Question 1

Under a system of floating exchange rates,an excess demand for a particular currency will lead to a(n)

Accepted Answer

A) depreciation of that currency. 
B) long-term shortage of that currency. 
C) appreciation of that currency. 
D) long-term surplus of that currency. 
A) depreciation of that currency. 
B) long-term shortage of that currency. 
C) appreciation of that currency. 
D) long-term surplus of that currency. C

Question 2

Refer to the information provided in Figure 20.3 below to answer the questions that follow.   Figure 20.3
-Refer to Figure 20.3.Which of the following will shift the supply of pounds from S1 to S2?

Accepted Answer

A) Fewer British firms want to invest in the United States. 
B) The price of U.S.bonds decreases relative to the price of British bonds. 
C) More British citizens travel to the United States. 
D) The inflation rate in the United States decreases relative to the inflation rate in England. 
A) Fewer British firms want to invest in the United States. 
B) The price of U.S.bonds decreases relative to the price of British bonds. 
C) More British citizens travel to the United States. 
D) The inflation rate in the United States decreases relative to the inflation rate in England. A

Question 3

Algebraically,the relationship between imports and income can be written as

Accepted Answer

A) IM = Y/m. 
B) Y = mIM. 
C) IM = m/Y. 
D) IM = mY. 
A) IM = Y/m. 
B) Y = mIM. 
C) IM = m/Y. 
D) IM = mY. D

Question 4

Which of the following is likely to increase the exports of a country?

Accepted Answer

A) an increase in income in the domestic country 
B) a decrease in income in the domestic country 
C) a decrease in income in foreign countries 
D) an increase in income in foreign countries 
A) an increase in income in the domestic country 
B) a decrease in income in the domestic country 
C) a decrease in income in foreign countries 
D) an increase in income in foreign countries

Question 5

The ________ states that if the costs of transportation are small,the price of the same good in different countries should be roughly the same.

Accepted Answer

A) price feedback effect 
B) trade feedback effect 
C) balance of trade effect 
D) law of one price 
A) price feedback effect 
B) trade feedback effect 
C) balance of trade effect 
D) law of one price

Question 6

If the MPS is 0.25 and the MPC is 0.6,then the MPM

Accepted Answer

A) is 0.85. 
B) is 0.35. 
C) is 0.15 
D) cannot be determined from the given information. 
A) is 0.85. 
B) is 0.35. 
C) is 0.15 
D) cannot be determined from the given information.

Question 7

An increase in Switzerland's interest rate and an increase in Switzerland's price level relative to U.S.price level have the same effect on the exchange rate between the two countries.

Accepted Answer

A) True 
 B)False

Question 8

The 2010 price level in Great Britain was relatively higher than the price level in the United States.Thus,a U.S.manufacturing facility looking to buy coal for its plant would most likely buy coal at home in the United States.

Accepted Answer

A) True 
 B)False

Question 9

Imports

Accepted Answer

A) bring foreign exchange,and thus they are registered as credit in the balance of payments. 
B) bring foreign exchange,and thus they are registered as debit in the balance of payments. 
C) cause foreign exchange to leave the country,and thus they are registered as credit in the balance of payments. 
D) cause foreign exchange to leave the country,and thus they are registered as debit in the balance of payments. 
A) bring foreign exchange,and thus they are registered as credit in the balance of payments. 
B) bring foreign exchange,and thus they are registered as debit in the balance of payments. 
C) cause foreign exchange to leave the country,and thus they are registered as credit in the balance of payments. 
D) cause foreign exchange to leave the country,and thus they are registered as debit in the balance of payments.

Question 10

Related to the Economics in Practice on p.703: By keeping the value of the yuan relatively low,the Chinese government has essentially ________ exports from China and made foreign goods ________ in China.

Accepted Answer

A) increased;more expensive 
B) increased;less expensive 
C) decreased;more expensive 
D) decreased;less expensive 
A) increased;more expensive 
B) increased;less expensive 
C) decreased;more expensive 
D) decreased;less expensive

Question 11

An increase in U.S.exports to Japan ________ the demand for U.S.dollars and ________ the supply of yen.

Accepted Answer

A) increases;increases 
B) decreases;increases 
C) increases;decreases 
D) decreases;decreases 
A) increases;increases 
B) decreases;increases 
C) increases;decreases 
D) decreases;decreases

Question 12

If an economy's MPC is 0.95 and the MPM is 0.15,then an increase in government spending of $1,000 will increase income by

Accepted Answer

A) $1,000. 
B) $4,500. 
C) $5,000. 
D) $8,000. 
A) $1,000. 
B) $4,500. 
C) $5,000. 
D) $8,000.

Question 13

If the MPC is 0.75 and the MPM is 0.25,the open economy multiplier is 2.

Accepted Answer

A) True 
 B)False

Question 14

When a country's exports of goods are less than its imports of goods in a given period,it has a

Accepted Answer

A) trade deficit. 
B) capital account deficit. 
C) trade surplus. 
D) current account surplus. 
A) trade deficit. 
B) capital account deficit. 
C) trade surplus. 
D) current account surplus.

Question 15

The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar (the exchange rate)falls,

Accepted Answer

A) Americans demand fewer foreign goods because these goods have become more expensive to American consumers. 
B) Americans demand more foreign goods because these goods have become less expensive to American consumers. 
C) foreigners demand more American goods because these goods have become less expensive to foreign consumers. 
D) foreigners demand more foreign goods because these goods have become more expensive to foreign consumers. 
A) Americans demand fewer foreign goods because these goods have become more expensive to American consumers. 
B) Americans demand more foreign goods because these goods have become less expensive to American consumers. 
C) foreigners demand more American goods because these goods have become less expensive to foreign consumers. 
D) foreigners demand more foreign goods because these goods have become more expensive to foreign consumers.

Question 16

Suppose that an increase in the price level of one country drives up prices in other countries.This,in turn,increases the price level in the first country.This process is the

Accepted Answer

A) J-curve effect. 
B) trade feedback effect. 
C) price feedback effect. 
D) balance of trade effect. 
A) J-curve effect. 
B) trade feedback effect. 
C) price feedback effect. 
D) balance of trade effect.

Question 17

Refer to the information provided in Figure 20.1 below to answer the questions that follow.   Figure 20.1
-Refer to Figure 20.1.If the economy is open and the government increases spending by 15,the new equilibrium output is

Accepted Answer

A) 81.25. 
B) 100. 
C) 112.50. 
D) 125. 
A) 81.25. 
B) 100. 
C) 112.50. 
D) 125.

Question 18

U.S.exports tend to decrease when

Accepted Answer

A) economic activity abroad is decreasing. 
B) foreign GDPs are rising. 
C) U.S.prices are low relative to those in the rest of the world. 
D) the inflation rate in the United States is lower than the inflation rates in other countries. 
A) economic activity abroad is decreasing. 
B) foreign GDPs are rising. 
C) U.S.prices are low relative to those in the rest of the world. 
D) the inflation rate in the United States is lower than the inflation rates in other countries.

Question 19

Until the mid-1970s the United States consistently ran

Accepted Answer

A) current account deficits and capital account surpluses. 
B) current account surpluses and capital account deficits. 
C) deficits in both the current account and the capital account. 
D) surpluses in both the current account and the capital account. 
A) current account deficits and capital account surpluses. 
B) current account surpluses and capital account deficits. 
C) deficits in both the current account and the capital account. 
D) surpluses in both the current account and the capital account.

Question 20

Refer to the information provided in Figure 20.2 below to answer the questions that follow.   Figure 20.2
-Refer to Figure 20.2.The dollar is currently at Point A.An appreciation of the euro causes a movement to Point

Accepted Answer

A) E. 
B) B. 
C) C. 
D) D. 
A) E. 
B) B. 
C) C. 
D) D.

Exam 20: Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Under a system of floating exchange rates,an excess demand for a particular currency will lead to a(n)

Refer to the information provided in Figure 20.3 below to answer the questions that follow. Figure 20.3 -Refer to Figure 20.3.Which of the following will shift the supply of pounds from S1 to S2?

Algebraically,the relationship between imports and income can be written as

Which of the following is likely to increase the exports of a country?

The ________ states that if the costs of transportation are small,the price of the same good in different countries should be roughly the same.

If the MPS is 0.25 and the MPC is 0.6,then the MPM

An increase in Switzerland's interest rate and an increase in Switzerland's price level relative to U.S.price level have the same effect on the exchange rate between the two countries.

The 2010 price level in Great Britain was relatively higher than the price level in the United States.Thus,a U.S.manufacturing facility looking to buy coal for its plant would most likely buy coal at home in the United States.

Imports

Related to the Economics in Practice on p.703: By keeping the value of the yuan relatively low,the Chinese government has essentially ________ exports from China and made foreign goods ________ in China.

An increase in U.S.exports to Japan ________ the demand for U.S.dollars and ________ the supply of yen.

If an economy's MPC is 0.95 and the MPM is 0.15,then an increase in government spending of $1,000 will increase income by

If the MPC is 0.75 and the MPM is 0.25,the open economy multiplier is 2.

When a country's exports of goods are less than its imports of goods in a given period,it has a

The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar (the exchange rate)falls,

Suppose that an increase in the price level of one country drives up prices in other countries.This,in turn,increases the price level in the first country.This process is the

Refer to the information provided in Figure 20.1 below to answer the questions that follow. Figure 20.1 -Refer to Figure 20.1.If the economy is open and the government increases spending by 15,the new equilibrium output is

U.S.exports tend to decrease when

Until the mid-1970s the United States consistently ran

Refer to the information provided in Figure 20.2 below to answer the questions that follow. Figure 20.2 -Refer to Figure 20.2.The dollar is currently at Point A.An appreciation of the euro causes a movement to Point

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade,comparative Advantage,and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Related to the Economics in Practice on p.703: By keeping the value of the yuan relatively low,the Chinese government has essentially exports from China and made foreign goods in China.

An increase in U.S.exports to Japan the demand for U.S.dollars and the supply of yen.