Question 1

________ was the major system of exchange rate determination before 1914.

Accepted Answer

A)  The Bretton Woods system 
B)  The gold standard 
C)  The freely-floating system 
D)  The managed-floating system 
A)  The Bretton Woods system 
B)  The gold standard 
C)  The freely-floating system 
D)  The managed-floating system B

Question 2

U.S. exports tend to increase when

Accepted Answer

A)  economic activity abroad is decreasing. 
B)  foreign GDPs are falling. 
C)  U.S. prices are falling compared to those in the rest of the world. 
D)  the U.S. dollar is strong compared to foreign currencies. 
A)  economic activity abroad is decreasing. 
B)  foreign GDPs are falling. 
C)  U.S. prices are falling compared to those in the rest of the world. 
D)  the U.S. dollar is strong compared to foreign currencies. C

Question 3

________ has been the primary system for determining exchange rates since 1971.

Accepted Answer

A)  The gold standard 
B)  The Bretton Woods system 
C)  A freely floating system 
D)  A managed floating system 
A)  The gold standard 
B)  The Bretton Woods system 
C)  A freely floating system 
D)  A managed floating system D

Question 4

The open economy multiplier is

Accepted Answer

A)  1/[1 - (MPC - MPM)]. 
B)  1/[1 - MPC - MPM]. 
C)  1/[1 - (MPM - MP
C) ]. 
D)  MPM/[1 - (MPC - MPM)]. 
A)  1/[1 - (MPC - MPM)]. 
B)  1/[1 - MPC - MPM]. 
C)  1/[1 - (MPM - MP
C) ]. 
D)  MPM/[1 - (MPC - MPM)].

Question 5

Refer to the information provided in Figure 19.1 below to answer the questions that follow.   Figure 19.1
-Refer to Figure 19.1. The open economy multiplier is

Accepted Answer

A)  1.25. 
B)  2. 
C)  4. 
D)  8. 
A)  1.25. 
B)  2. 
C)  4. 
D)  8.

Question 6

The level of U.S. exports depends ________ the level of income in other countries.

Accepted Answer

A)  entirely on 
B)  indirectly on 
C)  inversely with 
D)  directly on 
A)  entirely on 
B)  indirectly on 
C)  inversely with 
D)  directly on

Question 7

Which of the following policies tends to cause the dollar to depreciate?

Accepted Answer

A)  an contractionary monetary policy 
B)  an expansionary fiscal policy 
C)  a contractionary fiscal policy 
D)  a combination of an contractionary monetary policy and a expansionary fiscal policy 
A)  an contractionary monetary policy 
B)  an expansionary fiscal policy 
C)  a contractionary fiscal policy 
D)  a combination of an contractionary monetary policy and a expansionary fiscal policy

Question 8

When foreign assets in the United States decrease,

Accepted Answer

A)  the United States residents are reducing their debt to the rest of the world. 
B)  the United States residents are increasing their stock of assets. 
C)  the United States residents are increasing their debt to the rest of the world. 
D)  foreign residents debts to the United States residents also increase. 
A)  the United States residents are reducing their debt to the rest of the world. 
B)  the United States residents are increasing their stock of assets. 
C)  the United States residents are increasing their debt to the rest of the world. 
D)  foreign residents debts to the United States residents also increase.

Question 9

Which of the following statements is false?

Accepted Answer

A)  A country runs a net export deficit if it imports more than it exports. 
B)  If the current account is in surplus, the capital account must be in deficit. 
C)  The overall sum of all the entries in the balance of payments must be zero. 
D)  A country runs a current account surplus if it sells more of its assets abroad than it buys abroad. 
A)  A country runs a net export deficit if it imports more than it exports. 
B)  If the current account is in surplus, the capital account must be in deficit. 
C)  The overall sum of all the entries in the balance of payments must be zero. 
D)  A country runs a current account surplus if it sells more of its assets abroad than it buys abroad.

Question 10

Refer to the information provided in Figure 19.4 below to answer the questions that follow.   Figure 19.4
-Refer to Figure 19.4. If the demand and supply of pounds are D1 and S2, the equilibrium is

Accepted Answer

A)  $2.50 per pound and the quantity is 400 pounds. 
B)  $2.00 per pound and the quantity is 300 pounds. 
C)  2 pound per $ and the quantity is 400 pounds. 
D)  $1.50 per pound and the quantity is 200 pounds. 
A)  $2.50 per pound and the quantity is 400 pounds. 
B)  $2.00 per pound and the quantity is 300 pounds. 
C)  2 pound per $ and the quantity is 400 pounds. 
D)  $1.50 per pound and the quantity is 200 pounds.

Question 11

________ was the major system of exchange rate determination from the end of World War II until 1971.

Accepted Answer

A)  The gold standard 
B)  The Bretton Woods system 
C)  The freely-floating system 
D)  The managed-floating system 
A)  The gold standard 
B)  The Bretton Woods system 
C)  The freely-floating system 
D)  The managed-floating system

Question 12

A decrease in the supply of dollars and an increase in the demand for Mexican peso

Accepted Answer

A)  increases the value of the dollar. 
B)  increases the value of the peso. 
C)  increases the peso price of dollars. 
D)  has an indeterminate effect on the exchange rate between dollars and pesos. 
A)  increases the value of the dollar. 
B)  increases the value of the peso. 
C)  increases the peso price of dollars. 
D)  has an indeterminate effect on the exchange rate between dollars and pesos.

Question 13

Why does the depreciation of a country's currency tend to increase its price level?

Accepted Answer

A)  domestic buyers tend to substitute imports for domestic products 
B)  a currency depreciation makes a country's products less competitive in world markets, so exports fall 
C)  a currency depreciation makes imported inputs more expensive 
D)  a currency depreciation makes imported inputs less expensive 
A)  domestic buyers tend to substitute imports for domestic products 
B)  a currency depreciation makes a country's products less competitive in world markets, so exports fall 
C)  a currency depreciation makes imported inputs more expensive 
D)  a currency depreciation makes imported inputs less expensive

Question 14

Refer to the information provided in Figure 19.4 below to answer the questions that follow.   Figure 19.4
-Refer to Figure 19.4. The demand and supply of pounds are D2 and S2. An increase in British demand for U.S. exports, ceteris paribus, could

Accepted Answer

A)  increase the exchange rate ($/pound) to $2.50. 
B)  decrease the exchange rate ($/pound) to $1.50. 
C)  decrease the equilibrium quantity from 400 to 300 pounds. 
D)  increase the demand for pounds from D2 to D1. 
A)  increase the exchange rate ($/pound) to $2.50. 
B)  decrease the exchange rate ($/pound) to $1.50. 
C)  decrease the equilibrium quantity from 400 to 300 pounds. 
D)  increase the demand for pounds from D2 to D1.

Question 15

Refer to the information provided in Figure 19.1 below to answer the questions that follow.   Figure 19.1
-Refer to Figure 19.1. What is the MPM in this economy?

Accepted Answer

A)  0.2 
B)  0.25 
C)  0.6 
D)  cannot be determined from the graph 
A)  0.2 
B)  0.25 
C)  0.6 
D)  cannot be determined from the graph

Question 16

By the mid-1980s, the United States

Accepted Answer

A)  was neither a creditor nation or a debtor nation, as its current account and capital account were both valued at zero. 
B)  was both a creditor nation and a debtor nation, as its balance of payments was equal to zero. 
C)  changed from a creditor nation to a debtor nation. 
D)  changed from a debtor nation to a creditor nation. 
A)  was neither a creditor nation or a debtor nation, as its current account and capital account were both valued at zero. 
B)  was both a creditor nation and a debtor nation, as its balance of payments was equal to zero. 
C)  changed from a creditor nation to a debtor nation. 
D)  changed from a debtor nation to a creditor nation.

Question 17

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 18

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.

Question 19

[MPC - MPM] equals the marginal propensity to

Accepted Answer

A)  save. 
B)  import. 
C)  consume domestic goods. 
D)  export. 
A)  save. 
B)  import. 
C)  consume domestic goods. 
D)  export.

Question 20

The 2017 price level in Japan was relatively lower than the price level in the United States. Thus, a U.S. manufacturing facility looking to buy aluminum for its plant would most likely buy aluminum from Japan.

Accepted Answer

A) True 
 B)False

Exam 19: Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

________ was the major system of exchange rate determination before 1914.

U.S. exports tend to increase when

________ has been the primary system for determining exchange rates since 1971.

The open economy multiplier is

Refer to the information provided in Figure 19.1 below to answer the questions that follow. Figure 19.1 -Refer to Figure 19.1. The open economy multiplier is

The level of U.S. exports depends ________ the level of income in other countries.

Which of the following policies tends to cause the dollar to depreciate?

When foreign assets in the United States decrease,

Which of the following statements is false?

Refer to the information provided in Figure 19.4 below to answer the questions that follow. Figure 19.4 -Refer to Figure 19.4. If the demand and supply of pounds are D1 and S2, the equilibrium is

________ was the major system of exchange rate determination from the end of World War II until 1971.

A decrease in the supply of dollars and an increase in the demand for Mexican peso

Why does the depreciation of a country's currency tend to increase its price level?

Refer to the information provided in Figure 19.4 below to answer the questions that follow. Figure 19.4 -Refer to Figure 19.4. The demand and supply of pounds are D2 and S2. An increase in British demand for U.S. exports, ceteris paribus, could

Refer to the information provided in Figure 19.1 below to answer the questions that follow. Figure 19.1 -Refer to Figure 19.1. What is the MPM in this economy?

By the mid-1980s, the United States

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

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

[MPC - MPM] equals the marginal propensity to

The 2017 price level in Japan was relatively lower than the price level in the United States. Thus, a U.S. manufacturing facility looking to buy aluminum for its plant would most likely buy aluminum from Japan.

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

Money, the Federal Reserve, and the Interest Rate

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

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 19.4 below to answer the questions that follow. Figure 19.4 -Refer to Figure 19.4. If the demand and supply of pounds are D₁ and S₂, the equilibrium is

Refer to the information provided in Figure 19.4 below to answer the questions that follow. Figure 19.4 -Refer to Figure 19.4. The demand and supply of pounds are D₂ and S₂. An increase in British demand for U.S. exports, ceteris paribus, could