Question 1

The basic idea of crowding out is that a budget:

Accepted Answer

A) deficit will cause the interest rate to go down. 
B) deficit will cause the interest rate to go up. 
C) surplus will cause the interest rate to go down. 
D) surplus will cause the interest rate to go up. 
A) deficit will cause the interest rate to go down. 
B) deficit will cause the interest rate to go up. 
C) surplus will cause the interest rate to go down. 
D) surplus will cause the interest rate to go up.

Question 2

A country with a trade surplus is:

Accepted Answer

A) consuming more than it produces. 
B) producing more than it consumes. 
C) producing up to the level of desired consumption. 
D) consuming up to the level of potential production. 
A) consuming more than it produces. 
B) producing more than it consumes. 
C) producing up to the level of desired consumption. 
D) consuming up to the level of potential production.

Question 3

Without considering the effect that a change in the value of a currency might have on trade, the net effect of an expansionary fiscal policy is:

Accepted Answer

A) ambiguous with respect to the trade balance, but positive with respect to the exchange rate. 
B) ambiguous with respect to the exchange rate, but negative with respect to the trade balance. 
C) negative with respect to the exchange rate and positive with respect to the trade balance. 
D) positive with respect to the exchange rate and negative with respect to the trade balance. 
A) ambiguous with respect to the trade balance, but positive with respect to the exchange rate. 
B) ambiguous with respect to the exchange rate, but negative with respect to the trade balance. 
C) negative with respect to the exchange rate and positive with respect to the trade balance. 
D) positive with respect to the exchange rate and negative with respect to the trade balance.

Question 4

Considering an economy with a current trade deficit and considering only the direct effect on income, an expansionary monetary policy tends to:

Accepted Answer

A) decrease the exchange rate and increase the trade deficit. 
B) increase the exchange rate and increase the trade deficit. 
C) decrease the exchange rate and decrease the trade deficit. 
D) increase the exchange rate and decrease the trade deficit. 
A) decrease the exchange rate and increase the trade deficit. 
B) increase the exchange rate and increase the trade deficit. 
C) decrease the exchange rate and decrease the trade deficit. 
D) increase the exchange rate and decrease the trade deficit.

Question 5

A rising exchange rate raises U.S. living standards by:

Accepted Answer

A) causing a balance of trade surplus. 
B) discouraging imports. 
C) encouraging exports. 
D) helping to hold down inflation. 
A) causing a balance of trade surplus. 
B) discouraging imports. 
C) encouraging exports. 
D) helping to hold down inflation.

Question 6

If the value of the dollar falls relative to other currencies, the price of goods and services produced in the United States will appear:

Accepted Answer

A) more expensive to U.S. citizens. 
B) the same to foreigners. 
C) more expensive to foreigners. 
D) cheaper to foreigners. 
A) more expensive to U.S. citizens. 
B) the same to foreigners. 
C) more expensive to foreigners. 
D) cheaper to foreigners.

Question 7

Is it preferable for a country to have a high or a low exchange rate? Explain.

Accepted Answer

There is debate over whether high or low

Question 8

Considering only its direct effect on income, expansionary monetary policy tends to:

Accepted Answer

A) increase income and imports, shifting the U.S. trade balance in the direction of deficit. 
B) increase income and imports, shifting the U.S. trade balance in the direction of surplus. 
C) decrease income and imports, shifting the U.S. trade balance in the direction of deficit. 
D) decrease income and imports, shifting the U.S. trade balance in the direction of surplus. 
A) increase income and imports, shifting the U.S. trade balance in the direction of deficit. 
B) increase income and imports, shifting the U.S. trade balance in the direction of surplus. 
C) decrease income and imports, shifting the U.S. trade balance in the direction of deficit. 
D) decrease income and imports, shifting the U.S. trade balance in the direction of surplus.

Question 9

A country with strong international ties has:

Accepted Answer

A) more flexibility in its monetary and fiscal policy. 
B) more flexibility in its exchange rate policy. 
C) less flexibility in its monetary and fiscal policy. 
D) less flexibility in its exchange rate policy. 
A) more flexibility in its monetary and fiscal policy. 
B) more flexibility in its exchange rate policy. 
C) less flexibility in its monetary and fiscal policy. 
D) less flexibility in its exchange rate policy.

Question 10

All of the following are international (as opposed to domestic)policy goals for the United States except:

Accepted Answer

A) low inflation. 
B) a strong dollar. 
C) a balance of trade. 
D) an increase in exports relative to imports. 
A) low inflation. 
B) a strong dollar. 
C) a balance of trade. 
D) an increase in exports relative to imports.

Question 11

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

Accepted Answer

A) income effect offsets the price effect. 
B) price effect offsets the income effect. 
C) income and price effects work in the same direction, so the trade deficit is decreased. 
D) income and price effects work in the same direction, so the trade deficit is increased. 
A) income effect offsets the price effect. 
B) price effect offsets the income effect. 
C) income and price effects work in the same direction, so the trade deficit is decreased. 
D) income and price effects work in the same direction, so the trade deficit is increased.

Question 12

The desire of governments to be able to use both monetary and fiscal policies to pursue domestic goals of stable prices and full employment has been a reason that:

Accepted Answer

A) fixed exchange rates have been replaced with flexible exchange rates. 
B) flexible exchange rates have been replaced with fixed exchange rates. 
C) countries have tried to stabilize their exchange rates at a high level. 
D) countries have tried to stabilize their exchange rates at a low level. 
A) fixed exchange rates have been replaced with flexible exchange rates. 
B) flexible exchange rates have been replaced with fixed exchange rates. 
C) countries have tried to stabilize their exchange rates at a high level. 
D) countries have tried to stabilize their exchange rates at a low level.

Question 13

Expansionary fiscal policy tends to:

Accepted Answer

A) raise U.S. income, increase U.S. imports, and increase the trade deficit. 
B) raise U.S. income, increase U.S. imports, and lower the trade deficit. 
C) lower U.S. income, reduce U.S. imports, and increase the trade deficit. 
D) lower U.S. income, reduce U.S. imports, and lower the trade deficit. 
A) raise U.S. income, increase U.S. imports, and increase the trade deficit. 
B) raise U.S. income, increase U.S. imports, and lower the trade deficit. 
C) lower U.S. income, reduce U.S. imports, and increase the trade deficit. 
D) lower U.S. income, reduce U.S. imports, and lower the trade deficit.

Question 14

A stronger dollar would be a good policy if the U.S. government wanted to:

Accepted Answer

A) increase U.S. exports and expand the U.S. economy. 
B) increase U.S. imports and expand the U.S. economy. 
C) reduce U.S. exports and slow the U.S. economy. 
D) reduce U.S. imports and slow the U.S. economy. 
A) increase U.S. exports and expand the U.S. economy. 
B) increase U.S. imports and expand the U.S. economy. 
C) reduce U.S. exports and slow the U.S. economy. 
D) reduce U.S. imports and slow the U.S. economy.

Question 15

What is the primary benefit to the United States of a low price for the dollar in the foreign exchange market?

Accepted Answer

A) It makes foreign goods cheaper, helping consumers. 
B) It encourages exports, helping producers. 
C) It helps keep inflation under control. 
D) There are no benefits to the United States of a low price for the dollar; a higher price is always better. 
A) It makes foreign goods cheaper, helping consumers. 
B) It encourages exports, helping producers. 
C) It helps keep inflation under control. 
D) There are no benefits to the United States of a low price for the dollar; a higher price is always better.

Question 16

Considering only its direct effect on income, expansionary fiscal policy tends to:

Accepted Answer

A) be ambiguous with respect to the trade deficit. 
B) increase a trade surplus. 
C) decrease a trade deficit. 
D) increase a trade deficit. 
A) be ambiguous with respect to the trade deficit. 
B) increase a trade surplus. 
C) decrease a trade deficit. 
D) increase a trade deficit.

Question 17

Under what macroeconomic conditions would a high exchange rate be better than a low exchange rate?

Accepted Answer

A high exchange rate is good if the econ

Question 18

Internationalization of the debt refers to a situation in which the deficit is financed by foreigners:

Accepted Answer

A) buying the debt, so that crowding out is avoided. 
B) buying the debt, so that crowding out is increased. 
C) selling the debt, so that crowding out is increased. 
D) selling the debt, so that crowding out is avoided. 
A) buying the debt, so that crowding out is avoided. 
B) buying the debt, so that crowding out is increased. 
C) selling the debt, so that crowding out is increased. 
D) selling the debt, so that crowding out is avoided.

Question 19

If Japan is in a recession and the United States is growing too rapidly, international policy coordination most likely requires:

Accepted Answer

A) expansionary policies in Japan and contractionary policies in the United States. 
B) contractionary policies in Japan and expansionary policies in the United States. 
C) expansionary policies in both Japan and the United States. 
D) contractionary policies in both Japan and the United States. 
A) expansionary policies in Japan and contractionary policies in the United States. 
B) contractionary policies in Japan and expansionary policies in the United States. 
C) expansionary policies in both Japan and the United States. 
D) contractionary policies in both Japan and the United States.

Question 20

Internationalization of U.S. debt is:

Accepted Answer

A) helpful in the short run, but harmful in the long run. 
B) harmful in the short run, but helpful in the long run. 
C) helpful in both the short run and the long run. 
D) harmful in both the short run and the long run. 
A) helpful in the short run, but harmful in the long run. 
B) harmful in the short run, but helpful in the long run. 
C) helpful in both the short run and the long run. 
D) harmful in both the short run and the long run.

Exam 36: Macro Policy in a Global Setting

The basic idea of crowding out is that a budget:

A country with a trade surplus is:

Without considering the effect that a change in the value of a currency might have on trade, the net effect of an expansionary fiscal policy is:

Considering an economy with a current trade deficit and considering only the direct effect on income, an expansionary monetary policy tends to:

A rising exchange rate raises U.S. living standards by:

If the value of the dollar falls relative to other currencies, the price of goods and services produced in the United States will appear:

Is it preferable for a country to have a high or a low exchange rate? Explain.

Considering only its direct effect on income, expansionary monetary policy tends to:

A country with strong international ties has:

All of the following are international (as opposed to domestic)policy goals for the United States except:

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

The desire of governments to be able to use both monetary and fiscal policies to pursue domestic goals of stable prices and full employment has been a reason that:

Expansionary fiscal policy tends to:

A stronger dollar would be a good policy if the U.S. government wanted to:

What is the primary benefit to the United States of a low price for the dollar in the foreign exchange market?

Considering only its direct effect on income, expansionary fiscal policy tends to:

Under what macroeconomic conditions would a high exchange rate be better than a low exchange rate?

Internationalization of the debt refers to a situation in which the deficit is financed by foreigners:

If Japan is in a recession and the United States is growing too rapidly, international policy coordination most likely requires:

Internationalization of U.S. debt is:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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