Question 1

With high short-term international capital flows,fixed exchange rates,and flexible prices

Accepted Answer

A) monetary policy is effective 
B) fiscal policy is effective 
C) both fiscal and monetary policies are effective 
D) neither fiscal policy nor monetary policies are effective 
A) monetary policy is effective 
B) fiscal policy is effective 
C) both fiscal and monetary policies are effective 
D) neither fiscal policy nor monetary policies are effective B

Question 2

The aggregate demand curve for an open economy under fixed exchange rates is

Accepted Answer

A) less elastic than if the economy were closed 
B) more elastic than in the economy were closed 
C) more elastic than in the economy operated with flexible exchange rates 
D) all of the above 
A) less elastic than if the economy were closed 
B) more elastic than in the economy were closed 
C) more elastic than in the economy operated with flexible exchange rates 
D) all of the above B

Question 3

Empirical evidence suggests which of the following about central bank independence and inflation rates?

Accepted Answer

A) More independent central banks are associated with lower rates of inflation. 
B) More independent central banks are associated with constant rates of inflation. 
C) More independent central banks are associated with higher rates of inflation. 
D) There is no observable relationship between inflation rates and central bank independence. 
A) More independent central banks are associated with lower rates of inflation. 
B) More independent central banks are associated with constant rates of inflation. 
C) More independent central banks are associated with higher rates of inflation. 
D) There is no observable relationship between inflation rates and central bank independence. A

Question 4

The aggregate demand curve (AD)for closed economy is derived from the

Accepted Answer

A) IS curve 
B) LM curve 
C) FE curve 
D) IS and LM curves 
A) IS curve 
B) LM curve 
C) FE curve 
D) IS and LM curves

Question 5

What is the natural level of output?

Accepted Answer

The natural level of output is

Question 6

Which of the following statements is false?

Accepted Answer

A) a nations' natural level of output can increase as a result of growth 
B) imperfection in product markets can lead to temporary deviations in a nation's output from its long-run natural level 
C) sticky wages cannot lead to temporary deviations in a nation's output from its long-run natural level 
D) none of the above 
A) a nations' natural level of output can increase as a result of growth 
B) imperfection in product markets can lead to temporary deviations in a nation's output from its long-run natural level 
C) sticky wages cannot lead to temporary deviations in a nation's output from its long-run natural level 
D) none of the above

Question 7

A reduction in the general price level with a constant money supply is shown by a

Accepted Answer

A) leftward shift in the LM curve 
B) movement down along a given aggregate demand curve 
C) rightward shift in the aggregate supply curve 
D) a rightward shift in the IS curve 
A) leftward shift in the LM curve 
B) movement down along a given aggregate demand curve 
C) rightward shift in the aggregate supply curve 
D) a rightward shift in the IS curve

Question 8

Suppose that the economy is in long-run equilibrium,and people in other countries suddenly decide to purchase fewer US goods.Explain the short-run effects on the US economy under both fixed and flexible exchange rates.

Accepted Answer

Under fixed exchange rates,aggregate dem

Question 9

An autonomous short-term capital outflow under flexible exchange rates causes the nation's aggregate demand curve to

Accepted Answer

A) shift to the right 
B) shift to the left 
C) remain unchanged 
D) any of the above 
A) shift to the right 
B) shift to the left 
C) remain unchanged 
D) any of the above

Question 10

An increase in government expenditures leads to

Accepted Answer

A) a rightward shift in the IS curve 
B) a rightward shift in the AD curve 
C) an increase in the level of national income 
D) all of the above 
A) a rightward shift in the IS curve 
B) a rightward shift in the AD curve 
C) an increase in the level of national income 
D) all of the above

Question 11

The aggregate demand curve (AD)for an open economy is derived from the

Accepted Answer

A) IS curve 
B) LM curve 
C) BP curve 
D) all of the above 
A) IS curve 
B) LM curve 
C) BP curve 
D) all of the above

Question 12

Output in the short run exceeds the natural level of output if expected prices

Accepted Answer

A) exceed actual prices 
B) are lower than actual prices 
C) are equal to actual prices 
D) any of the above 
A) exceed actual prices 
B) are lower than actual prices 
C) are equal to actual prices 
D) any of the above

Question 13

Why does the ease of combating a recession with expansionary fiscal or monetary policy depend on how flexible prices are downward?

Accepted Answer

The easier prices fall the eas

Question 14

How does an increase in government expenditure impact aggregate demand?

Accepted Answer

An increase in government expenditure wi

Question 15

In general,as the economy expands or contracts over the business cycle

Accepted Answer

A) prices change rapidly 
B) prices remain unchanged except in a recession 
C) prices remain unchanged until the economy reaches full employment 
D) prices change,but slowly 
A) prices change rapidly 
B) prices remain unchanged except in a recession 
C) prices remain unchanged until the economy reaches full employment 
D) prices change,but slowly

Question 16

Which of the following statements is false?

Accepted Answer

A) expansionary fiscal or monetary policy can increase the nation's output temporarily above its natural level 
B) expansionary fiscal or monetary policy can used to correct a recession but only at the expense of higher prices in the nation 
C) a recession cannot be eliminated automatically even if domestic prices are flexible downward 
D) when prices are not flexible downward inflation may be less costly that recession 
A) expansionary fiscal or monetary policy can increase the nation's output temporarily above its natural level 
B) expansionary fiscal or monetary policy can used to correct a recession but only at the expense of higher prices in the nation 
C) a recession cannot be eliminated automatically even if domestic prices are flexible downward 
D) when prices are not flexible downward inflation may be less costly that recession

Question 17

The long run aggregate supply curve is

Accepted Answer

A) independent of prices and is vertical at the nation's natural rate of output 
B) dependent on prices and is vertical at the nation's natural rate of output 
C) independent of prices and is horizontal at the nation's natural rate of output 
D) dependent on prices and is horizontal at the nation's natural rate of output 
A) independent of prices and is vertical at the nation's natural rate of output 
B) dependent on prices and is vertical at the nation's natural rate of output 
C) independent of prices and is horizontal at the nation's natural rate of output 
D) dependent on prices and is horizontal at the nation's natural rate of output

Question 18

During the last decade the inflation rate in the U.S.has been roughly

Accepted Answer

A) 0% 
B) 3% 
C) 5% 
D) 8% 
A) 0% 
B) 3% 
C) 5% 
D) 8%

Question 19

An autonomous improvement in the nation's trade balance under fixed exchange rates will cause the nation's aggregate demand curve to

Accepted Answer

A) shift to the right 
B) shift to the left 
C) remain unchanged 
D) any of the above 
A) shift to the right 
B) shift to the left 
C) remain unchanged 
D) any of the above

Question 20

Which of the following is a correct statement about the effects of monetary and fiscal policies?

Accepted Answer

A) Monetary policy is effective under a fixed exchange rate regime,but not under flexible rates. 
B) A monetary shock will shift the aggregate demand curve in the same direction,whether exchange rates are fixed or flexible. 
C) A real shock will shift the aggregate demand curve under fixed but not flexible exchange rates. 
D) Monetary policy can always be used to correct real shocks,whether exchange rates are fixed or flexible. 
A) Monetary policy is effective under a fixed exchange rate regime,but not under flexible rates. 
B) A monetary shock will shift the aggregate demand curve in the same direction,whether exchange rates are fixed or flexible. 
C) A real shock will shift the aggregate demand curve under fixed but not flexible exchange rates. 
D) Monetary policy can always be used to correct real shocks,whether exchange rates are fixed or flexible.

Exam 19: Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

With high short-term international capital flows,fixed exchange rates,and flexible prices

The aggregate demand curve for an open economy under fixed exchange rates is

Empirical evidence suggests which of the following about central bank independence and inflation rates?

The aggregate demand curve (AD)for closed economy is derived from the

What is the natural level of output?

Which of the following statements is false?

A reduction in the general price level with a constant money supply is shown by a

Suppose that the economy is in long-run equilibrium,and people in other countries suddenly decide to purchase fewer US goods.Explain the short-run effects on the US economy under both fixed and flexible exchange rates.

An autonomous short-term capital outflow under flexible exchange rates causes the nation's aggregate demand curve to

An increase in government expenditures leads to

The aggregate demand curve (AD)for an open economy is derived from the

Output in the short run exceeds the natural level of output if expected prices

Why does the ease of combating a recession with expansionary fiscal or monetary policy depend on how flexible prices are downward?

How does an increase in government expenditure impact aggregate demand?

In general,as the economy expands or contracts over the business cycle

Which of the following statements is false?

The long run aggregate supply curve is

During the last decade the inflation rate in the U.S.has been roughly

An autonomous improvement in the nation's trade balance under fixed exchange rates will cause the nation's aggregate demand curve to

Which of the following is a correct statement about the effects of monetary and fiscal policies?

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

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