Question 1

A temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

Accepted Answer

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

Question 2

If a country has an overvaluation problem,the best solution is to

Accepted Answer

A) increase the official rate. 
B) buy less of its currency in the foreign exchange market. 
C) sell more of its currency in the foreign exchange market. 
D) decrease the money supply.

Question 3

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

Accepted Answer

The answer of Identify changes in two variables that would...

Question 4

What is purchasing power parity? Why might it not hold?

Accepted Answer

The answer of What is purchasing power parity? Why might...

Question 5

An exchange-rate system in which the nominal exchange rate is set by the government is known as

Accepted Answer

A) a flexible-exchange-rate system. 
B) a floating-exchange-rate system. 
C) a fixed-exchange-rate system. 
D) an exchange-rate union.

Question 6

Suppose the dollar/euro exchange rate falls.Then

Accepted Answer

A) French firms will import more from the United States into France. 
B) U)S.firms will export less to France. 
C) the dollar is less valuable relative to the euro. 
D) the euro is more valuable relative to the dollar.

Question 7

International businesses like a fixed-exchange-rate system because

Accepted Answer

A) they like large swings in currency values when devaluation or revaluation occur. 
B) they profit by speculating on devaluation or revaluation. 
C) they can plan better if they know what the exchange rate will be. 
D) fixed exchange rates are economically efficient.

Question 8

The idea that similar foreign and domestic goods,or baskets of goods,should have the same price when priced in terms of the same currency is called

Accepted Answer

A) equity. 
B) purchasing power parity. 
C) efficiency. 
D) the tragedy of the commons.

Question 9

In the Keynesian model of an open economy,a temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

Accepted Answer

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

Question 10

The real exchange rate is

Accepted Answer

A) the price of one currency in terms of another. 
B) the price of domestic goods relative to foreign goods. 
C) the quantity of gold that can be purchased by one unit of currency. 
D) the difference in interest rates between two countries.

Question 11

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

Accepted Answer

A) European goods become more expensive while U.S.goods become cheaper. 
B) European goods become cheaper while U.S.goods become more expensive. 
C) Both European and U.S.goods become more expensive. 
D) Both European and U.S.goods become cheaper.

Question 12

When the dollar rises relative to other currencies,

Accepted Answer

A) foreign goods are more expensive in terms of dollars. 
B) foreign currency is more expensive in terms of dollars. 
C) U)S.goods become more expensive to foreigners. 
D) foreign currency is more expensive in the United States,but foreign goods are cheaper.

Question 13

A decline in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall

Question 14

A decrease in the foreign real interest rate would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.

Accepted Answer

A) rise; shift up 
B) rise; shift down 
C) fall; shift up 
D) fall; shift down

Question 15

In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?

Accepted Answer

The answer of In a Keynesian model,what are the short-run...

Question 16

When the nominal exchange rate in terms of dollars per yen rises,

Accepted Answer

A) the dollar buys more yen and the dollar has depreciated. 
B) the dollar buys fewer yen and the dollar has depreciated. 
C) the dollar buys more yen and the dollar has appreciated. 
D) the dollar buys fewer yen and the dollar has appreciated.

Question 17

A temporary increase in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

Accepted Answer

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

Question 18

Assume the United States is currently running a current account deficit.The most effective way of eliminating this current account deficit would be to temporarily ________ government purchases and ________ the domestic money supply.

Accepted Answer

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

Question 19

Which of the following changes would cause American net exports to decrease?

Accepted Answer

A) A decrease in the real value of the dollar 
B) A decrease in American income 
C) An increase in foreign income 
D) A shift in demand by American consumers away from domestically produced goods

Question 20

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall

Exam 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

A temporary decrease in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

If a country has an overvaluation problem,the best solution is to

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

What is purchasing power parity? Why might it not hold?

An exchange-rate system in which the nominal exchange rate is set by the government is known as

Suppose the dollar/euro exchange rate falls.Then

International businesses like a fixed-exchange-rate system because

The idea that similar foreign and domestic goods,or baskets of goods,should have the same price when priced in terms of the same currency is called

In the Keynesian model of an open economy,a temporary decrease in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

The real exchange rate is

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

When the dollar rises relative to other currencies,

A decline in the domestic real interest rate would cause a in net exports and a in the exchange rate.

A decrease in the foreign real interest rate would cause the domestic country's net exports to and cause the domestic country's IS curve to .

In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?

When the nominal exchange rate in terms of dollars per yen rises,

A temporary increase in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

Assume the United States is currently running a current account deficit.The most effective way of eliminating this current account deficit would be to temporarily government purchases and the domestic money supply.

Which of the following changes would cause American net exports to decrease?

An increase in domestic output would cause a in net exports and a in the exchange rate.

Exam 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

A temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment) in the economy.

If a country has an overvaluation problem,the best solution is to

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

What is purchasing power parity? Why might it not hold?

An exchange-rate system in which the nominal exchange rate is set by the government is known as

Suppose the dollar/euro exchange rate falls.Then

International businesses like a fixed-exchange-rate system because

The idea that similar foreign and domestic goods,or baskets of goods,should have the same price when priced in terms of the same currency is called

In the Keynesian model of an open economy,a temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment) in the economy.

The real exchange rate is

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

When the dollar rises relative to other currencies,

A decline in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

A decrease in the foreign real interest rate would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.

In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?

When the nominal exchange rate in terms of dollars per yen rises,

A temporary increase in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment) in the economy.

Assume the United States is currently running a current account deficit.The most effective way of eliminating this current account deficit would be to temporarily ________ government purchases and ________ the domestic money supply.

Which of the following changes would cause American net exports to decrease?

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

A temporary decrease in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

In the Keynesian model of an open economy,a temporary decrease in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

A decline in the domestic real interest rate would cause a in net exports and a in the exchange rate.

A decrease in the foreign real interest rate would cause the domestic country's net exports to and cause the domestic country's IS curve to .

A temporary increase in government purchases would the domestic real interest rate and net desired saving (desired saving less desired investment) in the economy.

Assume the United States is currently running a current account deficit.The most effective way of eliminating this current account deficit would be to temporarily government purchases and the domestic money supply.

An increase in domestic output would cause a in net exports and a in the exchange rate.