Question 1

A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:

Accepted Answer

A)  Expansionary fiscal policy 
B)  Expansionary monetary policy 
C)  Contractionary fiscal policy 
D)  Contractionary monetary policy

Question 2

In a closed economy,which of the following will cause the economy's aggregate demand curve to shift to the right?

Accepted Answer

A)  decreases and wages and salaries paid to employees 
B)  increases in the prices of oil and natural gas 
C)  decreases in income taxes for households 
D)  decreases in the productivity of labor

Question 3

Suppose the United States faces domestic inflation and a current account surplus.Should the United States revalue the dollar,one would expect the:

Accepted Answer

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

Question 4

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

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 5

Given an open economy with high capital mobility and fixed exchange rates,suppose an expansionary fiscal policy is implemented to combat recession.The initial and secondary effects of the policy cause aggregate demand to increase,thus strengthening the policy's expansionary effect.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Policy coordination is complicated by

Accepted Answer

A)  Different economic objectives 
B)  Different national institutions 
C)  Different phases in the business cycle 
D)  All of the above

Question 9

Refer to Exhibit 16.1.The Federal Reserve might refuse to support the accord on the grounds that when helping to drive the dollar's exchange value downward,it promotes an increase in the U.S.:

Accepted Answer

A)  Rate of inflation 
B)  Budget deficit 
C)  Unemployment level 
D)  Economic growth rate

Question 10

Given fixed exchange rates,assume Mexico initiates expansionary monetary and fiscal policies to combat recession.These policies will also:

Accepted Answer

A)  Increase both imports and exports 
B)  Increase exports and reduce imports 
C)  Reduce a balance-of-payments surplus 
D)  Reduce a balance-of-payments deficit

Question 11

A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:

Accepted Answer

A)  Trade flows only 
B)  Capital flows only 
C)  both trade flows and capital flows 
D)  Neither trade flows nor capital flows

Question 12

Given an open economy with high capital mobility,monetary policy is strengthened under fixed exchange rates.

Accepted Answer

A) True 
 B)False

Question 13

Expenditure-switching policies include fiscal policy and monetary policy.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Under a system of managed-floating exchange rates with heavy exchange rate intervention:

Accepted Answer

A)  Fiscal policy is successful in promoting internal balance,while monetary policy is unsuccessful 
B)  Monetary policy is successful in promoting internal balance,while fiscal policy is unsuccessful 
C)  Both fiscal policy and monetary policy are successful in promoting internal balance 
D)  Neither fiscal policy nor monetary policy are successful in promoting internal balance

Question 16

Given an open economy with high capital mobility and floating exchange rates,suppose an expansionary monetary policy is implemented to combat recession.The initial and secondary effects of the policy

Accepted Answer

A)  cause aggregate demand to increase,thus strengthening the policy's expansionary effect on real output 
B)  cause aggregate demand to decrease,thus eliminating the policy's expansionary effect on real output 
C)  have conflicting effects on aggregate demand,thus weakening the policy's expansionary effect on real output 
D)  have conflicting effects on aggregate demand,thus strengthening the policy's expansionary effect on real output

Question 17

Which policies are expenditure-changing policies?

Accepted Answer

A)  Currency devaluation and revaluation 
B)  Import quotas and tariffs 
C)  Monetary and fiscal policy 
D)  Wage and price controls

Question 18

International policy coordination is plagued by differing national economic objectives,institutions,political climates,and phases in the business cycle.

Accepted Answer

A) True 
 B)False

Question 19

Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

Accepted Answer

A) True 
 B)False

Question 20

Given a system of floating exchange rates,an expansionary monetary policy by the Federal Reserve will cause

Accepted Answer

A)  the dollar to appreciate and will decrease U.S.net exports 
B)  the dollar to appreciate and will increase U.S.net exports 
C)  the dollar to depreciate and will increase U.S.net exports 
D)  the dollar to depreciate and will decrease U.S.net exports

Exam 16: Macroeconomic Policy in an Open Economy

A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:

In a closed economy,which of the following will cause the economy's aggregate demand curve to shift to the right?

Suppose the United States faces domestic inflation and a current account surplus.Should the United States revalue the dollar,one would expect the:

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

Given an open economy with high capital mobility and fixed exchange rates,suppose an expansionary fiscal policy is implemented to combat recession.The initial and secondary effects of the policy cause aggregate demand to increase,thus strengthening the policy's expansionary effect.

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:

Policy coordination is complicated by

Refer to Exhibit 16.1.The Federal Reserve might refuse to support the accord on the grounds that when helping to drive the dollar's exchange value downward,it promotes an increase in the U.S.:

Given fixed exchange rates,assume Mexico initiates expansionary monetary and fiscal policies to combat recession.These policies will also:

A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:

Given an open economy with high capital mobility,monetary policy is strengthened under fixed exchange rates.

Expenditure-switching policies include fiscal policy and monetary policy.

Which policy is an expenditure-switching policy?

Under a system of managed-floating exchange rates with heavy exchange rate intervention:

Given an open economy with high capital mobility and floating exchange rates,suppose an expansionary monetary policy is implemented to combat recession.The initial and secondary effects of the policy

Which policies are expenditure-changing policies?

International policy coordination is plagued by differing national economic objectives,institutions,political climates,and phases in the business cycle.

Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

Given a system of floating exchange rates,an expansionary monetary policy by the Federal Reserve will cause