Question 1

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 2

If national saving increases,________.(Assume that the capital account is zero and net transfers are zero. )

Accepted Answer

A) the sum of domestic investment and net exports must decrease 
B) the sum of domestic investment and foreign investment must increase 
C) the sum of domestic investment and foreign investment must decrease 
D) foreign investment must decrease to cover the gain 
A) the sum of domestic investment and net exports must decrease 
B) the sum of domestic investment and foreign investment must increase 
C) the sum of domestic investment and foreign investment must decrease 
D) foreign investment must decrease to cover the gain

Question 3

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 4

Ceteris paribus,an increase in the government's budget deficit will increase the current account deficit.

Accepted Answer

A) True 
 B)False

Question 5

If there is currently a shortage 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 an increase in the demand for dollars. 
D) There will be an increase in the supply of dollars. 
A) The dollar will appreciate. 
B) The dollar will depreciate. 
C) There will be an increase in the demand for dollars. 
D) There will be an increase in the supply of dollars.

Question 6

If the dollar appreciates,how will aggregate demand in the United States be affected?

Accepted Answer

A) Aggregate demand will shift to the right as exports increase. 
B) Aggregate demand will shift to the right as imports increase. 
C) Aggregate demand will shift to the left as imports increase. 
D) Aggregate demand will shift to the left as exports increase. 
A) Aggregate demand will shift to the right as exports increase. 
B) Aggregate demand will shift to the right as imports increase. 
C) Aggregate demand will shift to the left as imports increase. 
D) Aggregate demand will shift to the left as exports increase.

Question 7

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

Accepted Answer

In a closed economy,an expansionary fisc

Question 8

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 9

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 10

In 2014,global revenue for IBM was ________ when measured in local currencies than it was when measured in dollars.This occurred because the value of the U.S.dollar ________ relative to most other currencies.

Accepted Answer

A) higher;increased 
B) lower;increased 
C) higher;decreased 
D) lower;decreased 
A) higher;increased 
B) lower;increased 
C) higher;decreased 
D) lower;decreased

Question 11

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

Accepted Answer

A) True 
 B)False

Question 12

How might a U.S.federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S.dollar. )

Accepted Answer

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

Question 13

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

Accepted Answer

Expansionary fiscal policy (as from tax

Question 14

If net exports are equal to net foreign investment,which of the following is not true?

Accepted Answer

A) The balance of payments is zero. 
B) The current account balance is equal to the negative of the financial account balance. 
C) Net capital inflows are equal to imports minus exports. 
D) The balance on the financial account is zero. 
A) The balance of payments is zero. 
B) The current account balance is equal to the negative of the financial account balance. 
C) Net capital inflows are equal to imports minus exports. 
D) The balance on the financial account is zero.

Question 15

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 16

In the United States,domestic investment is greater than national saving.

Accepted Answer

A) True 
 B)False

Question 17

Figure 29-2  
-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 18

The balance of payments includes which three accounts?

Accepted Answer

A) the current account,the financial account,and the capital account 
B) the capital flows account,the financial account,and the trade account 
C) the net investment account,the net exports account,and the net transfers account 
D) the balance of trade account,the net foreign investment account,and statistical discrepancy 
A) the current account,the financial account,and the capital account 
B) the capital flows account,the financial account,and the trade account 
C) the net investment account,the net exports account,and the net transfers account 
D) the balance of trade account,the net foreign investment account,and statistical discrepancy

Question 19

Figure 29-1  
-Refer to Figure 29-1.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 20

You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera,but cameras in Ireland are all priced in euros.If the exchange rate is 0.85 euros per dollar,what's the highest price in euros you'd be willing to pay for a camera?

Accepted Answer

A) 105 euros 
B) 106.25 euros 
C) 110.15 euros 
D) 147 euros 
A) 105 euros 
B) 106.25 euros 
C) 110.15 euros 
D) 147 euros

Exam 29: Macroeconomics in an Open Economy

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

If national saving increases,________.(Assume that the capital account is zero and net transfers are zero. )

An increase in the demand for American-made goods will

Ceteris paribus,an increase in the government's budget deficit will increase the current account deficit.

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

If the dollar appreciates,how will aggregate demand in the United States be affected?

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in 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 a country has a fixed exchange rate

In 2014,global revenue for IBM was ________ when measured in local currencies than it was when measured in dollars.This occurred because the value of the U.S.dollar ________ relative to most other currencies.

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

How might a U.S.federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S.dollar. )

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

If net exports are equal to net foreign investment,which of the following is not true?

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.

In the United States,domestic investment is greater than national saving.

Figure 29-2 -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?

The balance of payments includes which three accounts?

Figure 29-1 -Refer to Figure 29-1.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?

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

In 2014,global revenue for IBM was when measured in local currencies than it was when measured in dollars.This occurred because the value of the U.S.dollar relative to most other currencies.