Question 1

Since 1999,the capital account has recorded

Accepted Answer

A)  transactions that affect net capital flows in the economy. 
B)  relatively minor transactions, such as migrants' transfers, and sales and purchases of nonproduced, nonfinancial assets. 
C)  transactions that affect the balance of trade or the balance of services. 
D)  statistical discrepancy between the current account and the financial account. 
A)  transactions that affect net capital flows in the economy. 
B)  relatively minor transactions, such as migrants' transfers, and sales and purchases of nonproduced, nonfinancial assets. 
C)  transactions that affect the balance of trade or the balance of services. 
D)  statistical discrepancy between the current account and the financial account.

Question 2

The United States has a closed economy.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

Accepted Answer

A)  consumption 
B)  private investment 
C)  net exports 
D)  government spending 
A)  consumption 
B)  private investment 
C)  net exports 
D)  government spending

Question 5

Holding all else constant,a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Accepted Answer

A) True 
 B)False

Question 6

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 7

If a country has a fixed exchange rate,

Accepted Answer

A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. 
A)  the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B)  central banks have more control over real GDP in the economy. 
C)  central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D)  the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency.

Question 8

An economy that has interactions in trade or finance with other economies is referred to as

Accepted Answer

A)  an open economy. 
B)  a closed economy. 
C)  a trade-balanced economy. 
D)  a net foreign investment economy. 
A)  an open economy. 
B)  a closed economy. 
C)  a trade-balanced economy. 
D)  a net foreign investment economy.

Question 9

How will contractionary monetary policy in Japan affect the demand and 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 10

Public saving equals taxes minus government spending minus transfer payments.

Accepted Answer

A) True 
 B)False

Question 11

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

Accepted Answer

In an open economy,the saving and invest

Question 12

Figure 29-1  
-Refer to Figure 29-1.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?
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.

Accepted Answer

The answer of Figure 29-1  
-Refer to Figure 29-1.Suppose...

Question 13

An increase in the demand for American-made goods will

Accepted Answer

A)  increase the supply of dollars on the foreign exchange market. 
B)  decrease the supply of dollars on the foreign exchange market. 
C)  increase the demand for dollars on the foreign exchange market. 
D)  decrease the demand for dollars on the foreign exchange market. 
A)  increase the supply of dollars on the foreign exchange market. 
B)  decrease the supply of dollars on the foreign exchange market. 
C)  increase the demand for dollars on the foreign exchange market. 
D)  decrease the demand for dollars on the foreign exchange market.

Question 14

The Federal Reserve's expansionary monetary policy implemented to deal with the recession of 2007-2009 has led to the

Accepted Answer

A)  demand for the U.S. dollar to decrease. 
B)  supply of the U.S. dollar to increase. 
C)  supply of U.S. Treasury securities to decrease. 
D)  supply of Japanese yen to decrease. 
A)  demand for the U.S. dollar to decrease. 
B)  supply of the U.S. dollar to increase. 
C)  supply of U.S. Treasury securities to decrease. 
D)  supply of Japanese yen to decrease.

Question 15

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

Accepted Answer

A)  $1.32 
B)  $2.23 
C)  $2.75 
D)  $2.81 
A)  $1.32 
B)  $2.23 
C)  $2.75 
D)  $2.81

Question 16

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

Accepted Answer

A)  The United States purchases 500 silver necklaces from Mexico. 
B)  The government of Mexico purchases 500 Ford F-150 pickup trucks from the United States. 
C)  A Mexican citizen purchases 25 shares of stock in Ford Motor Company. 
D)  The U.S. government donates $5 million to Mexico to help victims of drought in Mexico. 
A)  The United States purchases 500 silver necklaces from Mexico. 
B)  The government of Mexico purchases 500 Ford F-150 pickup trucks from the United States. 
C)  A Mexican citizen purchases 25 shares of stock in Ford Motor Company. 
D)  The U.S. government donates $5 million to Mexico to help victims of drought in Mexico.

Question 17

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

Accepted Answer

A)  euro decreased relative to the British pound. 
B)  British pound increased relative to the U.S. dollar. 
C)  U.S. dollar increased relative to most other currencies. 
D)  U.S. dollar decreased relative to the Japanese yen. 
A)  euro decreased relative to the British pound. 
B)  British pound increased relative to the U.S. dollar. 
C)  U.S. dollar increased relative to most other currencies. 
D)  U.S. dollar decreased relative to the Japanese yen.

Question 18

Which of the following is true about the occurrence of the twin deficits?

Accepted Answer

A)  They always occur together. 
B)  They only occur when exchange rates are fixed. 
C)  They did not occur after 1990 in the United States. 
D)  They occur consistently in all the economies of the world except the United States. 
A)  They always occur together. 
B)  They only occur when exchange rates are fixed. 
C)  They did not occur after 1990 in the United States. 
D)  They occur consistently in all the economies of the world except the United States.

Question 19

If net foreign investment is negative,which of the following must be true?

Accepted Answer

A)  Capital outflows are greater than capital inflows. 
B)  Domestic investment must be greater than national saving. 
C)  Net exports are positive. 
D)  Private saving is greater than public saving. 
A)  Capital outflows are greater than capital inflows. 
B)  Domestic investment must be greater than national saving. 
C)  Net exports are positive. 
D)  Private saving is greater than public saving.

Question 20

An increase in capital outflows from the United States will

Accepted Answer

A)  decrease the balance on the financial account. 
B)  increase the balance on the financial account. 
C)  decrease the balance on the capital account. 
D)  increase the balance on the current account. 
A)  decrease the balance on the financial account. 
B)  increase the balance on the financial account. 
C)  decrease the balance on the capital account. 
D)  increase the balance on the current account.

Exam 29: Macroeconomics in an Open Economy

Since 1999,the capital account has recorded

The United States has a closed economy.

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.)

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

Holding all else constant,a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

The impact of crowding out

If a country has a fixed exchange rate,

An economy that has interactions in trade or finance with other economies is referred to as

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

Public saving equals taxes minus government spending minus transfer payments.

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

An increase in the demand for American-made goods will

The Federal Reserve's expansionary monetary policy implemented to deal with the recession of 2007-2009 has led to the

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

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

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

Which of the following is true about the occurrence of the twin deficits?

If net foreign investment is negative,which of the following must be true?

An increase in capital outflows from the United States will

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

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