Question 1

Compared with the U.S. dollar-yuan, the average fluctuation in the U.S. dollar-euro exchange rate is:

Accepted Answer

A)  6 or 7 times as large. 
B)  about the same. 
C)  somewhat smaller. 
D)  6 or 7 times less. 
A)  6 or 7 times as large. 
B)  about the same. 
C)  somewhat smaller. 
D)  6 or 7 times less.

Question 2

Which one of the following reasons does NOT explain why exchange rates are important?

Accepted Answer

A)  They affect the affordability of imports. 
B)  They make exports either more or less expensive for foreign buyers. 
C)  They affect the value of foreign assets and their returns. 
D)  They affect the profits of all domestic producers. 
A)  They affect the affordability of imports. 
B)  They make exports either more or less expensive for foreign buyers. 
C)  They affect the value of foreign assets and their returns. 
D)  They affect the profits of all domestic producers.

Question 3

What is an exchange rate crisis, and what are the characteristics of an exchange rate crisis?

Accepted Answer

An exchange rate crisis occurs when a co

Question 4

International macroeconomics studies:

Accepted Answer

A)  decisions of individual households in other countries. 
B)  decisions by governments in other countries. 
C)  the interrelationship of large-scale economic issues across countries. 
D)  the interrelationship of politics and economics within a country. 
A)  decisions of individual households in other countries. 
B)  decisions by governments in other countries. 
C)  the interrelationship of large-scale economic issues across countries. 
D)  the interrelationship of politics and economics within a country.

Question 5

What is the link between current account imbalances and country risk?

Accepted Answer

The link between current account imbalan

Question 6

A nation's current account is:

Accepted Answer

A)  its current budget deficit. 
B)  the previous year's budget deficit. 
C)  a record of a nation's income, expenditure, deficit, and surplus during a particular period. 
D)  the difference between its total wealth and its total debt. 
A)  its current budget deficit. 
B)  the previous year's budget deficit. 
C)  a record of a nation's income, expenditure, deficit, and surplus during a particular period. 
D)  the difference between its total wealth and its total debt.

Question 7

Compared with 100 years ago, the number of currencies exchanged today is:

Accepted Answer

A)  dozens fewer. 
B)  insignificant. 
C)  many times more. 
D)  the same. 
A)  dozens fewer. 
B)  insignificant. 
C)  many times more. 
D)  the same.

Question 8

When the exchange value of the euro rises in terms of the U.S. dollar, U.S. residents find that European imports are:

Accepted Answer

A)  cheaper. 
B)  more expensive. 
C)  oversupplied to the United States. 
D)  more heavily taxed by the U.S. government. 
A)  cheaper. 
B)  more expensive. 
C)  oversupplied to the United States. 
D)  more heavily taxed by the U.S. government.

Question 9

Rent-seeking activities include:

Accepted Answer

A)  bribes. 
B)  lobbying. 
C)  favoritism. 
D)  bribes, lobbying, and favoritism. 
A)  bribes. 
B)  lobbying. 
C)  favoritism. 
D)  bribes, lobbying, and favoritism.

Question 10

The income gap between rich and poor nations has _____ over the last two decades and is the largest in history.

Accepted Answer

A)  doubled 
B)  tripled 
C)  grown by 10 times 
D)  grown by 50 times 
A)  doubled 
B)  tripled 
C)  grown by 10 times 
D)  grown by 50 times

Question 11

The idea of dollarization is:

Accepted Answer

A)  the use of domestic currency in a variable proportion with neighboring countries' currency. 
B)  the use of the U.S. dollar for paying the native country's debt. 
C)  a nation's use of a foreign currency over which it has no policy control. 
D)  the use of domestic currency in countries in Europe that are not part of the European Union. 
A)  the use of domestic currency in a variable proportion with neighboring countries' currency. 
B)  the use of the U.S. dollar for paying the native country's debt. 
C)  a nation's use of a foreign currency over which it has no policy control. 
D)  the use of domestic currency in countries in Europe that are not part of the European Union.

Question 12

A good's relative price indicates its:

Accepted Answer

A)  value only in its own nation. 
B)  value compared with the same good sold in another nation, expressed in a common currency. 
C)  exchange value only. 
D)  net value after taxes and depreciation. 
A)  value only in its own nation. 
B)  value compared with the same good sold in another nation, expressed in a common currency. 
C)  exchange value only. 
D)  net value after taxes and depreciation.

Question 13

To analyze whether an international private or sovereign borrower will repay a loan, creditors resort to:

Accepted Answer

A)  collateral requirements for loans. 
B)  International Monetary Fund expertise. 
C)  international credit rating agencies that operate much like they do in sophisticated financial markets. 
D)  incentives to repay, such as threats of foreclosure, force, or economic sanctions for delinquent borrowers. 
A)  collateral requirements for loans. 
B)  International Monetary Fund expertise. 
C)  international credit rating agencies that operate much like they do in sophisticated financial markets. 
D)  incentives to repay, such as threats of foreclosure, force, or economic sanctions for delinquent borrowers.

Question 14

Compared with earlier decades, the prevalence of exchange rate crises during the turn of the century (1997-2002) was:

Accepted Answer

A)  much less severe than in the 1970s with its high inflation and high unemployment. 
B)  much more severe in rapidly developing economies such as in South America and East Asia. 
C)  very typical of modern economic history, indicating a need for international cooperation. 
D)  much reduced as a result of the swift and effective response by the International Monetary Fund. 
A)  much less severe than in the 1970s with its high inflation and high unemployment. 
B)  much more severe in rapidly developing economies such as in South America and East Asia. 
C)  very typical of modern economic history, indicating a need for international cooperation. 
D)  much reduced as a result of the swift and effective response by the International Monetary Fund.

Question 15

What is the difference between an open economy and a closed economy?

Accepted Answer

A)  A closed economy has sealed borders and allows no tourism or migration. 
B)  An open economy has very few restrictions on trade or financial flows. 
C)  A closed economy has very tough wage and hour laws and will not tolerate labor unions. 
D)  An open economy has lax restrictions on drugs or other illegal activities. 
A)  A closed economy has sealed borders and allows no tourism or migration. 
B)  An open economy has very few restrictions on trade or financial flows. 
C)  A closed economy has very tough wage and hour laws and will not tolerate labor unions. 
D)  An open economy has lax restrictions on drugs or other illegal activities.

Question 16

The exchange rate between the U.S. dollar and the Chinese yuan:

Accepted Answer

A)  resulted in a rise in Chinese buying power. 
B)  declined 15% between 2005 and the financial crisis in 2008. 
C)  has created a situation in which China is able to get cheap products from the United States. 
D)  has been unchanged since July 2005. 
A)  resulted in a rise in Chinese buying power. 
B)  declined 15% between 2005 and the financial crisis in 2008. 
C)  has created a situation in which China is able to get cheap products from the United States. 
D)  has been unchanged since July 2005.

Question 17

It is _________ to assume that all goods are priced in a common currency in international markets.

Accepted Answer

A)  correct in every case 
B)  dangerous 
C)  incorrect in every case 
D)  unrealistic 
A)  correct in every case 
B)  dangerous 
C)  incorrect in every case 
D)  unrealistic

Question 18

What role does history play in the "Great Divergence"?

Accepted Answer

The "Great Divergence" refers to the per

Question 19

Economists say that the relationship between good institutions and good economic results is that:

Accepted Answer

A)  good institutions are essential to good economic outcomes. 
B)  good economic outcomes enable a society to build good institutions. 
C)  good institutions are not necessary for good government and good economic outcomes. 
D)  good economic results are usually based on access to essential natural resources and a competent labor force-not on access to societal institutions. 
A)  good institutions are essential to good economic outcomes. 
B)  good economic outcomes enable a society to build good institutions. 
C)  good institutions are not necessary for good government and good economic outcomes. 
D)  good economic results are usually based on access to essential natural resources and a competent labor force-not on access to societal institutions.

Question 20

Exchange rates exhibit:

Accepted Answer

A)  steady behavior across the board. 
B)  erratic behavior across the board. 
C)  very different behavior, depending on whether the rates are fixed or floating. 
D)  variable behavior (sometimes steady and other times erratic), depending on the business cycle. 
A)  steady behavior across the board. 
B)  erratic behavior across the board. 
C)  very different behavior, depending on whether the rates are fixed or floating. 
D)  variable behavior (sometimes steady and other times erratic), depending on the business cycle.

Exam 12: The Global Macroeconomy

Compared with the U.S. dollar-yuan, the average fluctuation in the U.S. dollar-euro exchange rate is:

Which one of the following reasons does NOT explain why exchange rates are important?

What is an exchange rate crisis, and what are the characteristics of an exchange rate crisis?

International macroeconomics studies:

What is the link between current account imbalances and country risk?

A nation's current account is:

Compared with 100 years ago, the number of currencies exchanged today is:

When the exchange value of the euro rises in terms of the U.S. dollar, U.S. residents find that European imports are:

Rent-seeking activities include:

The income gap between rich and poor nations has _____ over the last two decades and is the largest in history.

The idea of dollarization is:

A good's relative price indicates its:

To analyze whether an international private or sovereign borrower will repay a loan, creditors resort to:

Compared with earlier decades, the prevalence of exchange rate crises during the turn of the century (1997-2002) was:

What is the difference between an open economy and a closed economy?

The exchange rate between the U.S. dollar and the Chinese yuan:

It is _________ to assume that all goods are priced in a common currency in international markets.

What role does history play in the "Great Divergence"?

Economists say that the relationship between good institutions and good economic results is that:

Exchange rates exhibit:

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

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