Question 1

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Accepted Answer

A)  World supply of gold dropped drastically in the 1930s, severely limiting a country's ability to increase its money supply. 
B)  Imbalances in a country's balance of payments can be corrected only through changes in the entire economy. 
C)  In order to correct imbalances in its balance of payments, a country was forced on its trading partners to intervene in currency markets. 
D)  Some nations started hoarding gold in order to manipulate relative exchange rates. 
A)  World supply of gold dropped drastically in the 1930s, severely limiting a country's ability to increase its money supply. 
B)  Imbalances in a country's balance of payments can be corrected only through changes in the entire economy. 
C)  In order to correct imbalances in its balance of payments, a country was forced on its trading partners to intervene in currency markets. 
D)  Some nations started hoarding gold in order to manipulate relative exchange rates.

Question 2

The current account is

Accepted Answer

A)  an accounting statement that includes all spending flows within a nation's borders. 
B)  an accounting statement that includes all spending flows across a nation's border, except those that represent the purchases of assets. 
C)  equal to value of a country's exports. 
D)  equal to value of a country's imports. 
A)  an accounting statement that includes all spending flows within a nation's borders. 
B)  an accounting statement that includes all spending flows across a nation's border, except those that represent the purchases of assets. 
C)  equal to value of a country's exports. 
D)  equal to value of a country's imports.

Question 3

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Accepted Answer

A)  $40 billion 
B)  Less than $20 billion 
C)  More than $40 billion 
D)  Cannot be determined without information on the trade policies in question 
A)  $40 billion 
B)  Less than $20 billion 
C)  More than $40 billion 
D)  Cannot be determined without information on the trade policies in question

Question 4

Under a system of free-floating exchange rates, a nation will experience

Accepted Answer

A)  persistent surpluses in its balance of payments. 
B)  persistent deficits in its balance of payments. 
C)  a tendency toward equilibrium in its balance of payments. 
D)  persistent surpluses in its balance of trade. 
A)  persistent surpluses in its balance of payments. 
B)  persistent deficits in its balance of payments. 
C)  a tendency toward equilibrium in its balance of payments. 
D)  persistent surpluses in its balance of trade.

Question 5

A managed float exchange rate system is often used to reduce the uncertainty of businesses
Jengaged in importing and exporting.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

Accepted Answer

A)  managed float system. 
B)  free-floating exchange rate system. 
C)  commodity standard system. 
D)  fiat standard system. 
A)  managed float system. 
B)  free-floating exchange rate system. 
C)  commodity standard system. 
D)  fiat standard system.

Question 7

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

Accepted Answer

A)  the domestic economy and this will lead to a decrease in the capital account surplus. 
B)  foreign economies and this will lead to an increase in the capital account surplus. 
C)  the domestic economy and this will lead to an increase in the capital account surplus. 
D)  foreign economies and this will lead to a decrease in the capital account surplus. 
A)  the domestic economy and this will lead to a decrease in the capital account surplus. 
B)  foreign economies and this will lead to an increase in the capital account surplus. 
C)  the domestic economy and this will lead to an increase in the capital account surplus. 
D)  foreign economies and this will lead to a decrease in the capital account surplus.

Question 8

A current account surplus exists if the balance on the

Accepted Answer

A)  capital account is zero. 
B)  capital account is positive. 
C)  current account is negative. 
D)  current account is positive. 
A)  capital account is zero. 
B)  capital account is positive. 
C)  current account is negative. 
D)  current account is positive.

Question 9

All of the following are determinants of net exports except

Accepted Answer

A)  domestic and foreign incomes. 
B)  relative price levels. 
C)  domestic and foreign trade policies. 
D)  producers' expectations about future prices. 
A)  domestic and foreign incomes. 
B)  relative price levels. 
C)  domestic and foreign trade policies. 
D)  producers' expectations about future prices.

Question 10

Which of the following is possible with international trade? 
I. Countries that engage in trade can consume at a point outside their respective production possibilities curves.
II. Global production will be increased.
III. World resources will be used more efficiently.

Accepted Answer

A)  I, II, and III 
B)  I and II only 
C)  I and III only 
D)  II and III only 
A)  I, II, and III 
B)  I and II only 
C)  I and III only 
D)  II and III only

Question 11

A reduction in net exports will, all other things unchanged, shift the aggregate demand
Jcurve to the left.

Accepted Answer

A) True 
 B)False

Question 12

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Accepted Answer

In a fixed exchange rate system, the exc

Question 13

Fixed exchange rates are determined by the

Accepted Answer

A)  policies of the domestic government. 
B)  forces of demand and supply in the developed countries. 
C)  forces of demand and supply in the foreign exchange market. 
D)  forces of demand and supply in the domestic money market. 
A)  policies of the domestic government. 
B)  forces of demand and supply in the developed countries. 
C)  forces of demand and supply in the foreign exchange market. 
D)  forces of demand and supply in the domestic money market.

Question 14

In the long run, international trade

Accepted Answer

A)  affects the economy's natural level of employment. 
B)  affects the economy's real wage. 
C)  does not affect the natural level of employment or the real wage. 
D)  increases real wages because it increases a country's standard of living. 
A)  affects the economy's natural level of employment. 
B)  affects the economy's real wage. 
C)  does not affect the natural level of employment or the real wage. 
D)  increases real wages because it increases a country's standard of living.

Question 15

In the United States since 1960

Accepted Answer

A)  the export share of GDP has increased while the import share of GDP has not changed. 
B)  the import share of GDP has increased while the export share of GDP has not changed. 
C)  both the export share of GDP and the import share of GDP have increased. 
D)  both the export share of GDP and the import share of GDP have decreased. 
A)  the export share of GDP has increased while the import share of GDP has not changed. 
B)  the import share of GDP has increased while the export share of GDP has not changed. 
C)  both the export share of GDP and the import share of GDP have increased. 
D)  both the export share of GDP and the import share of GDP have decreased.

Question 16

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

Accepted Answer

A) True 
 B)False

Question 17

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Accepted Answer

A)  a free-floating exchange rate system. 
B)  a managed float. 
C)  a fixed exchange rate system. 
D)  a variable exchange rate system. 
A)  a free-floating exchange rate system. 
B)  a managed float. 
C)  a fixed exchange rate system. 
D)  a variable exchange rate system.

Question 18

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi) per ounce, this means

Accepted Answer

A)  that the gold market cannot reach an equilibrium because of a price control. 
B)  the government of Montmarinsi was committed to exchanging 1 ounce of gold to anyone who was willing to pay 80 monts. 
C)  that anyone wishing to buy foreign currency must pay in gold which can be purchased from the government at 80 monts per ounce. 
D)  that the government is the sole supplier of gold and sets the price of gold. 
A)  that the gold market cannot reach an equilibrium because of a price control. 
B)  the government of Montmarinsi was committed to exchanging 1 ounce of gold to anyone who was willing to pay 80 monts. 
C)  that anyone wishing to buy foreign currency must pay in gold which can be purchased from the government at 80 monts per ounce. 
D)  that the government is the sole supplier of gold and sets the price of gold.

Question 19

Changes in net exports caused by changes in the domestic price level

Accepted Answer

A)  shift the aggregate demand curve in the same direction as the price change. 
B)  shift the aggregate demand curve in the opposite direction of the price change. 
C)  do not shift the aggregate demand curve. 
D)  will not affect aggregate demand. 
A)  shift the aggregate demand curve in the same direction as the price change. 
B)  shift the aggregate demand curve in the opposite direction of the price change. 
C)  do not shift the aggregate demand curve. 
D)  will not affect aggregate demand.

Question 20

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in Jvalue against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports if strong income growth in the U.S. has a stronger effect than that of the Canadian dollar appreciation?

Accepted Answer

A)  Net exports will rise. 
B)  Net exports will fall. 
C)  Net exports will remain constant. 
D)  The effect on net exports is indeterminate. 
A)  Net exports will rise. 
B)  Net exports will fall. 
C)  Net exports will remain constant. 
D)  The effect on net exports is indeterminate.

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

The current account is

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Under a system of free-floating exchange rates, a nation will experience

A managed float exchange rate system is often used to reduce the uncertainty of businesses Jengaged in importing and exporting.

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

A current account surplus exists if the balance on the

All of the following are determinants of net exports except

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

A reduction in net exports will, all other things unchanged, shift the aggregate demand Jcurve to the left.

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Fixed exchange rates are determined by the

In the long run, international trade

In the United States since 1960

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi) per ounce, this means

Changes in net exports caused by changes in the domestic price level

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 15: Net Exports and International Finance

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

The current account is

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Under a system of free-floating exchange rates, a nation will experience

A managed float exchange rate system is often used to reduce the uncertainty of businesses Jengaged in importing and exporting.

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

A current account surplus exists if the balance on the

All of the following are determinants of net exports except

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

A reduction in net exports will, all other things unchanged, shift the aggregate demand Jcurve to the left.

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Fixed exchange rates are determined by the

In the long run, international trade

In the United States since 1960

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi) per ounce, this means

Changes in net exports caused by changes in the domestic price level

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters