Question 1

For a given real exchange rate,a nominal appreciation of the domestic currency will result from

Accepted Answer

A) a decline in the terms of trade. 
B) an increase in the price of the foreign good. 
C) an increase in the price of the domestic good. 
D) an increase in the domestic rate of inflation. 
A) a decline in the terms of trade. 
B) an increase in the price of the foreign good. 
C) an increase in the price of the domestic good. 
D) an increase in the domestic rate of inflation.

Question 2

According to the "beachhead effect," in order to undo the effects of a strong-dollar period,the real value of the dollar

Accepted Answer

A) must fall to at least half of its value before appreciation of the dollar began. 
B) must fall to the value it had before appreciation of the dollar began. 
C) must fall to a much lower level than it had before appreciation of the dollar began. 
D) must actually appreciate before it depreciates to undo the effects of a strong-dollar period. 
A) must fall to at least half of its value before appreciation of the dollar began. 
B) must fall to the value it had before appreciation of the dollar began. 
C) must fall to a much lower level than it had before appreciation of the dollar began. 
D) must actually appreciate before it depreciates to undo the effects of a strong-dollar period.

Question 3

A rise in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall 
A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall

Question 4

The currency created by the European Monetary Union,for which notes and coins became available in 2002,is the

Accepted Answer

A) ECU. 
B) euro. 
C) EMU. 
D) pound. 
A) ECU. 
B) euro. 
C) EMU. 
D) pound.

Question 5

In a flexible-exchange-rate system,the value of a currency is determined by

Accepted Answer

A) the government. 
B) the intersection of the IS and LM curves. 
C) the demand and supply for the currency in the foreign exchange market. 
D) Swiss gnomes. 
A) the government. 
B) the intersection of the IS and LM curves. 
C) the demand and supply for the currency in the foreign exchange market. 
D) Swiss gnomes.

Question 6

The Bretton Woods system relied on

Accepted Answer

A) a flexible-exchange-rate system. 
B) a floating-exchange-rate system. 
C) a fixed-exchange-rate system. 
D) an exchange-rate union. 
A) a flexible-exchange-rate system. 
B) a floating-exchange-rate system. 
C) a fixed-exchange-rate system. 
D) an exchange-rate union.

Question 7

When the nominal exchange rate in terms of dollars per yen rises,

Accepted Answer

A) the dollar buys more yen and the dollar has depreciated. 
B) the dollar buys fewer yen and the dollar has depreciated. 
C) the dollar buys more yen and the dollar has appreciated. 
D) the dollar buys fewer yen and the dollar has appreciated. 
A) the dollar buys more yen and the dollar has depreciated. 
B) the dollar buys fewer yen and the dollar has depreciated. 
C) the dollar buys more yen and the dollar has appreciated. 
D) the dollar buys fewer yen and the dollar has appreciated.

Question 8

Which of the following changes would cause American net exports to decrease?

Accepted Answer

A) A decrease in the real value of the dollar 
B) A decrease in American income 
C) An increase in foreign income 
D) A shift in demand by American consumers away from domestically produced goods 
A) A decrease in the real value of the dollar 
B) A decrease in American income 
C) An increase in foreign income 
D) A shift in demand by American consumers away from domestically produced goods

Question 9

Empirical evidence shows that in the short run,purchasing power parity ________,and in the long run,purchasing power parity ________.

Accepted Answer

A) holds; does not hold 
B) holds; holds 
C) does not hold; holds 
D) does not hold; does not hold 
A) holds; does not hold 
B) holds; holds 
C) does not hold; holds 
D) does not hold; does not hold

Question 10

The Maastricht treaty was the first step toward

Accepted Answer

A) having free trade between Russia and China. 
B) European monetary union. 
C) gaining credibility for monetary policy. 
D) reducing the costs of disinflation. 
A) having free trade between Russia and China. 
B) European monetary union. 
C) gaining credibility for monetary policy. 
D) reducing the costs of disinflation.

Question 11

If the real exchange rate rises 4%,domestic inflation is 2%,and foreign inflation is 0%,what is the percent change in the nominal exchange rate?

Accepted Answer

A) 6% 
B) 4% 
C) 2% 
D) 0% 
A) 6% 
B) 4% 
C) 2% 
D) 0%

Question 12

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

Accepted Answer

A) European goods become more expensive while U.S.goods become cheaper. 
B) European goods become cheaper while U.S.goods become more expensive. 
C) Both European and U.S.goods become more expensive. 
D) Both European and U.S.goods become cheaper. 
A) European goods become more expensive while U.S.goods become cheaper. 
B) European goods become cheaper while U.S.goods become more expensive. 
C) Both European and U.S.goods become more expensive. 
D) Both European and U.S.goods become cheaper.

Question 13

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

Accepted Answer

A) 0.25 
B) 0.4 
C) 2.5 
D) 4.0 
A) 0.25 
B) 0.4 
C) 2.5 
D) 4.0

Question 14

An increase in the U.S.money supply would cause the value of the dollar to ________ and U.S.net exports to ________ in the short run using a Keynesian model.

Accepted Answer

A) fall; fall 
B) fall; rise 
C) rise; rise 
D) rise; fall 
A) fall; fall 
B) fall; rise 
C) rise; rise 
D) rise; fall

Question 15

If the nominal exchange rate rises 5%,domestic inflation is 2%,and foreign inflation is 3%,what is the percent change in the real exchange rate?

Accepted Answer

A) 8% 
B) 6% 
C) 4% 
D) 2% 
A) 8% 
B) 6% 
C) 4% 
D) 2%

Question 16

If the real exchange rate rises 2%,domestic inflation is 3%,and foreign inflation is 1%,what is the percent change in the nominal exchange rate?

Accepted Answer

A) 6% 
B) 4% 
C) 2% 
D) 0% 
A) 6% 
B) 4% 
C) 2% 
D) 0%

Question 17

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

Accepted Answer

A) An increase in the money supply 
B) A decrease in the money supply 
C) A temporary increase in government purchases 
D) A temporary decrease in taxes 
A) An increase in the money supply 
B) A decrease in the money supply 
C) A temporary increase in government purchases 
D) A temporary decrease in taxes

Question 18

The J curve implies that a real depreciation will cause

Accepted Answer

A) the nominal exchange rate to appreciate in the short run and depreciate in the long run. 
B) the nominal exchange rate to depreciate in the short run and appreciate in the long run. 
C) net exports to fall in the short run and rise in the long run. 
D) net exports to rise in the short run and fall in the long run. 
A) the nominal exchange rate to appreciate in the short run and depreciate in the long run. 
B) the nominal exchange rate to depreciate in the short run and appreciate in the long run. 
C) net exports to fall in the short run and rise in the long run. 
D) net exports to rise in the short run and fall in the long run.

Question 19

Suppose the real exchange rate is 10,the domestic price level is 8,and the foreign price level is 4.
(a)What is the nominal exchange rate?
(b)Suppose the real exchange rate rises by 10%,the inflation rate in the domestic country is 6%,and the inflation rate in the foreign country is 4%.By what percentage does the nominal exchange rate change?
(c)Suppose the nominal exchange rate rises by 5%,the real exchange rate rises by 8%,and domestic inflation is 3%.What is the foreign inflation rate?

Accepted Answer

The answer of Suppose the real exchange rate is 10,the...

Question 20

The real exchange rate is

Accepted Answer

A) the price of one currency in terms of another. 
B) the price of domestic goods relative to foreign goods. 
C) the quantity of gold that can be purchased by one unit of currency. 
D) the difference in interest rates between two countries. 
A) the price of one currency in terms of another. 
B) the price of domestic goods relative to foreign goods. 
C) the quantity of gold that can be purchased by one unit of currency. 
D) the difference in interest rates between two countries.

For a given real exchange rate,a nominal appreciation of the domestic currency will result from

According to the "beachhead effect," in order to undo the effects of a strong-dollar period,the real value of the dollar

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.

The currency created by the European Monetary Union,for which notes and coins became available in 2002,is the

In a flexible-exchange-rate system,the value of a currency is determined by

The Bretton Woods system relied on

When the nominal exchange rate in terms of dollars per yen rises,

Which of the following changes would cause American net exports to decrease?

Empirical evidence shows that in the short run,purchasing power parity ,and in the long run,purchasing power parity .

The Maastricht treaty was the first step toward

If the real exchange rate rises 4%,domestic inflation is 2%,and foreign inflation is 0%,what is the percent change in the nominal exchange rate?

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

An increase in the U.S.money supply would cause the value of the dollar to and U.S.net exports to in the short run using a Keynesian model.

If the nominal exchange rate rises 5%,domestic inflation is 2%,and foreign inflation is 3%,what is the percent change in the real exchange rate?

If the real exchange rate rises 2%,domestic inflation is 3%,and foreign inflation is 1%,what is the percent change in the nominal exchange rate?

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

The J curve implies that a real depreciation will cause

The real exchange rate is

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 13: Exchange Rates,business Cycles,and Macroeconomic Policy in the Open Economy

For a given real exchange rate,a nominal appreciation of the domestic currency will result from

According to the "beachhead effect," in order to undo the effects of a strong-dollar period,the real value of the dollar

A rise in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

The currency created by the European Monetary Union,for which notes and coins became available in 2002,is the

In a flexible-exchange-rate system,the value of a currency is determined by

The Bretton Woods system relied on

When the nominal exchange rate in terms of dollars per yen rises,

Which of the following changes would cause American net exports to decrease?

Empirical evidence shows that in the short run,purchasing power parity ________,and in the long run,purchasing power parity ________.

The Maastricht treaty was the first step toward

If the real exchange rate rises 4%,domestic inflation is 2%,and foreign inflation is 0%,what is the percent change in the nominal exchange rate?

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

An increase in the U.S.money supply would cause the value of the dollar to ________ and U.S.net exports to ________ in the short run using a Keynesian model.

If the nominal exchange rate rises 5%,domestic inflation is 2%,and foreign inflation is 3%,what is the percent change in the real exchange rate?

If the real exchange rate rises 2%,domestic inflation is 3%,and foreign inflation is 1%,what is the percent change in the nominal exchange rate?

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

The J curve implies that a real depreciation will cause

The real exchange rate is

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.

Empirical evidence shows that in the short run,purchasing power parity ,and in the long run,purchasing power parity .

An increase in the U.S.money supply would cause the value of the dollar to and U.S.net exports to in the short run using a Keynesian model.