Question 1

If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in the United States?

Accepted Answer

A) An increase in U.S.imports 
B) An increase in U.S.exports 
C) A decrease in U.S.imports 
D) An increase in U.S.net exports 
A) An increase in U.S.imports 
B) An increase in U.S.exports 
C) A decrease in U.S.imports 
D) An increase in U.S.net exports

Question 2

A depreciation of the dollar will cause an increase in the Consumer Price Index.

Accepted Answer

A) True 
 B)False

Question 3

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

Accepted Answer

A) True 
 B)False

Question 4

A currency appreciation should _______ net exports, and, therefore, _________aggregate demand.

Accepted Answer

A) reduce; decrease 
B) reduce; reduce 
C) increase; decrease. 
D) None of the above is correct. 
A) reduce; decrease 
B) reduce; reduce 
C) increase; decrease. 
D) None of the above is correct.

Question 5

A country's trade deficit is the excess of its imports over its exports.

Accepted Answer

A) True 
 B)False

Question 6

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

Accepted Answer

A) It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B) It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C) It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well. 
D) It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well. 
A) It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B) It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C) It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well. 
D) It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well.

Question 7

International capital flows are purchases and sales of financial assets across national borders.

Accepted Answer

A) True 
 B)False

Question 8

If the dollar rises in value compared to other currencies, what will happen in the United States?

Accepted Answer

A) An increase in aggregate demand 
B) An increase in aggregate supply 
C) A decrease in aggregate supply 
D) An increase in the U.S.price level 
A) An increase in aggregate demand 
B) An increase in aggregate supply 
C) A decrease in aggregate supply 
D) An increase in the U.S.price level

Question 9

The U.S.trade deficit must be cured by some combination of lower budget deficits, higher savings, and lower investment.

Accepted Answer

A) True 
 B)False

Question 10

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall, which of the following is expected to happen?

Accepted Answer

A) Country X will export more. 
B) Economy of Country X will be depressed. 
C) Net exports will rise for Country X. 
D) Country Y will import more. 
A) Country X will export more. 
B) Economy of Country X will be depressed. 
C) Net exports will rise for Country X. 
D) Country Y will import more.

Question 11

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

Accepted Answer

A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper. 
A) shift up. 
B) shift down. 
C) get flatter. 
D) get steeper.

Question 12

A currency appreciation

Accepted Answer

A) reduces aggregate demand and increases aggregate supply. 
B) reduces aggregate demand and aggregate supply. 
C) increases aggregate demand and reduces aggregate supply. 
D) increases aggregate demand and aggregate supply. 
A) reduces aggregate demand and increases aggregate supply. 
B) reduces aggregate demand and aggregate supply. 
C) increases aggregate demand and reduces aggregate supply. 
D) increases aggregate demand and aggregate supply.

Question 13

What are the economic effects of a currency appreciation?

Accepted Answer

A) It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B) It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C) It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well. 
D) It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well. 
A) It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well. 
B) It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well. 
C) It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well. 
D) It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well.

Question 14

The expected effects of fiscal contraction are

Accepted Answer

A) higher real interest rates. 
B) exchange rate depreciation. 
C) increased trade deficit. 
D) All of these responses are correct. 
A) higher real interest rates. 
B) exchange rate depreciation. 
C) increased trade deficit. 
D) All of these responses are correct.

Question 15

Protectionism may fail to reduce a current account deficit because it

Accepted Answer

A) depreciates the dollar. 
B) invites retaliation, which hurts exports. 
C) encourages exports. 
D) does not reduce imports. 
A) depreciates the dollar. 
B) invites retaliation, which hurts exports. 
C) encourages exports. 
D) does not reduce imports.

Question 16

A fall in the domestic interest rate leads to capital

Accepted Answer

A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation. 
A) outflows and exchange rate appreciation. 
B) outflows and exchange rate depreciation. 
C) inflows and exchange rate depreciation. 
D) inflows and exchange rate appreciation.

Question 17

A currency appreciation reduces aggregate demand and raises aggregate supply.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would lead to a depreciating dollar?

Accepted Answer

A) A higher federal deficit 
B) Lower interest rates 
C) Higher interest rates 
D) Contractionary monetary policy 
A) A higher federal deficit 
B) Lower interest rates 
C) Higher interest rates 
D) Contractionary monetary policy

Question 19

If Japan experiences a period of deflation and the United States does not, what will happen in the United States?

Accepted Answer

A) An increase in aggregate supply 
B) A decrease in aggregate supply 
C) A decrease in aggregate demand 
D) An increase in aggregate demand 
A) An increase in aggregate supply 
B) A decrease in aggregate supply 
C) A decrease in aggregate demand 
D) An increase in aggregate demand

Question 20

Explain how exchange rate changes affect aggregate demand.

Accepted Answer

A currency appreciation will decrease ag

Exam 36: Exchange Rates and the Macroeconomy

If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in the United States?

A depreciation of the dollar will cause an increase in the Consumer Price Index.

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

A currency appreciation should _______ net exports, and, therefore, _________aggregate demand.

A country's trade deficit is the excess of its imports over its exports.

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

International capital flows are purchases and sales of financial assets across national borders.

If the dollar rises in value compared to other currencies, what will happen in the United States?

The U.S.trade deficit must be cured by some combination of lower budget deficits, higher savings, and lower investment.

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall, which of the following is expected to happen?

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

A currency appreciation

What are the economic effects of a currency appreciation?

The expected effects of fiscal contraction are

Protectionism may fail to reduce a current account deficit because it

A fall in the domestic interest rate leads to capital

A currency appreciation reduces aggregate demand and raises aggregate supply.

Which of the following would lead to a depreciating dollar?

If Japan experiences a period of deflation and the United States does not, what will happen in the United States?

Explain how exchange rate changes affect aggregate demand.

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Contemporary Issues in the Useconomy

Filters

A currency appreciation should _ net exports, and, therefore, ___aggregate demand.