Question 1

Since the early 1970s

Accepted Answer

A)  the exchange rates at which the currencies of the major industrial countries trade against each other have been fixed rates. 
B)  the interest rates at which the currencies of the major industrial countries trade against each other have been floating rates. 
C)  the interest rates at which the currencies of the major industrial countries trade against each other have been fixed rates. 
D)  the exchange rates at which the currencies of the major industrial countries trade against each other have been floating rates. 
A)  the exchange rates at which the currencies of the major industrial countries trade against each other have been fixed rates. 
B)  the interest rates at which the currencies of the major industrial countries trade against each other have been floating rates. 
C)  the interest rates at which the currencies of the major industrial countries trade against each other have been fixed rates. 
D)  the exchange rates at which the currencies of the major industrial countries trade against each other have been floating rates. D

Question 2

During the 1930s, those counties

Accepted Answer

A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold losses. 
C)  that abandoned the gold standard early in the Depression fared much better than those that clung to gold. 
D)  that abandoned the gold standard and floated their exchange rates were not able to avoid deflation. 
A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold losses. 
C)  that abandoned the gold standard early in the Depression fared much better than those that clung to gold. 
D)  that abandoned the gold standard and floated their exchange rates were not able to avoid deflation. C

Question 3

Each of the following was a factor that reduced foreign exchange speculators' estimates of the long-run value of the Mexican peso except

Accepted Answer

A)  a guerrilla uprising in the poor southern Mexican province of Chiapas cast doubt on political stability. 
B)  a wave of assassinations killed the candidate of the ruling Party of the Revolution and the designated successor to the then-Mexican President. 
C)  Mexico had just entered into the North American Free Trade Agreement. 
D)  the central bank raised the money supply during 1994. 
A)  a guerrilla uprising in the poor southern Mexican province of Chiapas cast doubt on political stability. 
B)  a wave of assassinations killed the candidate of the ruling Party of the Revolution and the designated successor to the then-Mexican President. 
C)  Mexico had just entered into the North American Free Trade Agreement. 
D)  the central bank raised the money supply during 1994. C

Question 4

Under a fixed exchange rate system with a high degree of capital mobility, an increase in foreign interest rates

Accepted Answer

A)  will result in a point-for-point decrease in domestic interest rates. 
B)  will put pressure on the domestic currency to appreciate against other currencies. 
C)  will result in a point-for-point increase in domestic interest rates. 
D)  will put pressure on other currencies to depreciate against the domestic currency. 
A)  will result in a point-for-point decrease in domestic interest rates. 
B)  will put pressure on the domestic currency to appreciate against other currencies. 
C)  will result in a point-for-point increase in domestic interest rates. 
D)  will put pressure on other currencies to depreciate against the domestic currency.

Question 5

Using the exchange-rate equation,   a decrease in     means that

Accepted Answer

A)  countries will have to decrease r or let increase. 
B)  countries will have to increase r or let decrease. 
C)  countries will have to decrease r or let decrease. 
D)  countries will have to increase r or let increase. 
A)  countries will have to decrease r or let increase. 
B)  countries will have to increase r or let decrease. 
C)  countries will have to decrease r or let decrease. 
D)  countries will have to increase r or let increase.

Question 6

The U.S. trade deficit has _________ since 2001 which may lead to a _________ of the dollar.

Accepted Answer

A)  continued to grow; depreciation 
B)  continued to grow; appreciation 
C)  decreased; depreciation 
D)  decreased; appreciation 
A)  continued to grow; depreciation 
B)  continued to grow; appreciation 
C)  decreased; depreciation 
D)  decreased; appreciation

Question 7

The reunification of Germany in 1990

Accepted Answer

A)  led to a large outward shift in the LM curve, following by a tightening of fiscal policy and a shift of the IS curve to the left. 
B)  led to a large outward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the left and raised real interest rates. 
C)  led to a large outward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the right and lowered real interest rates. 
D)  led to a large inward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the left and raised real interest rates. 
A)  led to a large outward shift in the LM curve, following by a tightening of fiscal policy and a shift of the IS curve to the left. 
B)  led to a large outward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the left and raised real interest rates. 
C)  led to a large outward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the right and lowered real interest rates. 
D)  led to a large inward shift of the IS curve, and a tightening of monetary policy, which shifted the LM curve to the left and raised real interest rates.

Question 8

Under a fixed exchange rate system with a high degree of capital mobility,

Accepted Answer

A)  macroeconomic policy makers determine the interest rate. 
B)  international currency speculators determine the interest rate. 
C)  the exchange rate is not as important as it is under a floating exchange rate system. 
D)  microeconomic policy makers determine the exchange rate. 
A)  macroeconomic policy makers determine the interest rate. 
B)  international currency speculators determine the interest rate. 
C)  the exchange rate is not as important as it is under a floating exchange rate system. 
D)  microeconomic policy makers determine the exchange rate.

Question 9

Each of the following is a cost of a floating exchange rate system except

Accepted Answer

A)  governments break the contracts they made with investors in foreign countries. 
B)  international trade is discouraged due to increased exchange rate risk. 
C)  political turmoil is avoided by floating exchange rate systems. 
D)  exporters and firms whose products compete with imported goods never know what their competitors' costs are going to be. 
A)  governments break the contracts they made with investors in foreign countries. 
B)  international trade is discouraged due to increased exchange rate risk. 
C)  political turmoil is avoided by floating exchange rate systems. 
D)  exporters and firms whose products compete with imported goods never know what their competitors' costs are going to be.

Question 10

A major disadvantage of the gold standard is that

Accepted Answer

A)  it tends to put inflationary pressures on the world economy. 
B)  it leads to much currency speculation. 
C)  it tends to put contractionary pressures on the world economy. 
D)  it leads to low interest rates. 
A)  it tends to put inflationary pressures on the world economy. 
B)  it leads to much currency speculation. 
C)  it tends to put contractionary pressures on the world economy. 
D)  it leads to low interest rates.

Question 11

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign interest rates

Accepted Answer

A)  will result in a point-for-point decrease in domestic interest rates. 
B)  will put pressure on the domestic currency to depreciate against other currencies. 
C)  will result in a point-for-point increase in domestic interest rates. 
D)  will put pressure on other currencies to appreciate against the domestic currency. 
A)  will result in a point-for-point decrease in domestic interest rates. 
B)  will put pressure on the domestic currency to depreciate against other currencies. 
C)  will result in a point-for-point increase in domestic interest rates. 
D)  will put pressure on other currencies to appreciate against the domestic currency.

Question 12

Under a fixed exchange rate system with a high degree of capital mobility, the domestic interest rate is determined by the following formula

Accepted Answer

A)  r = rf-   
B)  r = rf+   
C)  r = rf +   
D)  r = rf -   
A)  r = rf-   
B)  r = rf+   
C)  r = rf +   
D)  r = rf -

Question 13

The questions with which Chapter 15 is concerned include each of the following except

Accepted Answer

A)  why do most economies today have fixed exchange rate systems? 
B)  what is a fixed exchange rate system? 
C)  what is a floating exchange rate system? 
D)  what were the causes of the three major currency crises of the 1990s? 
A)  why do most economies today have fixed exchange rate systems? 
B)  what is a fixed exchange rate system? 
C)  what is a floating exchange rate system? 
D)  what were the causes of the three major currency crises of the 1990s?

Question 14

For most of the past century, the dominant international exchange rate regime

Accepted Answer

A)  has been one of fixed, not floating, exchange rates. 
B)  has been one of fixed, not floating, interest rates. 
C)  has been one of floating, not fixed, interest rates. 
D)  has been one of floating, not fixed, exchange rates. 
A)  has been one of fixed, not floating, exchange rates. 
B)  has been one of fixed, not floating, interest rates. 
C)  has been one of floating, not fixed, interest rates. 
D)  has been one of floating, not fixed, exchange rates.

Question 15

Under a floating exchange rate system,

Accepted Answer

A)  a country's net exports minus net investment from abroad must equal zero. 
B)  a country's net exports plus net investment from abroad must equal zero. 
C)  a country's net exports minus net investment from abroad plus the flow of gold into the country must equal zero. 
D)  a country's net exports plus net investment from abroad minus the flow of gold into the country must equal zero. 
A)  a country's net exports minus net investment from abroad must equal zero. 
B)  a country's net exports plus net investment from abroad must equal zero. 
C)  a country's net exports minus net investment from abroad plus the flow of gold into the country must equal zero. 
D)  a country's net exports plus net investment from abroad minus the flow of gold into the country must equal zero.

Question 16

One of the reasons that collapses of currencies occur is

Accepted Answer

A)  in situations of limited capital mobility, countries with undervalued exchange rates and large inflation- financed budget deficits suffer speculative attacks. 
B)  in situations of limited capital mobility, governments with overvalued exchange rates and large budget surpluses suffer speculative attacks. 
C)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain fixed exchange rates had become inconsistent with the government's political survival. 
D)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain floating exchange rates had become inconsistent with the government's political survival. 
A)  in situations of limited capital mobility, countries with undervalued exchange rates and large inflation- financed budget deficits suffer speculative attacks. 
B)  in situations of limited capital mobility, governments with overvalued exchange rates and large budget surpluses suffer speculative attacks. 
C)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain fixed exchange rates had become inconsistent with the government's political survival. 
D)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain floating exchange rates had become inconsistent with the government's political survival.

Question 17

To help solve the overvalued dollar problem of the late 1960s, policy makers in other countries thought that the United States should

Accepted Answer

A)  lower interest rates to expand the U.S. economy. 
B)  devalue the dollar to increase exports and decrease imports. 
C)  raise interest rates to encourage foreigners to invest in the United States. 
D)  raise tariffs to discourage imports. 
A)  lower interest rates to expand the U.S. economy. 
B)  devalue the dollar to increase exports and decrease imports. 
C)  raise interest rates to encourage foreigners to invest in the United States. 
D)  raise tariffs to discourage imports.

Question 18

It has proven to be difficult for a country to maintain a fixed exchange rate with today's high degree of capital mobility because

Accepted Answer

A)  foreign exchange speculators can buy so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency. 
B)  foreign exchange speculators always try to force a country's currency to depreciate. 
C)  foreign exchange speculators can sell so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency. 
D)  foreign exchange speculators always try to force a country's currency to appreciate. 
A)  foreign exchange speculators can buy so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency. 
B)  foreign exchange speculators always try to force a country's currency to depreciate. 
C)  foreign exchange speculators can sell so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency. 
D)  foreign exchange speculators always try to force a country's currency to appreciate.

Question 19

Each of the following is a benefit of a fixed exchange rate system except

Accepted Answer

A)  the reduction of exchange rate risk. 
B)  the avoidance of the churning of industrial risk. 
C)  the avoidance of political turmoil. 
D)  the central bank is free to set interest rates at whatever level it deems desirable. 
A)  the reduction of exchange rate risk. 
B)  the avoidance of the churning of industrial risk. 
C)  the avoidance of political turmoil. 
D)  the central bank is free to set interest rates at whatever level it deems desirable.

Question 20

Each of the following is a benefit of a floating exchange rate system except

Accepted Answer

A)  exchange rates are set by supply and demand, not by government decree. 
B)  governments are keeping the contracts they made with investors in foreign countries. 
C)  monetary or confidence shocks are not rapidly transmitted to other countries. 
D)  monetary policy is free to set interest rates at whatever level the central bank deems desirable to maintain internal balance. 
A)  exchange rates are set by supply and demand, not by government decree. 
B)  governments are keeping the contracts they made with investors in foreign countries. 
C)  monetary or confidence shocks are not rapidly transmitted to other countries. 
D)  monetary policy is free to set interest rates at whatever level the central bank deems desirable to maintain internal balance.

Since the early 1970s

During the 1930s, those counties

Each of the following was a factor that reduced foreign exchange speculators' estimates of the long-run value of the Mexican peso except

Under a fixed exchange rate system with a high degree of capital mobility, an increase in foreign interest rates

Using the exchange-rate equation, a decrease in means that

The U.S. trade deficit has _ since 2001 which may lead to a _ of the dollar.

The reunification of Germany in 1990

Under a fixed exchange rate system with a high degree of capital mobility,

Each of the following is a cost of a floating exchange rate system except

A major disadvantage of the gold standard is that

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign interest rates

Under a fixed exchange rate system with a high degree of capital mobility, the domestic interest rate is determined by the following formula

The questions with which Chapter 15 is concerned include each of the following except

For most of the past century, the dominant international exchange rate regime

Under a floating exchange rate system,

One of the reasons that collapses of currencies occur is

To help solve the overvalued dollar problem of the late 1960s, policy makers in other countries thought that the United States should

It has proven to be difficult for a country to maintain a fixed exchange rate with today's high degree of capital mobility because

Each of the following is a benefit of a fixed exchange rate system except

Each of the following is a benefit of a floating exchange rate system except

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 15: International Economic Policy

Since the early 1970s

During the 1930s, those counties

Each of the following was a factor that reduced foreign exchange speculators' estimates of the long-run value of the Mexican peso except

Under a fixed exchange rate system with a high degree of capital mobility, an increase in foreign interest rates

Using the exchange-rate equation, a decrease in means that

The U.S. trade deficit has _________ since 2001 which may lead to a _________ of the dollar.

The reunification of Germany in 1990

Under a fixed exchange rate system with a high degree of capital mobility,

Each of the following is a cost of a floating exchange rate system except

A major disadvantage of the gold standard is that

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign interest rates

Under a fixed exchange rate system with a high degree of capital mobility, the domestic interest rate is determined by the following formula

The questions with which Chapter 15 is concerned include each of the following except

For most of the past century, the dominant international exchange rate regime

Under a floating exchange rate system,

One of the reasons that collapses of currencies occur is

To help solve the overvalued dollar problem of the late 1960s, policy makers in other countries thought that the United States should

It has proven to be difficult for a country to maintain a fixed exchange rate with today's high degree of capital mobility because

Each of the following is a benefit of a fixed exchange rate system except

Each of the following is a benefit of a floating exchange rate system except

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

The U.S. trade deficit has _ since 2001 which may lead to a _ of the dollar.