Question 1

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

Accepted Answer

In a closed economy,expansionary fiscal

Question 2

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Accepted Answer

A) the dollar has depreciated. 
B) the dollar has appreciated. 
C) the British pound has depreciated. 
D) the British pound has stayed constant in value. 
A) the dollar has depreciated. 
B) the dollar has appreciated. 
C) the British pound has depreciated. 
D) the British pound has stayed constant in value.

Question 3

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 4

Figure 18-1  
-Refer to Figure 18-1.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 5

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Accepted Answer

A) True 
 B)False

Question 6

Contractionary monetary policy should increase foreign financial investment in the United States.

Accepted Answer

A) True 
 B)False

Question 7

According to the saving and investment equation,if net foreign investment falls by $35 million,

Accepted Answer

A) national saving in excess of domestic investment will decrease by $35 million. 
B) national savings will rise by $35 million. 
C) domestic investment will fall by $35 million. 
D) national saving in excess of domestic investment will rise by $35 million. 
A) national saving in excess of domestic investment will decrease by $35 million. 
B) national savings will rise by $35 million. 
C) domestic investment will fall by $35 million. 
D) national saving in excess of domestic investment will rise by $35 million.

Question 8

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Accepted Answer

A) True 
 B)False

Question 9

The recession of 2007-2009 decreased the demand for imports in Japan,which caused the ________ curve for the yen to shift to the ________,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 10

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 11

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

Question 12

Table 18-3
  
-Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

Accepted Answer

A) 0.20 dollars per krone and 1.43 dollars per euro 
B) 2.00 dollars per krone and 7.14 dollars per euro 
C) 0.02 dollars per krone and 0.70 dollars per euro 
D) 0.05 dollars per krone and 1.30 dollars per euro 
A) 0.20 dollars per krone and 1.43 dollars per euro 
B) 2.00 dollars per krone and 7.14 dollars per euro 
C) 0.02 dollars per krone and 0.70 dollars per euro 
D) 0.05 dollars per krone and 1.30 dollars per euro

Question 13

An increase in capital inflows will

Accepted Answer

A) increase net foreign investment. 
B) increase capital outflows. 
C) decrease capital outflows. 
D) increase the value of the domestic currency. 
A) increase net foreign investment. 
B) increase capital outflows. 
C) decrease capital outflows. 
D) increase the value of the domestic currency.

Question 14

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero. )

Accepted Answer

A) the United States must be exporting less than it is importing 
B) net capital flows must be positive 
C) national saving is greater than domestic investment 
D) net foreign investment must be negative 
A) the United States must be exporting less than it is importing 
B) net capital flows must be positive 
C) national saving is greater than domestic investment 
D) net foreign investment must be negative

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would you expect to increase both interest rates and exchange rates?

Accepted Answer

A) expansionary monetary policy 
B) contractionary monetary policy 
C) expansionary fiscal policy 
D) Both B and C will increase both interest rates and exchange rates. 
A) expansionary monetary policy 
B) contractionary monetary policy 
C) expansionary fiscal policy 
D) Both B and C will increase both interest rates and exchange rates.

Question 17

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 18

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

Question 19

Which of the following is not included in the balance of the financial account of the United States?

Accepted Answer

A) a purchase of Toyota stock by Ford 
B) a purchase of GE stock by a firm in China 
C) a purchase of U.S.car manufacturing plant by Toyota 
D) a purchase of a German brewery by the U.S.company,Budweiser 
E) a purchase of German legal services by Chase Manhattan Bank 
A) a purchase of Toyota stock by Ford 
B) a purchase of GE stock by a firm in China 
C) a purchase of U.S.car manufacturing plant by Toyota 
D) a purchase of a German brewery by the U.S.company,Budweiser 
E) a purchase of German legal services by Chase Manhattan Bank

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.

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

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

Figure 18-1 -Refer to Figure 18-1.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?

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Contractionary monetary policy should increase foreign financial investment in the United States.

According to the saving and investment equation,if net foreign investment falls by $35 million,

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

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

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

A decrease in capital outflows from the United States will

Table 18-3 -Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

An increase in capital inflows will

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero. )

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

Which of the following would you expect to increase both interest rates and exchange rates?

Since 1999,the capital account has recorded

Which of the following will not shift the demand for the euro to the right?

Which of the following is not included in the balance of the financial account of the United States?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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

Exam 18: Macroeconomics in an Open Economy

How is the impact of expansionary fiscal policy different in an open economy than in a closed economy?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

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

Figure 18-1 -Refer to Figure 18-1.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?

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Contractionary monetary policy should increase foreign financial investment in the United States.

According to the saving and investment equation,if net foreign investment falls by $35 million,

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

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

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

A decrease in capital outflows from the United States will

Table 18-3 -Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

An increase in capital inflows will

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero. )

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

Which of the following would you expect to increase both interest rates and exchange rates?

Since 1999,the capital account has recorded

Which of the following will not shift the demand for the euro to the right?

Which of the following is not included in the balance of the financial account of the United States?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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