Question 1

How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?

Accepted Answer

In the short run,the value of imports may increase,increasing the current account deficit.It may take many months before it causes exports to rise and imports to fall.

Question 2

Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s.

Accepted Answer

To address its macroeconomic problems in the early 1990s,Argentina fixed its currency to the U.S.dollar at a 1:1 rate and dramatically restricted the creation of new money.For every new Argentine peso put into circulation,the central bank was required to have a U.S.dollar to back it up and a currency board was created to oversee the system and enforce the rules.Later in the decade as Argentina faced recession,policy makers faced difficult choices.They could use expansionary macroeconomic policy to deal with the recession or they could maintain the peso's link to the dollar.They could devalue and increase the debt burden or they could maintain the exchange rate and watch the current account deficit grow and the economy shrink.They could cut spending to maintain fiscal soundness or increase spending to address the recession.

Question 3

For any given increase in spending that is not directly caused by an increase in income,the impact on equilibrium GDP is greater than the initial spending increase.

Accepted Answer

A) True 
 B)False  True

Question 4

When a central bank sells bonds,cash reserves throughout the financial system increase,interest rates fall,and investment spending increases.

Accepted Answer

A) True 
 B)False

Question 5

Which nations make up the G8?

Accepted Answer

Canada,France,German

Question 6

Contractionary fiscal policy can lead to a depreciation of the nation's currency.

Accepted Answer

A) True 
 B)False

Question 7

The J-curve effect of a currency depreciation results is due to

Accepted Answer

A) the initial effect having positive effects on the current account balance. 
B) the value of imports increasing by more than the value of exports at the time of devaluation. 
C) exports and imports being totally unresponsive to changes in exchange rates. 
D) decreases in the dollar price of imports. 
E) None of the above. 
A) the initial effect having positive effects on the current account balance. 
B) the value of imports increasing by more than the value of exports at the time of devaluation. 
C) exports and imports being totally unresponsive to changes in exchange rates. 
D) decreases in the dollar price of imports. 
E) None of the above.

Question 8

In most cases,expenditure-switching policies must be accompanied by expenditure-reducing policies because

Accepted Answer

A) expenditure-switching policies are completely ineffective without expenditure-reducing policies. 
B) inflation ensues as home country domestic expenditures switch away from foreign goods to domestic goods unless overall expenditures are reduced. 
C) inflation abroad may increase the demand for domestic goods,causing inflation to rise. 
D) the depreciation in the exchange rate may decrease the domestic price of foreign goods,causing an increase in the current account deficit. 
E) None of the above. 
A) expenditure-switching policies are completely ineffective without expenditure-reducing policies. 
B) inflation ensues as home country domestic expenditures switch away from foreign goods to domestic goods unless overall expenditures are reduced. 
C) inflation abroad may increase the demand for domestic goods,causing inflation to rise. 
D) the depreciation in the exchange rate may decrease the domestic price of foreign goods,causing an increase in the current account deficit. 
E) None of the above.

Question 9

Taxes,savings,and imports tend to magnify the effect of any spending change in the economy;that is,if investment spending initially increases,then spending will grow even more as taxes,savings,and imports increase,so the economic growth will accelerate.

Accepted Answer

A) True 
 B)False

Question 10

All of the following make the use of fiscal policy less attractive except

Accepted Answer

A) expansionary fiscal policy tends to cause inflation and offsets some of the increased consumer spending. 
B) that it cannot be effective,unless it is accommodated with expansionary monetary policy. 
C) the substantial margin of error in the value of the multiplier. 
D) the legislative lag,which is the time it takes for Congress and the President to pass and implement the measure. 
E) the crowding out effect,which is the decrease in private spending that occurs due to increased government spending. 
A) expansionary fiscal policy tends to cause inflation and offsets some of the increased consumer spending. 
B) that it cannot be effective,unless it is accommodated with expansionary monetary policy. 
C) the substantial margin of error in the value of the multiplier. 
D) the legislative lag,which is the time it takes for Congress and the President to pass and implement the measure. 
E) the crowding out effect,which is the decrease in private spending that occurs due to increased government spending.

Question 11

How does expansionary monetary policy affect a nation's exchange rate?

Accepted Answer

Because it lowers in

Question 12

When aggregate demand increases,

Accepted Answer

A) the price level is likely to rise as GDP rises. 
B) the price level is likely to fall as GDP rises. 
C) aggregate supply will shift to the right. 
D) aggregate supply will shift to the left. 
A) the price level is likely to rise as GDP rises. 
B) the price level is likely to fall as GDP rises. 
C) aggregate supply will shift to the right. 
D) aggregate supply will shift to the left.

Question 13

An increase in interest rates causes that nation to experience an outflow of financial capital and causes its currency to depreciate.

Accepted Answer

A) True 
 B)False

Question 14

Contractionary fiscal policy attempts to shift aggregate demand to the right.

Accepted Answer

A) True 
 B)False

Question 15

Economic growth would be illustrated by

Accepted Answer

A) a rightward shift of aggregate demand. 
B) a leftward shift of aggregate demand. 
C) a rightward shift of aggregate supply. 
D) a leftward shift of aggregate supply. 
A) a rightward shift of aggregate demand. 
B) a leftward shift of aggregate demand. 
C) a rightward shift of aggregate supply. 
D) a leftward shift of aggregate supply.

Question 16

Suppose the Asian financial crisis decreased U.S.exports.In the aggregate demand/aggregate supply model,this would be represented as

Accepted Answer

A) a shift to the right of aggregate supply,which would result in more production for the U.S.economy. 
B) a shift to the left of aggregate supply,which would result in less production for the U.S.economy. 
C) a shift to the right of aggregate demand,leading to more spending and production in the U.S.economy. 
D) a shift to the left of aggregate demand,leading to less spending and production in the U.S.economy. 
A) a shift to the right of aggregate supply,which would result in more production for the U.S.economy. 
B) a shift to the left of aggregate supply,which would result in less production for the U.S.economy. 
C) a shift to the right of aggregate demand,leading to more spending and production in the U.S.economy. 
D) a shift to the left of aggregate demand,leading to less spending and production in the U.S.economy.

Question 17

If interest rates rise,what will happen to the nation's exchange rate?

Accepted Answer

The answer of If interest rates rise,what will happen to...

Question 18

Which of the following may NOT serve as a possible chain reaction for either fiscal or monetary policy?

Accepted Answer

A) G↑ ⇒ Y↑ ⇒ C↑ ⇒ Y↑ ⇒ C↑.... 
B) T↓ ⇒ Y↑ ⇒ C↑ ⇒ Y↑ ⇒ C↑.... 
C) M↑ ⇒ i↓ ⇒ I↓ ⇒ Y↓ ⇒ C↓.... 
D) M↑ ⇒ i↓ ⇒ I↑ ⇒ Y↑ ⇒ C↑.... 
E) M↓ ⇒ i↑ ⇒ I↓ ⇒ Y↓ ⇒ C↓.... 
A) G↑ ⇒ Y↑ ⇒ C↑ ⇒ Y↑ ⇒ C↑.... 
B) T↓ ⇒ Y↑ ⇒ C↑ ⇒ Y↑ ⇒ C↑.... 
C) M↑ ⇒ i↓ ⇒ I↓ ⇒ Y↓ ⇒ C↓.... 
D) M↑ ⇒ i↓ ⇒ I↑ ⇒ Y↑ ⇒ C↑.... 
E) M↓ ⇒ i↑ ⇒ I↓ ⇒ Y↓ ⇒ C↓....

Question 19

All of the following took place during the Great Depression except

Accepted Answer

A) increase in unemployment from about 3.4 percent to about 25 percent and a decrease in real GDP by about 30 percent between 1929 in 1933. 
B) an increase in taxes because of the fear that budget deficits would undermine business confidence. 
C) a fall in the money supply by more than 30 percent. 
D) a rise in inflation during the early 1930s. 
E) the stock market crashed by about one-third in October of 1929. 
A) increase in unemployment from about 3.4 percent to about 25 percent and a decrease in real GDP by about 30 percent between 1929 in 1933. 
B) an increase in taxes because of the fear that budget deficits would undermine business confidence. 
C) a fall in the money supply by more than 30 percent. 
D) a rise in inflation during the early 1930s. 
E) the stock market crashed by about one-third in October of 1929.

Question 20

What typically happens to imports as income and spending rise?

Accepted Answer

The answer of What typically happens to imports as income...

How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?

Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s.

For any given increase in spending that is not directly caused by an increase in income,the impact on equilibrium GDP is greater than the initial spending increase.

When a central bank sells bonds,cash reserves throughout the financial system increase,interest rates fall,and investment spending increases.

Which nations make up the G8?

Contractionary fiscal policy can lead to a depreciation of the nation's currency.

The J-curve effect of a currency depreciation results is due to

In most cases,expenditure-switching policies must be accompanied by expenditure-reducing policies because

Taxes,savings,and imports tend to magnify the effect of any spending change in the economy;that is,if investment spending initially increases,then spending will grow even more as taxes,savings,and imports increase,so the economic growth will accelerate.

All of the following make the use of fiscal policy less attractive except

How does expansionary monetary policy affect a nation's exchange rate?

When aggregate demand increases,

An increase in interest rates causes that nation to experience an outflow of financial capital and causes its currency to depreciate.

Contractionary fiscal policy attempts to shift aggregate demand to the right.

Economic growth would be illustrated by

Suppose the Asian financial crisis decreased U.S.exports.In the aggregate demand/aggregate supply model,this would be represented as

If interest rates rise,what will happen to the nation's exchange rate?

Which of the following may NOT serve as a possible chain reaction for either fiscal or monetary policy?

All of the following took place during the Great Depression except

What typically happens to imports as income and spending rise?

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

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Exam 11: An Introduction to Open Economy Macroeconomics

How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?

Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s.

For any given increase in spending that is not directly caused by an increase in income,the impact on equilibrium GDP is greater than the initial spending increase.

When a central bank sells bonds,cash reserves throughout the financial system increase,interest rates fall,and investment spending increases.

Which nations make up the G8?

Contractionary fiscal policy can lead to a depreciation of the nation's currency.

The J-curve effect of a currency depreciation results is due to

In most cases,expenditure-switching policies must be accompanied by expenditure-reducing policies because

Taxes,savings,and imports tend to magnify the effect of any spending change in the economy;that is,if investment spending initially increases,then spending will grow even more as taxes,savings,and imports increase,so the economic growth will accelerate.

All of the following make the use of fiscal policy less attractive except

How does expansionary monetary policy affect a nation's exchange rate?

When aggregate demand increases,

An increase in interest rates causes that nation to experience an outflow of financial capital and causes its currency to depreciate.

Contractionary fiscal policy attempts to shift aggregate demand to the right.

Economic growth would be illustrated by

Suppose the Asian financial crisis decreased U.S.exports.In the aggregate demand/aggregate supply model,this would be represented as

If interest rates rise,what will happen to the nation's exchange rate?

Which of the following may NOT serve as a possible chain reaction for either fiscal or monetary policy?

All of the following took place during the Great Depression except

What typically happens to imports as income and spending rise?

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

Filters