Question 1

Which of the following is TRUE of the current account balance?

Accepted Answer

A) Monetary expansion has no effect on the current account balance. 
B) Monetary expansion decreases the current account balance. 
C) Fiscal expansion increases the current account balance. 
D) Fiscal expansion has no effect on the current account balance. 
E) Monetary expansion increases the current account balance. 
A) Monetary expansion has no effect on the current account balance. 
B) Monetary expansion decreases the current account balance. 
C) Fiscal expansion increases the current account balance. 
D) Fiscal expansion has no effect on the current account balance. 
E) Monetary expansion increases the current account balance.

Question 2

Which one of the following statements is MOST accurate?

Accepted Answer

A) In the long run,foreign output depends only on the available domestic supplies of factors of production. 
B) In the short run,domestic output depends only on the available domestic supplies of factors of production. 
C) In the long run,domestic output depends only on the available domestic supplies of factors of production. 
D) In the long run and in the short run,domestic output depends only on the available domestic supplies of factors of production. 
E) In the long run,domestic output depends only on the real exchange rate. 
A) In the long run,foreign output depends only on the available domestic supplies of factors of production. 
B) In the short run,domestic output depends only on the available domestic supplies of factors of production. 
C) In the long run,domestic output depends only on the available domestic supplies of factors of production. 
D) In the long run and in the short run,domestic output depends only on the available domestic supplies of factors of production. 
E) In the long run,domestic output depends only on the real exchange rate.

Question 3

In the short run

Accepted Answer

A) monetary expansion causes the CA to increase & fiscal expansion causes the CA to decrease. 
B) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to decrease. 
C) monetary expansion causes the CA to increase & fiscal expansion causes the CA to increase. 
D) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to increase. 
E) monetary expansion causes the CA to increase & the effects of fiscal expansion are ambiguous. 
A) monetary expansion causes the CA to increase & fiscal expansion causes the CA to decrease. 
B) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to decrease. 
C) monetary expansion causes the CA to increase & fiscal expansion causes the CA to increase. 
D) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to increase. 
E) monetary expansion causes the CA to increase & the effects of fiscal expansion are ambiguous.

Question 4

How would you define a DD schedule?

Accepted Answer

A) the combinations of output and the exchange rate that must hold when the home money market and the foreign exchange market are in equilibrium 
B) the combinations of output and the exchange rate that must hold when the output market is in short-run equilibrium 
C) factors of production in the long run 
D) the aggregate demand in relation to the foreign market value 
E) the currency depreciation in relation to the exchange rate 
A) the combinations of output and the exchange rate that must hold when the home money market and the foreign exchange market are in equilibrium 
B) the combinations of output and the exchange rate that must hold when the output market is in short-run equilibrium 
C) factors of production in the long run 
D) the aggregate demand in relation to the foreign market value 
E) the currency depreciation in relation to the exchange rate

Question 5

What is an accurate implication resulting from an increase in income?

Accepted Answer

A) an increase in exchange rate 
B) a decrease in exchange rate 
C) a decrease in consumption 
D) a decrease in output 
E) an increase in consumption 
A) an increase in exchange rate 
B) a decrease in exchange rate 
C) a decrease in consumption 
D) a decrease in output 
E) an increase in consumption

Question 6

Explain the difference between the following two expressions:
Y = C(Yd)+ I + G + CA(EP   /P,Yd)and
Y = C + I +G + CA

Accepted Answer

The first one represents a behavioral eq

Question 7

In the short-run,any rise in the real exchange rate,EP   /P,will cause

Accepted Answer

A) an upward shift in the aggregate demand function and a reduction in output. 
B) an upward shift in the aggregate demand function and an expansion of output. 
C) a downward shift in the aggregate demand function and an expansion of output. 
D) an downward shift in the aggregate demand function and a reduction in output. 
E) an upward shift in the aggregate demand function but leaves output intact. 
A) an upward shift in the aggregate demand function and a reduction in output. 
B) an upward shift in the aggregate demand function and an expansion of output. 
C) a downward shift in the aggregate demand function and an expansion of output. 
D) an downward shift in the aggregate demand function and a reduction in output. 
E) an upward shift in the aggregate demand function but leaves output intact.

Question 8

In practice,many U.S.import prices tend to rise by only around

Accepted Answer

A) 1/4 of a typical dollar depreciation over the following year. 
B) 1/3 of a typical dollar depreciation over the following year. 
C) 1/2 of a typical dollar depreciation over the following year. 
D) 2/3 of a typical dollar depreciation over the following year. 
E) 2/5 of a typical dollar depreciation over the following year. 
A) 1/4 of a typical dollar depreciation over the following year. 
B) 1/3 of a typical dollar depreciation over the following year. 
C) 1/2 of a typical dollar depreciation over the following year. 
D) 2/3 of a typical dollar depreciation over the following year. 
E) 2/5 of a typical dollar depreciation over the following year.

Question 9

Why does an exchange rate-output combination lying above both DD and AA jump first to AA in equilibrium?

Accepted Answer

A) Asset prices can adjust immediately. 
B) Production plans can adjust immediately. 
C) to preserve full employment 
D) Prices are nominal and demand is real. 
E) Aggregate demand adjusts faster than output. 
A) Asset prices can adjust immediately. 
B) Production plans can adjust immediately. 
C) to preserve full employment 
D) Prices are nominal and demand is real. 
E) Aggregate demand adjusts faster than output.

Question 10

The unique equilibrium output level in the short-run is found at the intersection of the following curves.

Accepted Answer

A) aggregate demand and aggregate supply 
B) aggregate demand and 45 degree line 
C) aggregate supply and 45 degree line 
D) aggregate demand and short-run aggregate supply 
E) aggregate supply and long-run demand 
A) aggregate demand and aggregate supply 
B) aggregate demand and 45 degree line 
C) aggregate supply and 45 degree line 
D) aggregate demand and short-run aggregate supply 
E) aggregate supply and long-run demand

Question 11

Which two time periods did the U.S.begin to experience a sharp increase in Current Account deficits?

Accepted Answer

A) 1981,mid-1990s 
B) 1971,mid-1990s 
C) 1961,mid-1990s 
D) 1971,mid-1980s 
E) 1985,mid-1990s 
A) 1981,mid-1990s 
B) 1971,mid-1990s 
C) 1961,mid-1990s 
D) 1971,mid-1980s 
E) 1985,mid-1990s

Question 12

In the short-run,a temporary increase in the money supply

Accepted Answer

A) shifts the AA curve to the right,increases output and depreciates the currency. 
B) shifts the AA curve to the left,increases output and depreciates the currency. 
C) shifts the AA curve to the left,decreases output and depreciates the currency. 
D) shifts the AA curve to the left,increases output and appreciates the currency. 
E) shifts the AA curve to the right,increases output and appreciates the currency. 
A) shifts the AA curve to the right,increases output and depreciates the currency. 
B) shifts the AA curve to the left,increases output and depreciates the currency. 
C) shifts the AA curve to the left,decreases output and depreciates the currency. 
D) shifts the AA curve to the left,increases output and appreciates the currency. 
E) shifts the AA curve to the right,increases output and appreciates the currency.

Question 13

In the short run,a permanent increase in the domestic money supply

Accepted Answer

A) has stronger effects on the exchange rate and output than an equal temporary increase. 
B) has stronger effects only on the exchange rate but not on output than an equal temporary increase. 
C) has weaker effects on the exchange rate and output than an equal temporary increase. 
D) has stronger effects on output,but lower effect the exchange rate than an equal temporary increase. 
E) has weaker effects only on the exchange rate than an equal temporary increase. 
A) has stronger effects on the exchange rate and output than an equal temporary increase. 
B) has stronger effects only on the exchange rate but not on output than an equal temporary increase. 
C) has weaker effects on the exchange rate and output than an equal temporary increase. 
D) has stronger effects on output,but lower effect the exchange rate than an equal temporary increase. 
E) has weaker effects only on the exchange rate than an equal temporary increase.

Question 14

In long-run equilibrium after a permanent money-supply increase there follows:

Accepted Answer

A) an increase in exchange rate,E. 
B) a decrease in exchange rate,E. 
C) an increase in output,Y. 
D) a decrease in output,Y. 
E) an unchanged exchange rate,E. 
A) an increase in exchange rate,E. 
B) a decrease in exchange rate,E. 
C) an increase in output,Y. 
D) a decrease in output,Y. 
E) an unchanged exchange rate,E.

Question 15

A naïve implication of the DD-AA framework is that either fiscal or monetary policy can lead to full employment.Discuss why this view is naïve.

Accepted Answer

(1)Inflation may arise without any gain

Question 16

In the short run,with prices fixed,how would an increase in government spending affect the DD-AA equilibrium?

Accepted Answer

A) It will increase output and appreciate the currency. 
B) It will increase output and depreciate the currency. 
C) It will decrease output and appreciate the currency. 
D) It will decrease output and depreciate the currency. 
E) It will increase output and have no effect on the currency. 
A) It will increase output and appreciate the currency. 
B) It will increase output and depreciate the currency. 
C) It will decrease output and appreciate the currency. 
D) It will decrease output and depreciate the currency. 
E) It will increase output and have no effect on the currency.

Which of the following is TRUE of the current account balance?

Which one of the following statements is MOST accurate?

In the short run

How would you define a DD schedule?

What is an accurate implication resulting from an increase in income?

Explain the difference between the following two expressions: Y = C(Y^d)+ I + G + CA(EP /P,Y^d)and Y = C + I +G + CA

In the short-run,any rise in the real exchange rate,EP /P,will cause

In practice,many U.S.import prices tend to rise by only around

Why does an exchange rate-output combination lying above both DD and AA jump first to AA in equilibrium?

The unique equilibrium output level in the short-run is found at the intersection of the following curves.

Which two time periods did the U.S.begin to experience a sharp increase in Current Account deficits?

In the short-run,a temporary increase in the money supply

In the short run,a permanent increase in the domestic money supply

In long-run equilibrium after a permanent money-supply increase there follows:

A naïve implication of the DD-AA framework is that either fiscal or monetary policy can lead to full employment.Discuss why this view is naïve.

In the short run,with prices fixed,how would an increase in government spending affect the DD-AA equilibrium?

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 17: Output and the Exchange Rate in the Short Run

Which of the following is TRUE of the current account balance?

Which one of the following statements is MOST accurate?

In the short run

How would you define a DD schedule?

What is an accurate implication resulting from an increase in income?

Explain the difference between the following two expressions: Y = C(Yd)+ I + G + CA(EP /P,Yd)and Y = C + I +G + CA

In the short-run,any rise in the real exchange rate,EP /P,will cause

In practice,many U.S.import prices tend to rise by only around

Why does an exchange rate-output combination lying above both DD and AA jump first to AA in equilibrium?

The unique equilibrium output level in the short-run is found at the intersection of the following curves.

Which two time periods did the U.S.begin to experience a sharp increase in Current Account deficits?

In the short-run,a temporary increase in the money supply

In the short run,a permanent increase in the domestic money supply

In long-run equilibrium after a permanent money-supply increase there follows:

A naïve implication of the DD-AA framework is that either fiscal or monetary policy can lead to full employment.Discuss why this view is naïve.

In the short run,with prices fixed,how would an increase in government spending affect the DD-AA equilibrium?

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Explain the difference between the following two expressions: Y = C(Y^d)+ I + G + CA(EP /P,Y^d)and Y = C + I +G + CA