Question 1

The case of New Zealand, described in the text, concludes that a country's current account deficits are NOT sustainable if a country's

Accepted Answer

A)  prospects for long-term economic growth are above its global deficit growth. 
B)  ability to sustain current account deficits is questionable. 
C)  unproductive industrial sectors and its prospects for long-run growth. 
D)  labor productivity is below that of most other countries. 
E)  exchange rate has fallen relative to other currencies. 
A)  prospects for long-term economic growth are above its global deficit growth. 
B)  ability to sustain current account deficits is questionable. 
C)  unproductive industrial sectors and its prospects for long-run growth. 
D)  labor productivity is below that of most other countries. 
E)  exchange rate has fallen relative to other currencies.

Question 2

An expenditure-changing policy

Accepted Answer

A)  alters the direction of the economy's total demand for goods and services. 
B)  alters the level of the economy's total demand for goods and services. 
C)  has no effect on aggregate demand. 
D)  is the same thing as an expenditure-switching policy. 
E)  affects aggregate supply but not aggregate demand. 
A)  alters the direction of the economy's total demand for goods and services. 
B)  alters the level of the economy's total demand for goods and services. 
C)  has no effect on aggregate demand. 
D)  is the same thing as an expenditure-switching policy. 
E)  affects aggregate supply but not aggregate demand.

Question 3

It is claimed that L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is an allegorical rendition of the U.S. political struggle over gold.

Accepted Answer

This statement is true. In L. Frank Baum

Question 4

In order to bring about a real depreciation of the dollar, the U.S. can hope for

Accepted Answer

A)  a rise in the U.S. price level. 
B)  a fall in foreign price levels. 
C)  a rise in the dollar's nominal value in terms of foreign currencies. 
D)  a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E)  increased output and full employment. 
A)  a rise in the U.S. price level. 
B)  a fall in foreign price levels. 
C)  a rise in the dollar's nominal value in terms of foreign currencies. 
D)  a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E)  increased output and full employment.

Question 5

Under purchasing power parity (PPP), if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the

Accepted Answer

A)  long-run DM price of the dollar will be doubled. 
B)  long-run DM price of the dollar will be halved. 
C)  long-run DM price of the dollar will remain the same. 
D)  short-run DM price of the dollar will be halved. 
E)  short-run DM price of the dollar will be doubled. 
A)  long-run DM price of the dollar will be doubled. 
B)  long-run DM price of the dollar will be halved. 
C)  long-run DM price of the dollar will remain the same. 
D)  short-run DM price of the dollar will be halved. 
E)  short-run DM price of the dollar will be doubled.

Question 6

Which one of the following statements is TRUE?

Accepted Answer

A)  Countries where investment is relatively productive should be net importers of current output. 
B)  Countries where investment is relatively unproductive should be net importers of current output. 
C)  Countries where investment is relatively productive should be net exporters of current output. 
D)  Countries where investment is relatively productive should not export or import current output. 
E)  Countries where investment is relatively unproductive should invest at home. 
A)  Countries where investment is relatively productive should be net importers of current output. 
B)  Countries where investment is relatively unproductive should be net importers of current output. 
C)  Countries where investment is relatively productive should be net exporters of current output. 
D)  Countries where investment is relatively productive should not export or import current output. 
E)  Countries where investment is relatively unproductive should invest at home.

Question 7

The Plaza Accord of 1985 announces that the

Accepted Answer

A)  G-5 countries will intervene in the foreign exchange market to bring about a dollar appreciation. 
B)  G-7 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
C)  G-5 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
D)  G-7 countries will intervene in the foreign exchange market to bring about a DM depreciation. 
E)  G-5 countries will not intervene in the foreign exchange market unless the dollar needs to appreciate. 
A)  G-5 countries will intervene in the foreign exchange market to bring about a dollar appreciation. 
B)  G-7 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
C)  G-5 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
D)  G-7 countries will intervene in the foreign exchange market to bring about a DM depreciation. 
E)  G-5 countries will not intervene in the foreign exchange market unless the dollar needs to appreciate.

Question 8

Coordination of economic policies among nations is a prisoner's ________ because all countries will be better off if they ________.

Accepted Answer

A)  dilemma; cooperate 
B)  conundrum; cooperate 
C)  sentence; compete 
D)  screed; compete 
E)  quandary; collude 
A)  dilemma; cooperate 
B)  conundrum; cooperate 
C)  sentence; compete 
D)  screed; compete 
E)  quandary; collude

Question 9

Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by

Accepted Answer

A)  using tight monetary policy. 
B)  using expansionary fiscal policy. 
C)  negotiating with the central bank of the United States. 
D)  setting their domestic interest rate equal to the U.S. interest rate. 
E)  holding their exchange rates constantly pegged to the euro and yen. 
A)  using tight monetary policy. 
B)  using expansionary fiscal policy. 
C)  negotiating with the central bank of the United States. 
D)  setting their domestic interest rate equal to the U.S. interest rate. 
E)  holding their exchange rates constantly pegged to the euro and yen.

Question 10

Economic experience since 1973 indicates that, under floating exchange rates

Accepted Answer

A)  large and persistent departures from external balance were not prevented. 
B)  large and persistent departures from external balance were prevented. 
C)  changes in exchange rates failed to act as automatic stabilizers. 
D)  reduced monetary policy autonomy. 
E)  monetary policy autonomy was protected. 
A)  large and persistent departures from external balance were not prevented. 
B)  large and persistent departures from external balance were prevented. 
C)  changes in exchange rates failed to act as automatic stabilizers. 
D)  reduced monetary policy autonomy. 
E)  monetary policy autonomy was protected.

Question 11

A country is said to be in balance of payments equilibrium, when the sum of its current and its

Accepted Answer

A)  non-reserved capital accounts equals zero. 
B)  reserved capital accounts equals zero. 
C)  non-reserved capital accounts equals to the surplus in the capital account. 
D)  non-reserved capital accounts equals to the deficit in the capital account. 
E)  non-reserved capital accounts is higher than the total capital account balance. 
A)  non-reserved capital accounts equals zero. 
B)  reserved capital accounts equals zero. 
C)  non-reserved capital accounts equals to the surplus in the capital account. 
D)  non-reserved capital accounts equals to the deficit in the capital account. 
E)  non-reserved capital accounts is higher than the total capital account balance.

Question 12

If central banks were no longer obliged to intervene in currency markets to fix exchange rates, governments would be able to use monetary policy to reach

Accepted Answer

A)  internal balance. 
B)  external balance. 
C)  internal and external balance. 
D)  internal but not external balance. 
E)  external but not internal balance. 
A)  internal balance. 
B)  external balance. 
C)  internal and external balance. 
D)  internal but not external balance. 
E)  external but not internal balance.

Question 13

Some claim that the long and agonizing periods of speculation preceding exchange rate realignments would

Accepted Answer

A)  not occur under a fixed exchange rate regime. 
B)  not occur under floating. 
C)  become more severe under currency board. 
D)  become less severe under floating. 
E)  be prolonged under floating. 
A)  not occur under a fixed exchange rate regime. 
B)  not occur under floating. 
C)  become more severe under currency board. 
D)  become less severe under floating. 
E)  be prolonged under floating.

Question 14

Under the gold standard era of 1870-1914

Accepted Answer

A)  central banks tried to have sharp fluctuations in the balance of payments. 
B)  central banks tried to avoid sharp fluctuations in the current account of the balance of payments. 
C)  central banks tried to avoid sharp fluctuations in the trade account of the balance of payments. 
D)  central banks tried to avoid sharp fluctuations in the capital account of the balance of payments. 
E)  central banks tried to avoid sharp fluctuations in the balance of payments. 
A)  central banks tried to have sharp fluctuations in the balance of payments. 
B)  central banks tried to avoid sharp fluctuations in the current account of the balance of payments. 
C)  central banks tried to avoid sharp fluctuations in the trade account of the balance of payments. 
D)  central banks tried to avoid sharp fluctuations in the capital account of the balance of payments. 
E)  central banks tried to avoid sharp fluctuations in the balance of payments.

Question 15

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

Accepted Answer

A)  depreciation caused by increasing the money supply would reduce unemployment by increasing world demand for them. 
B)  appreciation caused by increasing the money supply would reduce unemployment by increasing world demand for them. 
C)  appreciation caused by decreasing the money supply would reduce unemployment by increasing world demand for them. 
D)  appreciation caused by increasing the money supply would increase unemployment by increasing world demand for them. 
E)  appreciation caused by increasing the money supply would increase unemployment by decreasing world demand for them. 
A)  depreciation caused by increasing the money supply would reduce unemployment by increasing world demand for them. 
B)  appreciation caused by increasing the money supply would reduce unemployment by increasing world demand for them. 
C)  appreciation caused by decreasing the money supply would reduce unemployment by increasing world demand for them. 
D)  appreciation caused by increasing the money supply would increase unemployment by increasing world demand for them. 
E)  appreciation caused by increasing the money supply would increase unemployment by decreasing world demand for them.

Question 16

L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is

Accepted Answer

A)  an allegorical rendition of the U.S. political struggle over silver. 
B)  an allegorical rendition of the U.S. political struggle over copper. 
C)  an allegorical rendition of the U.S. political struggle over both silver and gold. 
D)  an allegorical rendition of the U.S. political struggle over indebted farmers. 
E)  an allegorical rendition of the U.S. political struggle over gold. 
A)  an allegorical rendition of the U.S. political struggle over silver. 
B)  an allegorical rendition of the U.S. political struggle over copper. 
C)  an allegorical rendition of the U.S. political struggle over both silver and gold. 
D)  an allegorical rendition of the U.S. political struggle over indebted farmers. 
E)  an allegorical rendition of the U.S. political struggle over gold.

Question 17

A country seeking to maintain internal balance would be concerned

Accepted Answer

A)  only with attaining low levels of unemployment. 
B)  primarily with ensuring that saving is weighted more towards domestic investment than the current account. 
C)  with large fluctuations in output or prices. 
D)  with maintaining an adequate stock of gold reserves. 
E)  with stabilizing employment levels globally. 
A)  only with attaining low levels of unemployment. 
B)  primarily with ensuring that saving is weighted more towards domestic investment than the current account. 
C)  with large fluctuations in output or prices. 
D)  with maintaining an adequate stock of gold reserves. 
E)  with stabilizing employment levels globally.

Question 18

Federal Reserve Chairman Volcker's policy to fight inflation

Accepted Answer

A)  led to the 1981-1983 recession, but was ultimately successful. 
B)  led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects. 
C)  was perfectly complemented by Reagan's decrease in fiscal spending. 
D)  led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s. 
E)  led to an immediate depreciation of the dollar. 
A)  led to the 1981-1983 recession, but was ultimately successful. 
B)  led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects. 
C)  was perfectly complemented by Reagan's decrease in fiscal spending. 
D)  led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s. 
E)  led to an immediate depreciation of the dollar.

Question 19

The costs of inflation have been most apparent in the post-war period in countries like

Accepted Answer

A)  Argentina. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan. 
A)  Argentina. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan.

Question 20

What explains the nearly universal scope of the Great Depression?

Accepted Answer

The international gold standar

Exam 19: International Monetary Systems: an Historical Overview

The case of New Zealand, described in the text, concludes that a country's current account deficits are NOT sustainable if a country's

An expenditure-changing policy

It is claimed that L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is an allegorical rendition of the U.S. political struggle over gold.

In order to bring about a real depreciation of the dollar, the U.S. can hope for

Under purchasing power parity (PPP), if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the

Which one of the following statements is TRUE?

The Plaza Accord of 1985 announces that the

Coordination of economic policies among nations is a prisoner's ________ because all countries will be better off if they ________.

Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by

Economic experience since 1973 indicates that, under floating exchange rates

A country is said to be in balance of payments equilibrium, when the sum of its current and its

If central banks were no longer obliged to intervene in currency markets to fix exchange rates, governments would be able to use monetary policy to reach

Some claim that the long and agonizing periods of speculation preceding exchange rate realignments would

Under the gold standard era of 1870-1914

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is

A country seeking to maintain internal balance would be concerned

Federal Reserve Chairman Volcker's policy to fight inflation

The costs of inflation have been most apparent in the post-war period in countries like

What explains the nearly universal scope of the Great Depression?

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Coordination of economic policies among nations is a prisoner's because all countries will be better off if they .