Question 1

When the economy is using all of its factors of production,the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False  True

Question 2

The J-curve shows that,after a currency depreciation,

Accepted Answer

A) the current account is likely to worsen before it improves. 
B) the current account is likely to improve before it worsens. 
C) the current account will remain unchanged after all adjustments have taken place. 
D) the current account is difficult to change in the long run. 
A) the current account is likely to worsen before it improves. 
B) the current account is likely to improve before it worsens. 
C) the current account will remain unchanged after all adjustments have taken place. 
D) the current account is difficult to change in the long run. A

Question 3

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

Accepted Answer

Because it lowers interest rates,it will cause the exchange rate to depreciate.

Question 4

Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation.Explain why the curve has the shape that it does.

Accepted Answer

Graph should look like Figure 11.6 in th

Question 5

Expenditure-reducing policies designed to improve a current account deficit

Accepted Answer

A) turn domestic spending towards domestic goods. 
B) reduce the overall level of demand in the economy. 
C) turn domestic spending towards foreign goods. 
D) increase the overall level of demand in the economy. 
A) turn domestic spending towards domestic goods. 
B) reduce the overall level of demand in the economy. 
C) turn domestic spending towards foreign goods. 
D) increase the overall level of demand in the economy.

Question 6

Expansionary monetary policy involves an increase in the money supply and a fall in interest rates,leading to a positive expansion in income.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following correctly describes the relationship between savings,the government budget balance,and the current account?

Accepted Answer

A) Private savings plus the government budget balance must equal private investment plus the current account. 
B) Private savings plus the current account must equal private investment plus the government budget surplus or deficit. 
C) Private savings plus private investment must equal the current account plus the government budget balance. 
D) Private investment must equal private savings plus the current account minus the government budget balance. 
A) Private savings plus the government budget balance must equal private investment plus the current account. 
B) Private savings plus the current account must equal private investment plus the government budget surplus or deficit. 
C) Private savings plus private investment must equal the current account plus the government budget balance. 
D) Private investment must equal private savings plus the current account minus the government budget balance.

Question 9

Changes in aggregate demand

Accepted Answer

A) could be caused by changes in the spending decisions of foreigners. 
B) are unlikely to change quickly in response to economic events. 
C) are primarily based on changes in firms' abilities to produce products. 
D) are not affected by changes in government policies. 
A) could be caused by changes in the spending decisions of foreigners. 
B) are unlikely to change quickly in response to economic events. 
C) are primarily based on changes in firms' abilities to produce products. 
D) are not affected by changes in government policies.

Question 10

Explain why expenditure switching and expenditure reducing policies need to be used together.

Accepted Answer

Policies that switch spending to domesti

Question 11

Which of the following correctly explains how expansionary monetary policy works?

Accepted Answer

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

Question 12

When spending and incomes in an economy increase,

Accepted Answer

A) imports are likely to increase. 
B) imports are likely to be unchanged. 
C) imports are likely to decrease. 
D) exports are likely to decrease. 
A) imports are likely to increase. 
B) imports are likely to be unchanged. 
C) imports are likely to decrease. 
D) exports are likely to decrease.

Question 13

A depreciation of the currency can switch spending away from foreign goods and reduce the effect of rising incomes on the current account.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is FALSE concerning the long run?

Accepted Answer

A) Economists believe that fiscal and monetary policies have no permanent effects on the economy. 
B) Economists more or less agree that the economy tends to fluctuate around the level that is consistent with full employment. 
C) In the long run, the unemployment rate returns to its normal level. 
D) The current account must tend toward balance in the long run. 
E) None of the above. 
A) Economists believe that fiscal and monetary policies have no permanent effects on the economy. 
B) Economists more or less agree that the economy tends to fluctuate around the level that is consistent with full employment. 
C) In the long run, the unemployment rate returns to its normal level. 
D) The current account must tend toward balance in the long run. 
E) None of the above.

Question 15

Explain why in an economy with fixed exchange rates,monetary policy will not cause expenditure switching.

Accepted Answer

Expenditure switching refers to switchin

Question 16

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 17

If consumption spending increases because people feel more confident about the future,

Accepted Answer

A) aggregate demand will shift to the left. 
B) aggregate demand will shift to the right. 
C) aggregate supply will shift to the left. 
D) aggregate supply will shift to the right. 
A) aggregate demand will shift to the left. 
B) aggregate demand will shift to the right. 
C) aggregate supply will shift to the left. 
D) aggregate supply will shift to the right.

Question 18

Explain how exchange rate policies affected economies during the Great Depression.

Accepted Answer

Many countries were on the gold standard

Question 19

Expansionary fiscal policy is likely to lead a nation's currency to depreciate.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is NOT a reason why the effects of tax cuts on government spending dissipate and each additional change in consumption and income becomes smaller and smaller?

Accepted Answer

A) Some of the increase in income will be lost through taxation. 
B) Some of the increase is saved and does not result in an increase in consumer demand. 
C) Some of the increase in consumption will be an additional demand for imported goods. 
D) Some of the increase is used for business investment. 
A) Some of the increase in income will be lost through taxation. 
B) Some of the increase is saved and does not result in an increase in consumer demand. 
C) Some of the increase in consumption will be an additional demand for imported goods. 
D) Some of the increase is used for business investment.

When the economy is using all of its factors of production,the aggregate supply curve is vertical.

The J-curve shows that,after a currency depreciation,

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

Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation.Explain why the curve has the shape that it does.

Expenditure-reducing policies designed to improve a current account deficit

Expansionary monetary policy involves an increase in the money supply and a fall in interest rates,leading to a positive expansion in income.

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

Which of the following correctly describes the relationship between savings,the government budget balance,and the current account?

Changes in aggregate demand

Explain why expenditure switching and expenditure reducing policies need to be used together.

Which of the following correctly explains how expansionary monetary policy works?

When spending and incomes in an economy increase,

A depreciation of the currency can switch spending away from foreign goods and reduce the effect of rising incomes on the current account.

Which of the following is FALSE concerning the long run?

Explain why in an economy with fixed exchange rates,monetary policy will not cause expenditure switching.

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

If consumption spending increases because people feel more confident about the future,

Explain how exchange rate policies affected economies during the Great Depression.

Expansionary fiscal policy is likely to lead a nation's currency to depreciate.

Which of the following is NOT a reason why the effects of tax cuts on government spending dissipate and each additional change in consumption and income becomes smaller and smaller?

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

China and India in the World Economy

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Exam 11: An Introduction to Open Economy Macroeconomics

When the economy is using all of its factors of production,the aggregate supply curve is vertical.

The J-curve shows that,after a currency depreciation,

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

Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation.Explain why the curve has the shape that it does.

Expenditure-reducing policies designed to improve a current account deficit

Expansionary monetary policy involves an increase in the money supply and a fall in interest rates,leading to a positive expansion in income.

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

Which of the following correctly describes the relationship between savings,the government budget balance,and the current account?

Changes in aggregate demand

Explain why expenditure switching and expenditure reducing policies need to be used together.

Which of the following correctly explains how expansionary monetary policy works?

When spending and incomes in an economy increase,

A depreciation of the currency can switch spending away from foreign goods and reduce the effect of rising incomes on the current account.

Which of the following is FALSE concerning the long run?

Explain why in an economy with fixed exchange rates,monetary policy will not cause expenditure switching.

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

If consumption spending increases because people feel more confident about the future,

Explain how exchange rate policies affected economies during the Great Depression.

Expansionary fiscal policy is likely to lead a nation's currency to depreciate.

Which of the following is NOT a reason why the effects of tax cuts on government spending dissipate and each additional change in consumption and income becomes smaller and smaller?

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

China and India in the World Economy

Filters