Question 1

Expenditure-changing policies modify the direction of aggregate demand,shifting it between domestic output and imports.

Accepted Answer

A) True 
 B)False

Question 2

Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

Accepted Answer

A) True 
 B)False

Question 3

A nation experiences overall balance if it achieves:

Accepted Answer

A)  Balance-of-payments equilibrium,full employment,and price stability 
B)  Balance-of-payments equilibrium,maximum productivity,and price stability 
C)  Full employment,price stability and no change in its money supply 
D)  Full employment,price stability,and maximum productivity

Question 4

All of the following are obstacles to international economic policy coordination except:

Accepted Answer

A)  Different national objectives and institutions 
B)  Different national political climates 
C)  Different phases in the business cycle 
D)  Different national currencies

Question 5

Suppose the United States faces domestic recession and a current account deficit.Should the United States devalue the dollar,one would expect the:

Accepted Answer

A)  Recession to become less severe--deficit to become less severe 
B)  Recession to become more severe--deficit to become less severe 
C)  Recession to become less severe--deficit to become more severe 
D)  Recession to become more severe--deficit to become more severe

Question 6

Suppose that Brazil faces domestic inflation and a current account deficit.Should Brazil devalue its currency,one would expect the:

Accepted Answer

A)  Inflation to become more severe--deficit to become less severe 
B)  Inflation to become more severe--deficit to become more severe 
C)  Inflation to become less severe--deficit to become less severe 
D)  Inflation to become less severe--deficit to become more severe

Question 7

The appropriate expenditure-switching policy to correct a current account surplus is:

Accepted Answer

A)  Currency revaluation 
B)  Currency devaluation 
C)  Expansionary monetary policy 
D)  Contractionary fiscal policy

Question 8

Which policy is an expenditure-switching policy?

Accepted Answer

A)  Increase in the money supply 
B)  Decrease in government expenditures 
C)  Increase in business and household taxes 
D)  Decrease in import tariffs

Question 9

Under a fixed exchange-rate system and high capital mobility,a contraction in the domestic money supply leads to a:

Accepted Answer

A)  Trade-account deficit and a capital-account surplus 
B)  Trade-account deficit and a capital-account deficit 
C)  Trade-account surplus and a capital-account surplus 
D)  Trade-account surplus and a capital-account deficit

Question 10

Currency devaluation and revaluation are considered to be expenditure-changing policies since they alter a country's aggregate demand for goods and services.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency.This causes the

Accepted Answer

A)  domestic money supply to decrease and a decline in aggregate demand 
B)  domestic money supply to increase and a decline in aggregate demand 
C)  domestic money supply to decrease and a rise in aggregate demand 
D)  domestic money supply to increase and a fall in aggregate demand

Question 12

A nation experiences external balance if it achieves:

Accepted Answer

A)  No net changes in its international gold stocks 
B)  Productivity levels equal to those of its trading partners 
C)  An increase in its money supply equal to increases overseas 
D)  Equilibrium in its balance of payments

Exam 16: Macroeconomic Policy in an Open-economy

Expenditure-changing policies modify the direction of aggregate demand,shifting it between domestic output and imports.

Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

A nation experiences overall balance if it achieves:

All of the following are obstacles to international economic policy coordination except:

Suppose the United States faces domestic recession and a current account deficit.Should the United States devalue the dollar,one would expect the:

Suppose that Brazil faces domestic inflation and a current account deficit.Should Brazil devalue its currency,one would expect the:

The appropriate expenditure-switching policy to correct a current account surplus is:

Which policy is an expenditure-switching policy?

Under a fixed exchange-rate system and high capital mobility,a contraction in the domestic money supply leads to a:

Currency devaluation and revaluation are considered to be expenditure-changing policies since they alter a country's aggregate demand for goods and services.

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency.This causes the

A nation experiences external balance if it achieves: