investment equation holds only when the federal budget is balanced.

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

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

Which of the following would decrease net exports in the United States?

National saving equals

Figure 18-3 -Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be

Ceteris paribus,a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________; i.e.,the dollar ________ in value against the yen.

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero.)

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

A country which incurs a current account deficit will most likely have a financial or capital account surplus.

The current account includes records of a country's

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Which of the following would decrease the balance on the current account?

How might a budget deficit affect the balance of trade?

Figure 18-1 -Refer to Figure 18-1.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

How will an interest rate decrease in the United States affect equilibrium in the foreign exchange market?

The current account deficits incurred by the United States in the 1980s were caused,in the opinion of many economists,by

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

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.

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

The saving and investment equation holds only when the federal budget is balanced.

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

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

Ceteris paribus,a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ; i.e.,the dollar in value against the yen.

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