Question 1

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

Accepted Answer

A) The demand for dollars falls,and the supply of dollars falls. 
B) The demand for dollars rises,and the supply of dollars rises. 
C) The demand for dollars rises,and the supply of dollars falls. 
D) The demand for dollars falls,and the supply of dollars rises. 
A) The demand for dollars falls,and the supply of dollars falls. 
B) The demand for dollars rises,and the supply of dollars rises. 
C) The demand for dollars rises,and the supply of dollars falls. 
D) The demand for dollars falls,and the supply of dollars rises.

Question 2

If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then

Accepted Answer

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

Question 3

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 camera you're looking at costs 115 euros,under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase. )

Accepted Answer

A) 0.56 euros per dollar 
B) 0.89 euros per dollar 
C) 0.92 euros per dollar 
D) You would purchase the new camera at any of the above exchange rates. 
A) 0.56 euros per dollar 
B) 0.89 euros per dollar 
C) 0.92 euros per dollar 
D) You would purchase the new camera at any of the above exchange rates.

Question 4

If foreign holdings of U.S.dollars increase,holding all else constant,

Accepted Answer

A) the balance on the U.S.financial account will increase. 
B) the balance on the U.S.current account will increase. 
C) the balance on the U.S.capital account will increase. 
D) the U.S.balance of trade will increase. 
A) the balance on the U.S.financial account will increase. 
B) the balance on the U.S.current account will increase. 
C) the balance on the U.S.capital account will increase. 
D) the U.S.balance of trade will increase.

Question 5

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Accepted Answer

A) a depreciation of the franc 
B) an appreciation of the dollar 
C) a decrease in the price level in the United States 
D) a decrease in the price level in Switzerland 
A) a depreciation of the franc 
B) an appreciation of the dollar 
C) a decrease in the price level in the United States 
D) a decrease in the price level in Switzerland

Question 6

Suppose the majority of the shares of British Airways stock were sold to a firm in the United States.Assuming all else remains constant,this will

Accepted Answer

A) decrease the balance of the U.S.financial account. 
B) decrease foreign direct investment in the United States. 
C) decrease the balance of the U.S.current account. 
D) increase net portfolio investment in the United States. 
E) create a capital inflow in the United States. 
A) decrease the balance of the U.S.financial account. 
B) decrease foreign direct investment in the United States. 
C) decrease the balance of the U.S.current account. 
D) increase net portfolio investment in the United States. 
E) create a capital inflow in the United States.

Question 7

How does contractionary monetary policy affect net exports in the short run?

Accepted Answer

A) Contractionary monetary policy increases exports and reduces imports. 
B) Contractionary monetary policy reduces exports and increases imports. 
C) Contractionary monetary policy increases exports and increases imports. 
D) Contractionary monetary policy reduces exports and reduces imports. 
A) Contractionary monetary policy increases exports and reduces imports. 
B) Contractionary monetary policy reduces exports and increases imports. 
C) Contractionary monetary policy increases exports and increases imports. 
D) Contractionary monetary policy reduces exports and reduces imports.

Question 8

Suppose the U.S.Congress is successful in enacting tariffs large enough to eliminate the current account deficit.What would happen to the level of domestic investment?

Accepted Answer

A) It would not change. 
B) It would rise and exceed national saving. 
C) It would rise to a level equal to net foreign investment. 
D) It would fall to a level equal to national saving. 
A) It would not change. 
B) It would rise and exceed national saving. 
C) It would rise to a level equal to net foreign investment. 
D) It would fall to a level equal to national saving.

Question 9

Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should ________ Chinese exports and ________ imports to China.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease 
A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease

Question 10

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

Question 11

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 12

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Accepted Answer

A) consumption 
B) private investment 
C) net exports 
D) All of the above are crowded out by higher interest rates. 
A) consumption 
B) private investment 
C) net exports 
D) All of the above are crowded out by higher interest rates.

Question 13

Figure 18-2  
-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 14

Suppose the government cuts taxes.We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.

Accepted Answer

A) rise;appreciate 
B) rise;depreciate 
C) fall;depreciate 
D) fall;appreciate 
A) rise;appreciate 
B) rise;depreciate 
C) fall;depreciate 
D) fall;appreciate

Question 15

If net exports are negative,

Accepted Answer

A) net foreign investment is also negative. 
B) capital inflows must be less than capital outflows. 
C) net foreign investment is positive. 
D) Both A and B are correct. 
A) net foreign investment is also negative. 
B) capital inflows must be less than capital outflows. 
C) net foreign investment is positive. 
D) Both A and B are correct.

Question 16

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 17

The price of domestic goods in terms of foreign goods is referred to as

Accepted Answer

A) the nominal exchange rate. 
B) the relative inflation rate. 
C) the current account balance. 
D) the real exchange rate. 
A) the nominal exchange rate. 
B) the relative inflation rate. 
C) the current account balance. 
D) the real exchange rate.

Question 18

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 19

Expansionary fiscal policy should raise the exchange rate of the dollar.

Accepted Answer

A) True 
 B)False

Question 20

In 2014,global revenue for IBM was $2 billion lower when measured in dollars than when measured in local currencies.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.

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then

If foreign holdings of U.S.dollars increase,holding all else constant,

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Suppose the majority of the shares of British Airways stock were sold to a firm in the United States.Assuming all else remains constant,this will

How does contractionary monetary policy affect net exports in the short run?

Suppose the U.S.Congress is successful in enacting tariffs large enough to eliminate the current account deficit.What would happen to the level of domestic investment?

Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should Chinese exports and imports to China.

The balance of payments includes which three accounts?

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Figure 18-2 -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?

Suppose the government cuts taxes.We would expect interest rates to and the dollar to in foreign exchange markets.

If net exports are negative,

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

The price of domestic goods in terms of foreign goods is referred to as

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.

Expansionary fiscal policy should raise the exchange rate of the dollar.

In 2014,global revenue for IBM was $2 billion lower when measured in dollars than when measured in local currencies.The reason for this discrepancy is the value of the

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 does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then

If foreign holdings of U.S.dollars increase,holding all else constant,

Assume the United States is the "domestic" country and Switzerland is the "foreign" country.Which of the following might decrease the real exchange rate between the United States and Switzerland?

Suppose the majority of the shares of British Airways stock were sold to a firm in the United States.Assuming all else remains constant,this will

How does contractionary monetary policy affect net exports in the short run?

Suppose the U.S.Congress is successful in enacting tariffs large enough to eliminate the current account deficit.What would happen to the level of domestic investment?

Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should ________ Chinese exports and ________ imports to China.

The balance of payments includes which three accounts?

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

Figure 18-2 -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?

Suppose the government cuts taxes.We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.

If net exports are negative,

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

The price of domestic goods in terms of foreign goods is referred to as

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.

Expansionary fiscal policy should raise the exchange rate of the dollar.

In 2014,global revenue for IBM was $2 billion lower when measured in dollars than when measured in local currencies.The reason for this discrepancy is the value of the

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

Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should Chinese exports and imports to China.

Suppose the government cuts taxes.We would expect interest rates to and the dollar to in foreign exchange markets.

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.