Question 1

If the dollar appreciates against the yen,ceteris paribus,this will cause:

Accepted Answer

A)  net exports to decline, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate. 
B)  net exports to decline, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate. 
C)  net exports to increase, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate. 
D)  net exports to increase, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate. 
A)  net exports to decline, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate. 
B)  net exports to decline, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate. 
C)  net exports to increase, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate. 
D)  net exports to increase, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate.

Question 2

Refer to Figure 20.3 for the following questions.
Figure 20.3  
-Suppose the above graph in Figure 20.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 US dollars and the situation persisted,

Accepted Answer

A)  the currency would be overvalued. 
B)  there would need to be devaluation of the currency. 
C)  the supply of pounds would be less than the demand for pounds. 
D)  the supply of pounds would be greater than the demand for pounds. 
A)  the currency would be overvalued. 
B)  there would need to be devaluation of the currency. 
C)  the supply of pounds would be less than the demand for pounds. 
D)  the supply of pounds would be greater than the demand for pounds.

Question 3

The Australian dollar is partially backed by the gold held at the Reserve Bank of Australia.

Accepted Answer

A) True 
 B)False

Question 4

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 5

The real exchange rate of British pounds to Australian dollars will increase if the British price level ________ and the nominal exchange rate of pounds to the dollar ________.

Accepted Answer

A)  increases; rises 
B)  decreases; rises 
C)  increases; falls 
D)  decreases; falls 
A)  increases; rises 
B)  decreases; rises 
C)  increases; falls 
D)  decreases; falls

Question 6

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

No.In an open economy,the savi

Question 7

Under the 'gold standard',

Accepted Answer

A)  there was no inflation. 
B)  the central bank had more complete control over the money supply. 
C)  technological change in the production of gold did not affect the money supply. 
D)  the central bank lacked control over the money supply. 
A)  there was no inflation. 
B)  the central bank had more complete control over the money supply. 
C)  technological change in the production of gold did not affect the money supply. 
D)  the central bank lacked control over the money supply.

Question 8

The country's exchange rate system is a(n)_________ system when a country's exchange rate is allowed to vary within a particular target zone against the currencies of other countries.

Accepted Answer

A)  floating rate 
B)  adjustable peg 
C)  pegged rate 
D)  managed floating rate 
A)  floating rate 
B)  adjustable peg 
C)  pegged rate 
D)  managed floating rate

Question 9

If net primary income and net secondary income are $10 billion,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

Accepted Answer

A)  $9 billion deficit in its current account. 
B)  surplus of $11 billion in its balance of payments. 
C)  surplus of $36 billion in its current account. 
D)  $11 billion surplus in its current account. 
A)  $9 billion deficit in its current account. 
B)  surplus of $11 billion in its balance of payments. 
C)  surplus of $36 billion in its current account. 
D)  $11 billion surplus in its current account.

Question 10

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in Australia in the long run?

Accepted Answer

A)  Exchange rates will rise. 
B)  Exchange rates will fall. 
C)  Exchange rates will be unaffected by changes in the relative rate of productivity growth in Australia, both in the short run and in the long run. 
D)  The exchange rate will be affected in the short run, but not in the long run. 
A)  Exchange rates will rise. 
B)  Exchange rates will fall. 
C)  Exchange rates will be unaffected by changes in the relative rate of productivity growth in Australia, both in the short run and in the long run. 
D)  The exchange rate will be affected in the short run, but not in the long run.

Question 11

A goods trade deficit indicates that a

Accepted Answer

A)  country imports more than it exports. 
B)  country imports less than it exports. 
C)  country's imports equal its exports. 
D)  country's trade has decreased on average. 
A)  country imports more than it exports. 
B)  country imports less than it exports. 
C)  country's imports equal its exports. 
D)  country's trade has decreased on average.

Question 12

'Purchasing power parity' is the theory that in the long run,exchange rates move to equalise

Accepted Answer

A)  nominal interest rates across countries. 
B)  real GDP across countries. 
C)  corporate profits across countries. 
D)  the relative purchasing power of currencies across countries. 
A)  nominal interest rates across countries. 
B)  real GDP across countries. 
C)  corporate profits across countries. 
D)  the relative purchasing power of currencies across countries.

Question 13

The idea of 'twin deficits' refers to the possibility that a large federal budget deficit will lead to a

Accepted Answer

A)  balance of payments deficit. 
B)  financial account deficit. 
C)  trade surplus. 
D)  current account deficit. 
A)  balance of payments deficit. 
B)  financial account deficit. 
C)  trade surplus. 
D)  current account deficit.

Question 14

The supply of dollars in exchange for yen will increase,if,ceteris paribus,

Accepted Answer

A)  Japanese interest rates fall relative to interest rates in other countries. 
B)  speculators think the value of the dollar will fall relative to the yen. 
C)  there is a recession in Australia. 
D)  the desirability of investing in Japan falls. 
A)  Japanese interest rates fall relative to interest rates in other countries. 
B)  speculators think the value of the dollar will fall relative to the yen. 
C)  there is a recession in Australia. 
D)  the desirability of investing in Japan falls.

Question 15

When the value of a currency is determined ________,the exchange rate system is defined as a 'floating exchange rate system'.

Accepted Answer

A)  only by supply and demand 
B)  by the country's government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by the country's government, with occasional readjustments in value 
A)  only by supply and demand 
B)  by the country's government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by the country's government, with occasional readjustments in value

Question 16

By the early 20th century,the majority of the world's major trading nations had adopted the ________.

Accepted Answer

A)  gold standard 
B)  managed float exchange rate system 
C)  Bretton Woods exchange rate system 
D)  floating exchange rate system 
A)  gold standard 
B)  managed float exchange rate system 
C)  Bretton Woods exchange rate system 
D)  floating exchange rate system

Question 17

One problem with the Bretton Woods System was that

Accepted Answer

A)  the total number of US dollar reserves held by central banks was greater than US gold reserves. 
B)  some countries with overvalued currencies refused to devalue them. 
C)  in the early days of the system, many currencies were undervalued versus the US dollar. 
D)  gold discoveries caused worldwide inflation. 
A)  the total number of US dollar reserves held by central banks was greater than US gold reserves. 
B)  some countries with overvalued currencies refused to devalue them. 
C)  in the early days of the system, many currencies were undervalued versus the US dollar. 
D)  gold discoveries caused worldwide inflation.

Question 18

Suppose the flow of capital from Japan into Australia begins to slow in the coming year.Show how this would affect the value of the dollar in the market for Australian dollars (with the exchange rate defined as yen per dollar).If this occurs,what is the effect on the balance of trade in goods and services?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The exchange rate before the change in t

Question 19

If an Australian company sells insurance to a foreign company,how does this affect Australia's balance of payments?

Accepted Answer

A)  It increases exports of services. 
B)  It increases capital inflows. 
C)  It increases imports of goods. 
D)  It lowers the balance on the current account. 
A)  It increases exports of services. 
B)  It increases capital inflows. 
C)  It increases imports of goods. 
D)  It lowers the balance on the current account.

Question 20

Refer to Figure 20.2 for the following questions.
Figure 20.2  
-Refer to Figure 20.2.Suppose that interest rates in Australia fall 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)  Supply would decrease, demand would increase, and the economy moves from A to D to C. 
D)  Supply would increase, demand would increase, and the economy moves from D to A to B. 
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)  Supply would decrease, demand would increase, and the economy moves from A to D to C. 
D)  Supply would increase, demand would increase, and the economy moves from D to A to B.

If the dollar appreciates against the yen,ceteris paribus,this will cause:

Refer to Figure 20.3 for the following questions. Figure 20.3 -Suppose the above graph in Figure 20.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 US dollars and the situation persisted,

The Australian dollar is partially backed by the gold held at the Reserve Bank of Australia.

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

The real exchange rate of British pounds to Australian dollars will increase if the British price level and the nominal exchange rate of pounds to the dollar .

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain. _ _

Under the 'gold standard',

The country's exchange rate system is a(n)_________ system when a country's exchange rate is allowed to vary within a particular target zone against the currencies of other countries.

If net primary income and net secondary income are $10 billion,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in Australia in the long run?

A goods trade deficit indicates that a

'Purchasing power parity' is the theory that in the long run,exchange rates move to equalise

The idea of 'twin deficits' refers to the possibility that a large federal budget deficit will lead to a

The supply of dollars in exchange for yen will increase,if,ceteris paribus,

When the value of a currency is determined ________,the exchange rate system is defined as a 'floating exchange rate system'.

By the early 20th century,the majority of the world's major trading nations had adopted the ________.

One problem with the Bretton Woods System was that

If an Australian company sells insurance to a foreign company,how does this affect Australia's balance of payments?

Refer to Figure 20.2 for the following questions. Figure 20.2 -Refer to Figure 20.2.Suppose that interest rates in Australia fall relative to those in the European Union.Assuming all else remains constant,how would this be represented?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Filters

Exam 20: Macroeconomics in an Open Economy

If the dollar appreciates against the yen,ceteris paribus,this will cause:

Refer to Figure 20.3 for the following questions. Figure 20.3 -Suppose the above graph in Figure 20.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 US dollars and the situation persisted,

The Australian dollar is partially backed by the gold held at the Reserve Bank of Australia.

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

The real exchange rate of British pounds to Australian dollars will increase if the British price level ________ and the nominal exchange rate of pounds to the dollar ________.

Under the 'gold standard',

The country's exchange rate system is a(n)_________ system when a country's exchange rate is allowed to vary within a particular target zone against the currencies of other countries.

If net primary income and net secondary income are $10 billion,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in Australia in the long run?

A goods trade deficit indicates that a

'Purchasing power parity' is the theory that in the long run,exchange rates move to equalise

The idea of 'twin deficits' refers to the possibility that a large federal budget deficit will lead to a

The supply of dollars in exchange for yen will increase,if,ceteris paribus,

When the value of a currency is determined ________,the exchange rate system is defined as a 'floating exchange rate system'.

By the early 20th century,the majority of the world's major trading nations had adopted the ________.

One problem with the Bretton Woods System was that

If an Australian company sells insurance to a foreign company,how does this affect Australia's balance of payments?

Refer to Figure 20.2 for the following questions. Figure 20.2 -Refer to Figure 20.2.Suppose that interest rates in Australia fall relative to those in the European Union.Assuming all else remains constant,how would this be represented?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Filters

The real exchange rate of British pounds to Australian dollars will increase if the British price level and the nominal exchange rate of pounds to the dollar .