Question 1

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

Accepted Answer

Investment in the United States was grea

Question 2

The level of saving in Japan has historically been high relative to the level of domestic investment.Based on this information,we would expect that

Accepted Answer

A) Japan's net foreign investment has been relatively low. 
B) Japan's net exports have been relatively high. 
C) Japan's capital inflows are positive. 
D) Japan's private saving is greater than its public saving. 
A) Japan's net foreign investment has been relatively low. 
B) Japan's net exports have been relatively high. 
C) Japan's capital inflows are positive. 
D) Japan's private saving is greater than its public saving.

Question 3

How will contractionary monetary policy in Japan affect the demand for the yen and the supply of the yen in the foreign exchange market?

Accepted Answer

A) The demand for the yen will fall,and the supply of the yen will increase. 
B) The demand for the yen will increase,and the supply of the yen will fall. 
C) The demand for the yen will fall,and the supply of the yen will fall. 
D) The demand for the yen will increase,and the supply of the yen will increase. 
A) The demand for the yen will fall,and the supply of the yen will increase. 
B) The demand for the yen will increase,and the supply of the yen will fall. 
C) The demand for the yen will fall,and the supply of the yen will fall. 
D) The demand for the yen will increase,and the supply of the yen will increase.

Question 4

How does an increase in the relative price of a country's goods in terms of foreign goods,or real exchange rate,affect its balance of trade?

Accepted Answer

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

Question 5

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

Accepted Answer

An increase in government purchases fina

Question 6

The balance of trade is defined as

Accepted Answer

A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account. 
A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account.

Question 7

Assuming no change in the nominal exchange rate,how will a decrease in the price level 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

Is fiscal policy more or less effective in manipulating aggregate demand in an open economy?

Accepted Answer

Expansionary fiscal policy (as from tax

Question 9

Which of the following would result in a trade surplus for the United States?

Accepted Answer

A) Exports of goods = $725 billion Imports of goods = $790 billion
Exports of services = $350 billion
Imports of services = $260 billion 
B) Exports of goods = $625 billion Imports of goods = $625 billion
Exports of services = $300 billion
Imports of services = $375 billion 
C) Exports of goods = $550 billion Imports of goods = $575 billion
Exports of services = $275 billion
Imports of services = $300 billion 
D) All of the above will result in a trade surplus. 
A) Exports of goods = $725 billion Imports of goods = $790 billion
Exports of services = $350 billion
Imports of services = $260 billion 
B) Exports of goods = $625 billion Imports of goods = $625 billion
Exports of services = $300 billion
Imports of services = $375 billion 
C) Exports of goods = $550 billion Imports of goods = $575 billion
Exports of services = $275 billion
Imports of services = $300 billion 
D) All of the above will result in a trade surplus.

Question 10

Figure 18-1  
-Refer to Figure 18-1.Currency speculators believe that the value of the euro will increase relative to the dollar.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.

Question 11

Net foreign investment is a measure of net capital outflows,equal to capital outflows minus capital inflows in a given period of accounting.

Accepted Answer

A) True 
 B)False

Question 12

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and Russia decreases from 28 to 23,

Accepted Answer

A) the prices of U.S.goods and services have decreased by 5% relative to Russia. 
B) the prices of U.S.goods and services have increased by 25.5% relative to Russia. 
C) the prices of U.S.goods and services have decreased by 18% relative to Russia. 
D) the prices of U.S.goods and services have increased by 22% relative to Russia. 
A) the prices of U.S.goods and services have decreased by 5% relative to Russia. 
B) the prices of U.S.goods and services have increased by 25.5% relative to Russia. 
C) the prices of U.S.goods and services have decreased by 18% relative to Russia. 
D) the prices of U.S.goods and services have increased by 22% relative to Russia.

Question 13

An increase in capital inflows will

Accepted Answer

A) increase net foreign investment. 
B) increase capital outflows. 
C) decrease capital outflows. 
D) increase the value of the domestic currency. 
A) increase net foreign investment. 
B) increase capital outflows. 
C) decrease capital outflows. 
D) increase the value of the domestic currency.

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

Expansionary monetary policy will have what effect on the components of aggregate demand?

Accepted Answer

A) Consumption,investment,and net exports will rise. 
B) Consumption and investment will rise,but net exports will fall. 
C) Consumption will rise,but investment and net exports will fall. 
D) Consumption will fall,but investment and net exports will rise. 
A) Consumption,investment,and net exports will rise. 
B) Consumption and investment will rise,but net exports will fall. 
C) Consumption will rise,but investment and net exports will fall. 
D) Consumption will fall,but investment and net exports will rise.

Question 16

What impact might a decrease in the U.S.federal budget deficit have on interest rates and exchange rates in the market for the U.S.dollar? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

Accepted Answer

A) Interest rates and exchange rates increase. 
B) Interest rates increase and exchange rates decrease. 
C) Interest rates decrease and exchange rates increase. 
D) Interest rates and exchange rates decrease. 
A) Interest rates and exchange rates increase. 
B) Interest rates increase and exchange rates decrease. 
C) Interest rates decrease and exchange rates increase. 
D) Interest rates and exchange rates decrease.

Question 17

The United States is called a debtor nation because

Accepted Answer

A) it has a large current account deficit and is simultaneously funded by foreign investment. 
B) it has a large financial account deficit that is used to fund the current account deficit. 
C) it has a large balance of payments deficit that is used to fund the current account deficit. 
D) U.S.capital outflows are much greater than U.S.capital inflows. 
A) it has a large current account deficit and is simultaneously funded by foreign investment. 
B) it has a large financial account deficit that is used to fund the current account deficit. 
C) it has a large balance of payments deficit that is used to fund the current account deficit. 
D) U.S.capital outflows are much greater than U.S.capital inflows.

Question 18

An appreciating yen makes Japanese products

Accepted Answer

A) more expensive in foreign markets. 
B) less expensive in foreign markets. 
C) more expensive in the Japanese market. 
D) more expensive in both foreign markets and the Japanese market. 
A) more expensive in foreign markets. 
B) less expensive in foreign markets. 
C) more expensive in the Japanese market. 
D) more expensive in both foreign markets and the Japanese market.

Question 19

Following a tax cut by government,domestic investment will ________ and net exports will ________.

Accepted Answer

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

Question 20

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

Accepted Answer

A) an increase in foreign direct investment 
B) an increase in the amount of aid money the government sends abroad 
C) an increase in imports 
D) an increase in the balance of trade 
A) an increase in foreign direct investment 
B) an increase in the amount of aid money the government sends abroad 
C) an increase in imports 
D) an increase in the balance of trade

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

The level of saving in Japan has historically been high relative to the level of domestic investment.Based on this information,we would expect that

How will contractionary monetary policy in Japan affect the demand for the yen and the supply of the yen in the foreign exchange market?

How does an increase in the relative price of a country's goods in terms of foreign goods,or real exchange rate,affect its balance of trade?

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

The balance of trade is defined as

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

Is fiscal policy more or less effective in manipulating aggregate demand in an open economy?

Which of the following would result in a trade surplus for the United States?

Figure 18-1 -Refer to Figure 18-1.Currency speculators believe that the value of the euro will increase relative to the dollar.Assuming all else remains constant,how would this be represented?

Net foreign investment is a measure of net capital outflows,equal to capital outflows minus capital inflows in a given period of accounting.

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and Russia decreases from 28 to 23,

An increase in capital inflows will

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.

Expansionary monetary policy will have what effect on the components of aggregate demand?

What impact might a decrease in the U.S.federal budget deficit have on interest rates and exchange rates in the market for the U.S.dollar? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

The United States is called a debtor nation because

An appreciating yen makes Japanese products

Following a tax cut by government,domestic investment will and net exports will .

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

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

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

The level of saving in Japan has historically been high relative to the level of domestic investment.Based on this information,we would expect that

How will contractionary monetary policy in Japan affect the demand for the yen and the supply of the yen in the foreign exchange market?

How does an increase in the relative price of a country's goods in terms of foreign goods,or real exchange rate,affect its balance of trade?

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

The balance of trade is defined as

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

Is fiscal policy more or less effective in manipulating aggregate demand in an open economy?

Which of the following would result in a trade surplus for the United States?

Figure 18-1 -Refer to Figure 18-1.Currency speculators believe that the value of the euro will increase relative to the dollar.Assuming all else remains constant,how would this be represented?

Net foreign investment is a measure of net capital outflows,equal to capital outflows minus capital inflows in a given period of accounting.

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and Russia decreases from 28 to 23,

An increase in capital inflows will

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.

Expansionary monetary policy will have what effect on the components of aggregate demand?

What impact might a decrease in the U.S.federal budget deficit have on interest rates and exchange rates in the market for the U.S.dollar? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

The United States is called a debtor nation because

An appreciating yen makes Japanese products

Following a tax cut by government,domestic investment will ________ and net exports will ________.

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

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.

Following a tax cut by government,domestic investment will and net exports will .