Question 1

When net capital flows are negative,

Accepted Answer

A) capital inflows are less than capital outflows. 
B) net foreign investment is negative. 
C) capital outflows are less than capital inflows. 
D) A and B are both correct. 
A) capital inflows are less than capital outflows. 
B) net foreign investment is negative. 
C) capital outflows are less than capital inflows. 
D) A and B are both correct.

Question 2

What is the relationship between the balance of trade and the current account balance?

Accepted Answer

The balance of trade measures the differ

Question 3

Assuming no change in the nominal exchange rate,how will a higher rate of inflation 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 4

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

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 5

How does an increase in a country's exchange rate affect its balance of trade?

Accepted Answer

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

Question 6

What two measures of macroeconomic activity are often referred to as the "twin deficits"?

Accepted Answer

A) net capital flows and net exports 
B) the foreign exchange deficit and net foreign investment 
C) the budget deficit and the trade balance 
D) the saving-investment deficit and the export deficit 
A) net capital flows and net exports 
B) the foreign exchange deficit and net foreign investment 
C) the budget deficit and the trade balance 
D) the saving-investment deficit and the export deficit

Question 7

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 8

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

Accepted Answer

A) The dollar will appreciate,and the equilibrium quantity of dollars will decrease. 
B) The dollar will depreciate,and the equilibrium quantity of dollars exchanged will decrease. 
C) The dollar will appreciate,and the equilibrium quantity of dollars will increase. 
D) The dollar will appreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined. 
A) The dollar will appreciate,and the equilibrium quantity of dollars will decrease. 
B) The dollar will depreciate,and the equilibrium quantity of dollars exchanged will decrease. 
C) The dollar will appreciate,and the equilibrium quantity of dollars will increase. 
D) The dollar will appreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined.

Question 9

The impact of crowding out

Accepted Answer

A) is larger in a closed economy as compared to an open economy. 
B) is larger in an open economy as compared to a closed economy. 
C) is larger in an open economy as compared to a closed economy when fiscal policy is contractionary. 
D) is larger in a closed economy as compared to an open economy when fiscal policy is contractionary. 
A) is larger in a closed economy as compared to an open economy. 
B) is larger in an open economy as compared to a closed economy. 
C) is larger in an open economy as compared to a closed economy when fiscal policy is contractionary. 
D) is larger in a closed economy as compared to an open economy when fiscal policy is contractionary.

Question 10

Suppose that Federal Reserve policy leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is a closed economy,and how will it affect real GDP in the short run if the United States is an open economy?

Accepted Answer

For a closed economy,higher interest rat

Question 11

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

Accepted Answer

National saving increases when the gover

Question 12

If New Yorkers decrease their purchases of French champagne,assuming all else remains constant,this will ________ of the United States.

Accepted Answer

A) increase the balance of trade 
B) decrease net exports 
C) decrease the current account balance 
D) increase the trade deficit 
E) increase the balance of payments 
A) increase the balance of trade 
B) decrease net exports 
C) decrease the current account balance 
D) increase the trade deficit 
E) increase the balance of payments

Question 13

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Accepted Answer

A) a depreciation of the franc 
B) an appreciation of the dollar 
C) a decrease in the price level in the United States 
D) a decrease in the price level in Switzerland 
A) a depreciation of the franc 
B) an appreciation of the dollar 
C) a decrease in the price level in the United States 
D) a decrease in the price level in Switzerland

Question 14

Ceteris paribus,an increase in the government's budget deficit will decrease the financial account surplus.

Accepted Answer

A) True 
 B)False

Question 15

If Californians increase their purchases of Italian wine,assuming all else remains constant,this will ________ of the United States.

Accepted Answer

A) decrease the balance of trade 
B) increase net exports 
C) increase the current account balance 
D) decrease the trade deficit 
E) decrease the balance of payments 
A) decrease the balance of trade 
B) increase net exports 
C) increase the current account balance 
D) decrease the trade deficit 
E) decrease the balance of payments

Question 16

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

Accepted Answer

A) both the euro and dollar have appreciated. 
B) both the euro and dollar have depreciated. 
C) the euro has appreciated and the dollar has depreciated. 
D) the euro has depreciated and the dollar has appreciated. 
A) both the euro and dollar have appreciated. 
B) both the euro and dollar have depreciated. 
C) the euro has appreciated and the dollar has depreciated. 
D) the euro has depreciated and the dollar has appreciated.

Question 17

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

Accepted Answer

A) The balance on the financial account is positive. 
B) The trade balance is positive. 
C) Net foreign investment is positive. 
D) The balance on the capital account is negative. 
A) The balance on the financial account is positive. 
B) The trade balance is positive. 
C) Net foreign investment is positive. 
D) The balance on the capital account is negative.

Question 18

In an open economy,expansionary monetary policy will cause

Accepted Answer

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

Question 19

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Accepted Answer

A) consumption 
B) private investment 
C) net exports 
D) All of the above are crowded out by higher interest rates. 
A) consumption 
B) private investment 
C) net exports 
D) All of the above are crowded out by higher interest rates.

Question 20

Which of the following will not shift the demand for the euro to the right?

Accepted Answer

A) an increase in interest rates in the European Union 
B) an increase in incomes in countries that buy goods from the European Union 
C) expectations among speculators that the price of the euro will rise in the future 
D) a decrease in the demand for European goods 
A) an increase in interest rates in the European Union 
B) an increase in incomes in countries that buy goods from the European Union 
C) expectations among speculators that the price of the euro will rise in the future 
D) a decrease in the demand for European goods

When net capital flows are negative,

What is the relationship between the balance of trade and the current account balance?

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

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

How does an increase in a country's exchange rate affect its balance of trade?

What two measures of macroeconomic activity are often referred to as the "twin deficits"?

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

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

The impact of crowding out

Suppose that Federal Reserve policy leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is a closed economy,and how will it affect real GDP in the short run if the United States is an open economy?

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

If New Yorkers decrease their purchases of French champagne,assuming all else remains constant,this will ________ of the United States.

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Ceteris paribus,an increase in the government's budget deficit will decrease the financial account surplus.

If Californians increase their purchases of Italian wine,assuming all else remains constant,this will ________ of the United States.

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

In an open economy,expansionary monetary policy will cause

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Which of the following will not shift the demand for the euro to the right?

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

When net capital flows are negative,

What is the relationship between the balance of trade and the current account balance?

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

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

How does an increase in a country's exchange rate affect its balance of trade?

What two measures of macroeconomic activity are often referred to as the "twin deficits"?

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

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

The impact of crowding out

Suppose that Federal Reserve policy leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is a closed economy,and how will it affect real GDP in the short run if the United States is an open economy?

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

If New Yorkers decrease their purchases of French champagne,assuming all else remains constant,this will ________ of the United States.

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Ceteris paribus,an increase in the government's budget deficit will decrease the financial account surplus.

If Californians increase their purchases of Italian wine,assuming all else remains constant,this will ________ of the United States.

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

In an open economy,expansionary monetary policy will cause

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Which of the following will not shift the demand for the euro to the right?

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