Question 1

Fiscal policy is most effective when exchange rates are fixed.

Accepted Answer

A) True 
 B)False  True

Question 2

Illustrate with a graph the effects of fiscal policy when exchange rates are fixed.

Accepted Answer

Draw horizontal BP curve. Fiscal policy shifts IS. Monetary policy must accommodate by shifting LM to match IS in order to maintain fixed exchange rate.

Question 3

With floating exchange rates

Accepted Answer

A) monetary policy is effective. 
B) fiscal policy is ineffective. 
C) monetary and fiscal policy are effective. 
D) fiscal and monetary policy are ineffective. 
A) monetary policy is effective. 
B) fiscal policy is ineffective. 
C) monetary and fiscal policy are effective. 
D) fiscal and monetary policy are ineffective. A

Question 4

With fixed exchange rates,a country

Accepted Answer

A) cannot conduct independent monetary policy. 
B) can conduct independent monetary policy. 
C) cannot conduct independent fiscal policy. 
D) Both A and C. 
A) cannot conduct independent monetary policy. 
B) can conduct independent monetary policy. 
C) cannot conduct independent fiscal policy. 
D) Both A and C.

Question 5

What was the Plaza Agreement about?

Accepted Answer

A coordinated interv

Question 6

Which of the following statements about the financial crisis that began in 2008 is true?

Accepted Answer

A) It was a great illustration of how interdependent national economies are. 
B) Most economists agree that it originated in China. 
C) It only lasted 3 weeks. 
D) It only affected housing markets. 
A) It was a great illustration of how interdependent national economies are. 
B) Most economists agree that it originated in China. 
C) It only lasted 3 weeks. 
D) It only affected housing markets.

Question 7

What policies would you recommend to the U.S.government to lower the balance of trade deficit and decrease net capital inflows?

Accepted Answer

Lower the

Question 8

The goal of international economic policy cooperation is to allow for greater flexibility in exchange rates.

Accepted Answer

A) True 
 B)False

Question 9

With flexible exchange rates,perfect asset substitutability,and perfect capital mobility,expansionary monetary policy will cause

Accepted Answer

A) income to rise, interest rates to fall, and the domestic currency to depreciate. 
B) income to fall, interest rates to rise, and the domestic currency to appreciate. 
C) income to rise, interest rates to remain unchanged, and the domestic currency to appreciate. 
D) income to rise, interest rates to remain unchanged, and the domestic currency to depreciate. 
A) income to rise, interest rates to fall, and the domestic currency to depreciate. 
B) income to fall, interest rates to rise, and the domestic currency to appreciate. 
C) income to rise, interest rates to remain unchanged, and the domestic currency to appreciate. 
D) income to rise, interest rates to remain unchanged, and the domestic currency to depreciate.

Question 10

A point to the left of the LM curve would represent a situation in which

Accepted Answer

A) money demand is greater than money supply. 
B) money supply is greater than money demand. 
C) money demand is greater than goods demand. 
D) money demand is less than goods demand. 
A) money demand is greater than money supply. 
B) money supply is greater than money demand. 
C) money demand is greater than goods demand. 
D) money demand is less than goods demand.

Question 11

With fixed exchange rates,perfect asset substitutability,and perfect capital mobility

Accepted Answer

A) the LM curve is horizontal. 
B) the LM curve is vertical. 
C) the BP curve is horizontal. 
D) the BP curve is vertical. 
A) the LM curve is horizontal. 
B) the LM curve is vertical. 
C) the BP curve is horizontal. 
D) the BP curve is vertical.

Question 12

Which of the following is not a necessary condition for a flat BP curve?

Accepted Answer

A) perfect capital mobility 
B) perfect asset substitutability 
C) fixed exchange rates 
D) floating exchanges rates 
E) Both C and D 
A) perfect capital mobility 
B) perfect asset substitutability 
C) fixed exchange rates 
D) floating exchanges rates 
E) Both C and D

Question 13

The BP curve presents combinations of y and i that yield balance of trade equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would cause the IS curve to shift to the left?

Accepted Answer

A) an increase in government expenditures 
B) a decrease in the money supply 
C) an increase in domestic investment 
D) a decrease in taxes 
A) an increase in government expenditures 
B) a decrease in the money supply 
C) an increase in domestic investment 
D) a decrease in taxes

Question 15

The LM curve will shift to the right when government expenditures increase.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would not cause the IS curve to shift to the left?

Accepted Answer

A) a decrease in government expenditures 
B) a decrease in the money supply 
C) an increase in the domestic price level 
D) an increase in taxes 
A) a decrease in government expenditures 
B) a decrease in the money supply 
C) an increase in the domestic price level 
D) an increase in taxes

Question 17

Many economists argue that the sharp reduction in U.S.net exports in the mid 1980s was due to

Accepted Answer

A) expansionary U.S. monetary policy. 
B) contractionary U.S. monetary policy. 
C) expansionary U.S. fiscal policy. 
D) contractionary U.S. fiscal policy. 
A) expansionary U.S. monetary policy. 
B) contractionary U.S. monetary policy. 
C) expansionary U.S. fiscal policy. 
D) contractionary U.S. fiscal policy.

Question 18

Which of the following would cause the LM curve to shift to the right?
A)increased money supply
B)a larger U.S. capital account deficit
C)a depreciation of the dollar
D)lower level of U.S. income

Accepted Answer

The answer of Which of the following would cause the...

Question 19

Which of the following is not a true statement?

Accepted Answer

A) The higher the income level, the lower interest rates must be for goods market equilibrium. 
B) The higher the income level, the higher interest rates must be for money market equilibrium. 
C) The higher the income level, the lower the interest rate must be for external balance to be achieved. 
D) Equilibrium occurs at the intersection of the IS, LM, and BP curves. 
A) The higher the income level, the lower interest rates must be for goods market equilibrium. 
B) The higher the income level, the higher interest rates must be for money market equilibrium. 
C) The higher the income level, the lower the interest rate must be for external balance to be achieved. 
D) Equilibrium occurs at the intersection of the IS, LM, and BP curves.

Question 20

Illustrate with a graph the effects of monetary policy on the economy when exchange rates are flexible.

Accepted Answer

Assume perfect asset substitut

Fiscal policy is most effective when exchange rates are fixed.

Illustrate with a graph the effects of fiscal policy when exchange rates are fixed.

With floating exchange rates

With fixed exchange rates,a country

What was the Plaza Agreement about?

Which of the following statements about the financial crisis that began in 2008 is true?

What policies would you recommend to the U.S.government to lower the balance of trade deficit and decrease net capital inflows?

The goal of international economic policy cooperation is to allow for greater flexibility in exchange rates.

With flexible exchange rates,perfect asset substitutability,and perfect capital mobility,expansionary monetary policy will cause

A point to the left of the LM curve would represent a situation in which

With fixed exchange rates,perfect asset substitutability,and perfect capital mobility

Which of the following is not a necessary condition for a flat BP curve?

The BP curve presents combinations of y and i that yield balance of trade equilibrium.

Which of the following would cause the IS curve to shift to the left?

The LM curve will shift to the right when government expenditures increase.

Which of the following would not cause the IS curve to shift to the left?

Many economists argue that the sharp reduction in U.S.net exports in the mid 1980s was due to

Which of the following would cause the LM curve to shift to the right? A)increased money supply B)a larger U.S. capital account deficit C)a depreciation of the dollar D)lower level of U.S. income

Which of the following is not a true statement?

Illustrate with a graph the effects of monetary policy on the economy when exchange rates are flexible.

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Classical Model of International Trade

The Heckscher-Ohlin Model

Tests of Trade Models: the Leontief Paradox and Its Aftermath

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Agreements

International Trade and Economic Growth

The Balance of Payments

The Foreign Exchange Market

International Monetary Systems

Exchange Rates in the Short Run

Exchange Rates in the Long Run

Theories of the Current Account Balance

International Banking, debt and Risk

Filters

Exam 17: Open Economy Macroeconomics

Fiscal policy is most effective when exchange rates are fixed.

Illustrate with a graph the effects of fiscal policy when exchange rates are fixed.

With floating exchange rates

With fixed exchange rates,a country

What was the Plaza Agreement about?

Which of the following statements about the financial crisis that began in 2008 is true?

What policies would you recommend to the U.S.government to lower the balance of trade deficit and decrease net capital inflows?

The goal of international economic policy cooperation is to allow for greater flexibility in exchange rates.

With flexible exchange rates,perfect asset substitutability,and perfect capital mobility,expansionary monetary policy will cause

A point to the left of the LM curve would represent a situation in which

With fixed exchange rates,perfect asset substitutability,and perfect capital mobility

Which of the following is not a necessary condition for a flat BP curve?

The BP curve presents combinations of y and i that yield balance of trade equilibrium.

Which of the following would cause the IS curve to shift to the left?

The LM curve will shift to the right when government expenditures increase.

Which of the following would not cause the IS curve to shift to the left?

Many economists argue that the sharp reduction in U.S.net exports in the mid 1980s was due to

Which of the following would cause the LM curve to shift to the right? A)increased money supply B)a larger U.S. capital account deficit C)a depreciation of the dollar D)lower level of U.S. income

Which of the following is not a true statement?

Illustrate with a graph the effects of monetary policy on the economy when exchange rates are flexible.

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Classical Model of International Trade

The Heckscher-Ohlin Model

Tests of Trade Models: the Leontief Paradox and Its Aftermath

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Agreements

International Trade and Economic Growth

The Balance of Payments

The Foreign Exchange Market

International Monetary Systems

Exchange Rates in the Short Run

Exchange Rates in the Long Run

Theories of the Current Account Balance

International Banking, debt and Risk

Filters