Question 1

Which of the following is NOT one of the factors that could affect the size of the multiplier?

Accepted Answer

A) What sector of the economy receives the initial increase in spending 
B) How the spending is financed 
C) Whether the economy is in recession or at full employment 
D) Whether the economy is in autarky equilibrium 
A) What sector of the economy receives the initial increase in spending 
B) How the spending is financed 
C) Whether the economy is in recession or at full employment 
D) Whether the economy is in autarky equilibrium

Question 2

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 3

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

Accepted Answer

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

Question 4

Monetary policy is more effective in an open economy than in a closed economy.

Accepted Answer

A) True 
 B)False

Question 5

Expenditure switching policies are best used on their own.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are possible explanations for why it took so long for trade balances to respond to the depreciation of the dollar except

Accepted Answer

A) the prior increase in the value of the dollar had padded the profit margins of foreign producers. 
B) foreign trade barriers made it impossible for the United States to substantially expand exports it bought. 
C) there were still impacts from earlier appreciations working through the system. 
D) exports began to increase from a much lower base than imports. 
A) the prior increase in the value of the dollar had padded the profit margins of foreign producers. 
B) foreign trade barriers made it impossible for the United States to substantially expand exports it bought. 
C) there were still impacts from earlier appreciations working through the system. 
D) exports began to increase from a much lower base than imports.

Question 7

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 8

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

Question 9

Fiscal policy does not have an effect on interest rates.

Accepted Answer

A) True 
 B)False

Question 10

Carefully explain why monetary policy is likely to be more effective in a open economy than fiscal policy.

Accepted Answer

Expansionary fiscal policy increases int

Question 11

When macroeconomic policies are not coordinated,

Accepted Answer

A) macroeconomic policies will not be effective. 
B) expansionary policies in one country are likely to increase global imbalances. 
C) worldwide recessions are likely. 
D) low-income countries cannot grow. 
A) macroeconomic policies will not be effective. 
B) expansionary policies in one country are likely to increase global imbalances. 
C) worldwide recessions are likely. 
D) low-income countries cannot grow.

Question 12

Which of the following is an example of expansionary monetary policy?

Accepted Answer

A) Open market purchases of bonds 
B) A decrease in government spending 
C) A decrease in taxes 
D) An increase in interest rates 
A) Open market purchases of bonds 
B) A decrease in government spending 
C) A decrease in taxes 
D) An increase in interest rates

Question 13

When aggregate demand meets aggregate supply in the horizontal portion of the aggregate supply curve,

Accepted Answer

A) a decrease in demand will cause prices to rise but no change in output. 
B) a decrease in demand will cause output to rise but no change in prices. 
C) a decrease in demand will cause prices to fall but no change in output. 
D) a decrease in demand will cause output to fall but no change in prices. 
A) a decrease in demand will cause prices to rise but no change in output. 
B) a decrease in demand will cause output to rise but no change in prices. 
C) a decrease in demand will cause prices to fall but no change in output. 
D) a decrease in demand will cause output to fall but no change in prices.

Question 14

Fiscal policy is

Accepted Answer

A) the selling of government bonds by the Treasury. 
B) the deliberate manipulation of the money supply designed to affect the interest rate. 
C) the deliberate manipulation of taxation and spending designed to affect the economy. 
D) the selling of foreign exchange reserves designed to change the exchange rate. 
A) the selling of government bonds by the Treasury. 
B) the deliberate manipulation of the money supply designed to affect the interest rate. 
C) the deliberate manipulation of taxation and spending designed to affect the economy. 
D) the selling of foreign exchange reserves designed to change the exchange rate.

Question 15

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

Question 16

Expenditure switching refers to

Accepted Answer

A) a switching back and forth between investment and consumption expenditures. 
B) a switching back and forth between domestic and foreign goods in response to changes in the exchange rate. 
C) a switching back and forth between domestic and foreign goods in response to changes in the interest rate. 
D) a switching of back and forth in the current account from a deficit to a surplus and vice versa. 
A) a switching back and forth between investment and consumption expenditures. 
B) a switching back and forth between domestic and foreign goods in response to changes in the exchange rate. 
C) a switching back and forth between domestic and foreign goods in response to changes in the interest rate. 
D) a switching of back and forth in the current account from a deficit to a surplus and vice versa.

Question 17

Which of the following correctly explains how expansionary fiscal 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 18

Intermediate inputs are

Accepted Answer

A) goods used for household consumption only. 
B) goods used for government consumption only. 
C) goods purchased by one business from another to use in production. 
D) raw materials used in the production process. 
A) goods used for household consumption only. 
B) goods used for government consumption only. 
C) goods purchased by one business from another to use in production. 
D) raw materials used in the production process.

Question 19

Which of the following is true?

Accepted Answer

A) Points along the aggregate supply curve show the equilibrium levels of output and prices that are consistent on the demand side of the economy. 
B) Points along the aggregate demand curve show the equilibrium levels of output and prices that are consistent on the supply side of the economy. 
C) Aggregate demand shows the levels of GDP and prices where expenditure decisions and production decisions match. 
D) Aggregate supply shows the levels of GDP and prices where expenditure decisions and production decisions match. 
A) Points along the aggregate supply curve show the equilibrium levels of output and prices that are consistent on the demand side of the economy. 
B) Points along the aggregate demand curve show the equilibrium levels of output and prices that are consistent on the supply side of the economy. 
C) Aggregate demand shows the levels of GDP and prices where expenditure decisions and production decisions match. 
D) Aggregate supply shows the levels of GDP and prices where expenditure decisions and production decisions match.

Question 20

Government spending and taxes

Accepted Answer

A) do not change aggregate demand. 
B) are an important component of aggregate supply. 
C) do not play a big role in determining GDP. 
D) are a major determinant of aggregate demand. 
A) do not change aggregate demand. 
B) are an important component of aggregate supply. 
C) do not play a big role in determining GDP. 
D) are a major determinant of aggregate demand.

Which of the following is NOT one of the factors that could affect the size of the multiplier?

When aggregate demand increases,

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

Monetary policy is more effective in an open economy than in a closed economy.

Expenditure switching policies are best used on their own.

All of the following are possible explanations for why it took so long for trade balances to respond to the depreciation of the dollar except

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.

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

Fiscal policy does not have an effect on interest rates.

Carefully explain why monetary policy is likely to be more effective in a open economy than fiscal policy.

When macroeconomic policies are not coordinated,

Which of the following is an example of expansionary monetary policy?

When aggregate demand meets aggregate supply in the horizontal portion of the aggregate supply curve,

Fiscal policy is

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.

Expenditure switching refers to

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

Intermediate inputs are

Which of the following is true?

Government spending and taxes

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

Exam 11: An Introduction to Open Economy Macroeconomics

Which of the following is NOT one of the factors that could affect the size of the multiplier?

When aggregate demand increases,

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

Monetary policy is more effective in an open economy than in a closed economy.

Expenditure switching policies are best used on their own.

All of the following are possible explanations for why it took so long for trade balances to respond to the depreciation of the dollar except

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.

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

Fiscal policy does not have an effect on interest rates.

Carefully explain why monetary policy is likely to be more effective in a open economy than fiscal policy.

When macroeconomic policies are not coordinated,

Which of the following is an example of expansionary monetary policy?

When aggregate demand meets aggregate supply in the horizontal portion of the aggregate supply curve,

Fiscal policy is

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.

Expenditure switching refers to

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

Intermediate inputs are

Which of the following is true?

Government spending and taxes

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