Question 1

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world.

Accepted Answer

A)  deficit; deficit 
B)  deficit; surplus 
C)  surplus; deficit 
D)  surplus; surplus 
E)  deficit; balance 
A)  deficit; deficit 
B)  deficit; surplus 
C)  surplus; deficit 
D)  surplus; surplus 
E)  deficit; balance

Question 2

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

Accepted Answer

Higher incomes in the United States will

Question 3

Suppose the Fed pursues a policy that 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 an open economy? This policy

Accepted Answer

A)  reduces investment spending, consumption spending and net exports, all of which reduce GDP. 
B)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports rise which increases GDP. 
C)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports fall which increases GDP. 
D)  increases investment spending, consumption spending, and net exports, all of which increase GDP. 
A)  reduces investment spending, consumption spending and net exports, all of which reduce GDP. 
B)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports rise which increases GDP. 
C)  reduces investment spending and consumption spending, both of which reduce GDP. Net exports fall which increases GDP. 
D)  increases investment spending, consumption spending, and net exports, all of which increase GDP.

Question 4

How does expansionary monetary policy affect net exports?

Accepted Answer

A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports. 
A)  Expansionary monetary policy increases exports and reduces imports. 
B)  Expansionary monetary policy reduces exports and increases imports. 
C)  Expansionary monetary policy increases exports and increases imports. 
D)  Expansionary monetary policy reduces exports and reduces imports.

Question 5

An increase in U.S.federal government budget deficits that raises U.S.interest rates relative to the rest of the world should

Accepted Answer

A)  raise the trade balance. 
B)  increase net exports. 
C)  cause the dollar to depreciate. 
D)  lead to a current account deficit. 
E)  decrease foreign portfolio investment. 
A)  raise the trade balance. 
B)  increase net exports. 
C)  cause the dollar to depreciate. 
D)  lead to a current account deficit. 
E)  decrease foreign portfolio investment.

Question 6

Figure 29-1  
-Refer to Figure 29-1.Europe suffers a recession.Assuming all else remains constant,this would be represented as a movement from ________.

Accepted Answer

A)  D to A 
B)  C to D 
C)  B to C 
D)  A to D 
E)  A to B 
A)  D to A 
B)  C to D 
C)  B to C 
D)  A to D 
E)  A to B

Question 7

Why did the dollar fall in value relative to other currencies in the first half of 2011?

Accepted Answer

A)  Foreign investors increased their investment in U.S. financial assets, and this raises the demand for dollars. 
B)  Foreign investors have reduced the level of investment in U.S. financial assets, decreasing the demand for dollars. 
C)  Foreign investors no longer want to hold dollars and this raises the demand for dollars. 
D)  The negative trade balance due to the current account deficit reduces the supply of dollars. 
A)  Foreign investors increased their investment in U.S. financial assets, and this raises the demand for dollars. 
B)  Foreign investors have reduced the level of investment in U.S. financial assets, decreasing the demand for dollars. 
C)  Foreign investors no longer want to hold dollars and this raises the demand for dollars. 
D)  The negative trade balance due to the current account deficit reduces the supply of dollars.

Question 8

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 9

When a foreign investor buys a bond issued in the United States,

Accepted Answer

A)  the balance on the capital account increases. 
B)  the balance on the current account increases. 
C)  the balance on the financial account increases. 
D)  the balance of trade increases. 
A)  the balance on the capital account increases. 
B)  the balance on the current account increases. 
C)  the balance on the financial account increases. 
D)  the balance of trade increases.

Question 10

Persistent current account deficits in the United States

Accepted Answer

A)  can be seen as a vote of confidence in the strength of the U.S. economy. 
B)  cause persistent declines in investment in the United States. 
C)  cause U.S. investors to accumulate more foreign assets than foreign investors accumulate U.S. assets. 
D)  will eventually cause the value of the dollar to rise. 
A)  can be seen as a vote of confidence in the strength of the U.S. economy. 
B)  cause persistent declines in investment in the United States. 
C)  cause U.S. investors to accumulate more foreign assets than foreign investors accumulate U.S. assets. 
D)  will eventually cause the value of the dollar to rise.

Question 11

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and France increases from 1.5 to 1.8,

Accepted Answer

A)  the prices of U.S. goods and services have increased by 53% relative to France. 
B)  the prices of U.S. goods and services have increased by 3% relative to France. 
C)  the prices of U.S. goods and services have decreased by 16% relative to France. 
D)  the prices of U.S. goods and services have increased by 20% relative to France. 
A)  the prices of U.S. goods and services have increased by 53% relative to France. 
B)  the prices of U.S. goods and services have increased by 3% relative to France. 
C)  the prices of U.S. goods and services have decreased by 16% relative to France. 
D)  the prices of U.S. goods and services have increased by 20% relative to France.

Question 12

The current account balance equals the value of net exports.

Accepted Answer

A) True 
 B)False

Question 13

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 14

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

Accepted Answer

A)  Real GDP will fall. 
B)  Real GDP will rise. 
C)  Real GDP will be unaffected by the depreciation of the dollar. 
D)  Real GDP will be unchanged, but nominal GDP will rise. 
A)  Real GDP will fall. 
B)  Real GDP will rise. 
C)  Real GDP will be unaffected by the depreciation of the dollar. 
D)  Real GDP will be unchanged, but nominal GDP will rise.

Question 15

How might a budget deficit affect the balance of trade?

Accepted Answer

A)  A budget deficit raises interest rates, which raises exchange rates, and increases the balance of trade. 
B)  A budget deficit raises interest rates, which raises exchange rates, and reduces the balance of trade. 
C)  A budget deficit reduces interest rates, which raises exchange rates, and reduces the balance of trade. 
D)  A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade. 
A)  A budget deficit raises interest rates, which raises exchange rates, and increases the balance of trade. 
B)  A budget deficit raises interest rates, which raises exchange rates, and reduces the balance of trade. 
C)  A budget deficit reduces interest rates, which raises exchange rates, and reduces the balance of trade. 
D)  A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade.

Question 16

If there is currently a surplus of dollars,which of the following would you expect to see in the foreign exchange market?

Accepted Answer

A)  The dollar will appreciate. 
B)  The dollar will depreciate. 
C)  There will be a decrease in the demand for dollars. 
D)  There will be a decrease in the supply of dollars. 
A)  The dollar will appreciate. 
B)  The dollar will depreciate. 
C)  There will be a decrease in the demand for dollars. 
D)  There will be a decrease in the supply of dollars.

Question 17

The recession of 2007-2009 decreased the demand for imports in Japan,which caused the ________ curve for the yen to ________,increasing the exchange rate and the value of the yen.

Accepted Answer

A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left 
A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left

Question 18

Figure 29-1  
-Refer to Figure 29-1.The appreciation of the euro is represented as a movement from ________.

Accepted Answer

A)  D to A 
B)  D to C 
C)  B to C 
D)  A to C 
E)  A to B 
A)  D to A 
B)  D to C 
C)  B to C 
D)  A to C 
E)  A to B

Question 19

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

Accepted Answer

A)  more; more 
B)  more; fewer 
C)  fewer; more 
D)  fewer; fewer 
A)  more; more 
B)  more; fewer 
C)  fewer; more 
D)  fewer; fewer

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

Exam 29: Macroeconomics in an Open Economy

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world.

Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?

Suppose the Fed pursues a policy that 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 an open economy? This policy

How does expansionary monetary policy affect net exports?

An increase in U.S.federal government budget deficits that raises U.S.interest rates relative to the rest of the world should

Figure 29-1 -Refer to Figure 29-1.Europe suffers a recession.Assuming all else remains constant,this would be represented as a movement from ________.

Why did the dollar fall in value relative to other currencies in the first half of 2011?

The balance of trade is defined as

When a foreign investor buys a bond issued in the United States,

Persistent current account deficits in the United States

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and France increases from 1.5 to 1.8,

The current account balance equals the value of net exports.

An appreciating yen makes Japanese products

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

How might a budget deficit affect the balance of trade?

If there is currently a surplus of dollars,which of the following would you expect to see in the foreign exchange market?

The recession of 2007-2009 decreased the demand for imports in Japan,which caused the ________ curve for the yen to ________,increasing the exchange rate and the value of the yen.

Figure 29-1 -Refer to Figure 29-1.The appreciation of the euro is represented as a movement from ________.

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

The United States has a trade with all its major trading partners and a trade with every region of the world.

The recession of 2007-2009 decreased the demand for imports in Japan,which caused the curve for the yen to ,increasing the exchange rate and the value of the yen.

The United States usually exports goods than it imports and exports services than it imports.