Question 1

The current account does not include which of the following?

Accepted Answer

A) net exports 
B) net investment income 
C) net transfers 
D) U.S.holdings of foreign assets

Question 2

If the dollar appreciates against the Mexican peso

Accepted Answer

A) Mexican imports to the U.S.become more expensive. 
B) U.S.exports to Mexico become less expensive. 
C) U.S.exports to Mexico become more expensive. 
D) The value of Mexican imports to the United States does not change.

Question 3

If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion,what is the balance on the capital account,assuming no statistical discrepancy?

Accepted Answer

A) $1,445 billion 
B) $239 billion 
C) $0 
D) -$239 billion

Question 4

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

Accepted Answer

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

Question 5

Holding all else constant,a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Accepted Answer

A) True 
 B)False

Question 6

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

Accepted Answer

A) 94 
B) 115 
C) 128 
D) 153

Question 7

How does expansionary monetary policy affect net exports?

Accepted Answer

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

Question 8

Expansionary fiscal policy crowds out both domestic investment and net exports.

Accepted Answer

A) True 
 B)False

Question 9

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.

Question 10

An expansionary monetary policy in the United States should

Accepted Answer

A) decrease the foreign currency price of U.S.exports. 
B) cause the dollar to appreciate. 
C) decrease the dollar price of imports. 
D) decrease net exports.

Question 11

If the United States has a net export deficit,which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

Accepted Answer

A) The balance on the financial account must equal the balance on the current account. 
B) Net foreign investment must be negative as well. 
C) Domestic private saving must be less than net foreign investment. 
D) Domestic public saving must be less than net foreign investment.

Question 12

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar,how many American dollars are required to buy a product that costs 2.5 Canadian dollars?

Accepted Answer

A) $1.32 
B) $2.23 
C) $2.75 
D) $2.81

Question 13

A decrease in U.S.federal government budget deficits that lowers U.S.interest rates relative to the rest of the world should

Accepted Answer

A) lower the trade balance. 
B) decrease net exports. 
C) cause the dollar to appreciate. 
D) decrease the current account surplus. 
E) increase foreign portfolio investment.

Question 14

If net exports are positive

Accepted Answer

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

Question 15

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

Accepted Answer

A) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded cannot be determined. 
B) The equilibrium exchange rate will decrease,and the equilibrium quantity of dollars traded cannot be determined. 
C) The equilibrium exchange rate cannot be determined,and the equilibrium quantity of dollars traded will increase. 
D) The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded will increase.

Question 16

In 2016 the value of the U.S.dollar increased relative to the currencies of most of its major trading partners.This rise in the price of the dollar against the other currencies was ________ for companies that exported to the United States and ________ for U.S.companies that exported to other countries.

Accepted Answer

A) good; good 
B) bad; good 
C) good; bad 
D) bad; bad

Question 17

Figure 18-1 
-Refer to Figure 18-1.The French fall in love with California wines and triple their purchases of this beverage.Assuming all else remains constant,this would be represented as a movement from

Accepted Answer

A) B to A. 
B) C to D. 
C) B to C. 
D) A to D. 
E) A to B.

Question 18

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.

Question 19

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Accepted Answer

The answer of Explain and show graphically the effect of...

Question 20

In international exchange markets,a rise in interest rates in the United States will cause the demand for dollars to ________ and the supply of dollars to ________.

Accepted Answer

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

Exam 18: Macroeconomics in an Open Economy