Question 1

A revaluation can help reduce shortages of domestic currency.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions:  
-(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  not related to 
A)  greater than 
B)  less than 
C)  equal to 
D)  not related to

Question 3

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600, then the real exchange rate is:

Accepted Answer

A)  ¥1. 
B)  ¥40. 
C)  ¥1,000. 
D)  ¥2,400. 
A)  ¥1. 
B)  ¥40. 
C)  ¥1,000. 
D)  ¥2,400.

Question 4

If the nominal exchange rate and the price level fall, then the real exchange rate will fall as well.

Accepted Answer

A) True 
 B)False

Question 5

If the United States is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

Accepted Answer

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

Question 6

If the government wants to increase the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 7

If the government wants to decrease the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

Accepted Answer

A) True 
 B)False

Question 8

When a currency becomes more valuable in terms of other currencies, it depreciates.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions:  
-(Figure: The Loanable Funds Model in the U.S. Market) Refer to Figure: The Loanable Funds Model in the U.S. Market. If the actual interest rate is less than 4% in the U.S. market, then the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to 
A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to

Question 10

The current account responds to changes in:

Accepted Answer

A)  the nominal exchange rate. 
B)  the real exchange rate. 
C)  the interest rate. 
D)  both the nominal and real exchange rates. 
A)  the nominal exchange rate. 
B)  the real exchange rate. 
C)  the interest rate. 
D)  both the nominal and real exchange rates.

Question 11

One limitation of maintaining a fixed exchange rate system is that:

Accepted Answer

A)  it subjects the country's exchange rate to wide fluctuations in the foreign exchange market. 
B)  it provides an incentive for the country to change its inflation policy frequently. 
C)  the country may not be able to use monetary policy to achieve other goals, such as full employment. 
D)  it leads to wide fluctuations in the growth rate. 
A)  it subjects the country's exchange rate to wide fluctuations in the foreign exchange market. 
B)  it provides an incentive for the country to change its inflation policy frequently. 
C)  the country may not be able to use monetary policy to achieve other goals, such as full employment. 
D)  it leads to wide fluctuations in the growth rate.

Question 12

After a devaluation, all other things equal, exports will likely _____ and imports will likely _____.

Accepted Answer

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

Question 13

When interest rates are higher in country A than in other countries:

Accepted Answer

A)  other countries will borrow more from country A. 
B)  capital will flow into country A. 
C)  capital will flow out of country A. 
D)  country A will lend more to other countries. 
A)  other countries will borrow more from country A. 
B)  capital will flow into country A. 
C)  capital will flow out of country A. 
D)  country A will lend more to other countries.

Question 14

Use the following to answer questions:  
-(Figure: The Loanable Funds Model in the U.S. Market) Refer to Figure: The Loanable Funds Model in the U.S. Market. Assume that each country's equilibrium interest rate is 4%. To reconcile the apparent disequilibrium in both markets, assuming that assets and liabilities are viewed as homogeneous, capital _____ will _____ interest rates.

Accepted Answer

A)  outflow from the United States; lower U.S. 
B)  outflow from Britain; lower British 
C)  outflow from Britain; raise British 
D)  inflow to the United States; raise U.S. 
A)  outflow from the United States; lower U.S. 
B)  outflow from Britain; lower British 
C)  outflow from Britain; raise British 
D)  inflow to the United States; raise U.S.

Question 15

The primary economic disadvantage of adopting the euro for Britain is:

Accepted Answer

A)  the loss of the ability to conduct an independent monetary policy. 
B)  the loss of national pride. 
C)  a decrease in international trade and growth of GDP. 
D)  the risk of a higher rate of unemployment. 
A)  the loss of the ability to conduct an independent monetary policy. 
B)  the loss of national pride. 
C)  a decrease in international trade and growth of GDP. 
D)  the risk of a higher rate of unemployment.

Question 16

If a fixed currency is below its target exchange rate, the government will sell its own currency in foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 17

Economists summarize a country's transactions with other countries with a(n) _____ account.

Accepted Answer

A)  circular flow 
B)  balance of payments 
C)  exchange rate 
D)  purchasing power parity 
A)  circular flow 
B)  balance of payments 
C)  exchange rate 
D)  purchasing power parity

Question 18

When a currency depreciates, the prices of its imports from other countries will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly.

Question 19

The Venezuelan bolivar trades at a fixed exchange rate. If Venezuela uses monetary policy to change the exchange rate of the bolivar from $0.16 to $0.20, the bolivar has:

Accepted Answer

A)  depreciated. 
B)  been devalued. 
C)  appreciated. 
D)  been revalued. 
A)  depreciated. 
B)  been devalued. 
C)  appreciated. 
D)  been revalued.

Question 20

A _____ balance on the financial account means a _____.

Accepted Answer

A)  positive; financial account surplus 
B)  negative; financial account surplus 
C)  positive; financial account deficit 
D)  positive; current account surplus 
A)  positive; financial account surplus 
B)  negative; financial account surplus 
C)  positive; financial account deficit 
D)  positive; current account surplus

A revaluation can help reduce shortages of domestic currency.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600, then the real exchange rate is:

If the nominal exchange rate and the price level fall, then the real exchange rate will fall as well.

If the United States is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.

If the government wants to increase the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

If the government wants to decrease the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

When a currency becomes more valuable in terms of other currencies, it depreciates.

The current account responds to changes in:

One limitation of maintaining a fixed exchange rate system is that:

After a devaluation, all other things equal, exports will likely _ and imports will likely _.

When interest rates are higher in country A than in other countries:

The primary economic disadvantage of adopting the euro for Britain is:

If a fixed currency is below its target exchange rate, the government will sell its own currency in foreign exchange markets.

Economists summarize a country's transactions with other countries with a(n) _____ account.

When a currency depreciates, the prices of its imports from other countries will:

The Venezuelan bolivar trades at a fixed exchange rate. If Venezuela uses monetary policy to change the exchange rate of the bolivar from $0.16 to $0.20, the bolivar has:

A _ balance on the financial account means a _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

Exam 18: International Macroeconomics

A revaluation can help reduce shortages of domestic currency.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600, then the real exchange rate is:

If the nominal exchange rate and the price level fall, then the real exchange rate will fall as well.

If the United States is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

If the government wants to increase the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

If the government wants to decrease the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

When a currency becomes more valuable in terms of other currencies, it depreciates.

The current account responds to changes in:

One limitation of maintaining a fixed exchange rate system is that:

After a devaluation, all other things equal, exports will likely _____ and imports will likely _____.

When interest rates are higher in country A than in other countries:

The primary economic disadvantage of adopting the euro for Britain is:

If a fixed currency is below its target exchange rate, the government will sell its own currency in foreign exchange markets.

Economists summarize a country's transactions with other countries with a(n) _____ account.

When a currency depreciates, the prices of its imports from other countries will:

The Venezuelan bolivar trades at a fixed exchange rate. If Venezuela uses monetary policy to change the exchange rate of the bolivar from $0.16 to $0.20, the bolivar has:

A _____ balance on the financial account means a _____.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

If the United States is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.

After a devaluation, all other things equal, exports will likely _ and imports will likely _.

A _ balance on the financial account means a _.