Question 1

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

Question 2

Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.

Accepted Answer

A) True 
 B)False

Question 3

Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic capital markets.The result would be

Accepted Answer

A)  a depreciation of the domestic currency and a rise in net exports 
B)  a depreciation of the domestic currency and a fall in net exports 
C)  an appreciation of the domestic currency and a rise in net exports 
D)  an appreciation of the domestic currency and a fall in net exports

Question 4

Expenditure-switching policies alter the level of total spending (aggregate demand)for goods and services produced domestically and those imported.

Accepted Answer

A) True 
 B)False

Question 5

An expenditure-increasing policy would consist of an increase in:

Accepted Answer

A)  Import tariffs 
B)  Import quotas 
C)  Governmental taxes 
D)  The money supply

Question 6

Most industrial countries generally considered ____ as the most important economic goal.

Accepted Answer

A)  External balance 
B)  Internal balance 
C)  Maximum efficiency for business 
D)  Maximum efficiency for labor

Question 7

A nation realizes overall balance when it achieves full employment and current account equilibrium.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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

Accepted Answer

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

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of:

Accepted Answer

A)  Tariff trade barrier formation 
B)  Nontariff trade barrier formation 
C)  International economic policy coordination 
D)  Beggar-thy-neighbor policies

Exam 16: Macroeconomic Policy in an Open Economy

A nation experiences external balance if it achieves:

Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.

Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic capital markets.The result would be

Expenditure-switching policies alter the level of total spending (aggregate demand)for goods and services produced domestically and those imported.

An expenditure-increasing policy would consist of an increase in:

Most industrial countries generally considered ____ as the most important economic goal.

A nation realizes overall balance when it achieves full employment and current account equilibrium.

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

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

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

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

The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of: