Question 1

If the United States increased its budget deficit, and it is at or near full employment, the most likely effect is to crowd

Accepted Answer

A)  in investment and crowd out net exports. 
B)  out investment and crowd in net exports. 
C)  in investment and crowd in net exports. 
D)  out investment and crowd out net exports. 
A)  in investment and crowd out net exports. 
B)  out investment and crowd in net exports. 
C)  in investment and crowd in net exports. 
D)  out investment and crowd out net exports.

Question 2

Table 36-2  
From Table 36-2, what can you conclude about net exports as GDP rises?

Accepted Answer

A)  Net exports rise and then fall as GDP rises. 
B)  Net exports are constant as GDP rises. 
C)  Net exports rise as GDP rises. 
D)  Net exports fall as GDP rises. 
A)  Net exports rise and then fall as GDP rises. 
B)  Net exports are constant as GDP rises. 
C)  Net exports rise as GDP rises. 
D)  Net exports fall as GDP rises.

Question 3

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

Accepted Answer

A)  Lower real interest rates 
B)  A drop in the exchange rate 
C)  An increase in net exports 
D)  All of these responses are correct. 
A)  Lower real interest rates 
B)  A drop in the exchange rate 
C)  An increase in net exports 
D)  All of these responses are correct.

Question 4

An exchange rate appreciation will shift the aggregate demand curve inward.

Accepted Answer

A) True 
 B)False

Question 5

An expansionary monetary policy will

Accepted Answer

A)  increase imports. 
B)  decrease exports. 
C)  increase a current account deficit. 
D)  decrease a capital account surplus. 
A)  increase imports. 
B)  decrease exports. 
C)  increase a current account deficit. 
D)  decrease a capital account surplus.

Question 6

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 7

A nation's currency is said to appreciate when exchange rates change so that a unit of its currency can buy more units of foreign currency.

Accepted Answer

A) True 
 B)False

Question 8

The international trade response to a contractionary monetary policy will cause aggregate demand to shift ____ and aggregate supply to shift ____.

Accepted Answer

A)  outward; outward 
B)  inward; outward 
C)  outward; inward 
D)  inward; inward 
A)  outward; outward 
B)  inward; outward 
C)  outward; inward 
D)  inward; inward

Question 9

The trade deficit is the mirror image of the required capital inflows. So why worry about these capital inflows?

Accepted Answer

A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S. government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created. 
A)  Trade deficits automatically cause larger budget deficits. 
B)  Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S. government. 
C)  These capital inflows create debts on which interest and principal payments will have to be made in the future. 
D)  During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.

Question 10

Because one country's imports are another country's exports, rapid (or sluggish) economic growth in one country contributes to rapid (or sluggish) growth in other countries.

Accepted Answer

A) True 
 B)False

Question 11

In an open economy, the government deficit is 400 and investment exceeds saving by 300, so in equilibrium the trade deficit ( IM − X ) must be

Accepted Answer

A)  100 
B)  200 
C)  300 
D)  700 
A)  100 
B)  200 
C)  300 
D)  700

Question 12

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate.

Accepted Answer

A fiscal expansion normally makes the ex

Question 13

Which of the following would be cures for the U.S. trade deficit?

Accepted Answer

A)  Americans saving less and spending more 
B)  A severe recession in Europe and Asia 
C)  A severe recession in the United States 
D)  A tax cut 
E)  All of these responses are correct. 
A)  Americans saving less and spending more 
B)  A severe recession in Europe and Asia 
C)  A severe recession in the United States 
D)  A tax cut 
E)  All of these responses are correct.

Question 14

When the dollar appreciates, the cost to Americans of foreign goods

Accepted Answer

A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls. 
A)  rises and the CPI falls. 
B)  rises and the CPI rises. 
C)  falls and the CPI rises. 
D)  falls and the CPI falls.

Question 15

Table 36-2   In Table 36-2, assume that exports rise to $900. How large is the multiplier?

Accepted Answer

A)  5 
B)  4 
C)  2.5 
D)  2 
A)  5 
B)  4 
C)  2.5 
D)  2

Question 16

A sizable appreciation of the U.S. dollar in the mid-1980s

Accepted Answer

A)  raised U.S. exports and imports. 
B)  raised U.S. exports and reduced imports. 
C)  reduced U.S. exports and imports. 
D)  reduced U.S. exports and raised imports. 
A)  raised U.S. exports and imports. 
B)  raised U.S. exports and reduced imports. 
C)  reduced U.S. exports and imports. 
D)  reduced U.S. exports and raised imports.

Question 17

What are the economic effects of a currency depreciation?

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 18

If the U.S. government runs a budget deficit ( G − T ), that deficit must be financed by an excess of

Accepted Answer

A)  T over G . 
B)  C over T plus G . 
C)  investment by American businesses and individuals. 
D)  S over I by American businesses and individuals, or by borrowing from foreigners. 
A)  T over G . 
B)  C over T plus G . 
C)  investment by American businesses and individuals. 
D)  S over I by American businesses and individuals, or by borrowing from foreigners.

Question 19

Depreciation of the Japanese yen would lead to

Accepted Answer

A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  inward shift in the aggregate demand curve for Japan. 
A)  outward shift in the aggregate supply curve for Japan. 
B)  upward shift in the aggregate demand curve for Japan. 
C)  downward shift in the aggregate supply curve for Japan. 
D)  inward shift in the aggregate demand curve for Japan.

Question 20

Figure 36-6
 
In Figure 36-6, which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

Accepted Answer

A)  An appreciation of the dollar 
B)  A depreciation of the dollar 
C)  An appreciation of the Japanese yen 
D)  An increase in the U.S. price level 
A)  An appreciation of the dollar 
B)  A depreciation of the dollar 
C)  An appreciation of the Japanese yen 
D)  An increase in the U.S. price level

Exam 36: Exchange Rates and the Macroeconomy

If the United States increased its budget deficit, and it is at or near full employment, the most likely effect is to crowd

Table 36-2 From Table 36-2, what can you conclude about net exports as GDP rises?

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

An exchange rate appreciation will shift the aggregate demand curve inward.

An expansionary monetary policy will

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 nation's currency is said to appreciate when exchange rates change so that a unit of its currency can buy more units of foreign currency.

The international trade response to a contractionary monetary policy will cause aggregate demand to shift ____ and aggregate supply to shift ____.

The trade deficit is the mirror image of the required capital inflows. So why worry about these capital inflows?

Because one country's imports are another country's exports, rapid (or sluggish) economic growth in one country contributes to rapid (or sluggish) growth in other countries.

In an open economy, the government deficit is 400 and investment exceeds saving by 300, so in equilibrium the trade deficit ( IM − X ) must be

What is the impact of expansionary fiscal policy on the exchange rate? Explain the process through which expansionary fiscal policy affects the exchange rate.

Which of the following would be cures for the U.S. trade deficit?

When the dollar appreciates, the cost to Americans of foreign goods

Table 36-2 In Table 36-2, assume that exports rise to $900. How large is the multiplier?

A sizable appreciation of the U.S. dollar in the mid-1980s

What are the economic effects of a currency depreciation?

If the U.S. government runs a budget deficit ( G − T ), that deficit must be financed by an excess of

Depreciation of the Japanese yen would lead to

Figure 36-6 In Figure 36-6, which of the following will cause a movement from equilibrium at point A to equilibrium at point C?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

Filters

The international trade response to a contractionary monetary policy will cause aggregate demand to shift and aggregate supply to shift .