Question 1

The case of New Zealand,described in the text,draws what technical conclusion regarding the country's international debt position?

Accepted Answer

Fundamentally,the question is whether or

Question 2

Advocates of flexible exchange rates claim that under flexible exchange rates,the central bank of

Accepted Answer

A) an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
B) a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
C) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
D) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort. 
E) an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort. 
A) an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
B) a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
C) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
D) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort. 
E) an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort.

Question 3

Why do governments prefer to avoid current account deficits that are too large?

Accepted Answer

A current account deficit may pose no pr

Question 4

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

Accepted Answer

A) monetary policy oriented towards domestic goals 
B) exchange rate instability 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation 
A) monetary policy oriented towards domestic goals 
B) exchange rate instability 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation

Question 5

"Fixed exchange rates are not even an option for most countries." Discuss.

Accepted Answer

Durable fixed exchange rate arrangements

Question 6

An expenditure-changing policy

Accepted Answer

A) alters the direction of the economy's total demand for goods and services. 
B) alters the level of the economy's total demand for goods and services. 
C) has no effect on aggregate demand. 
D) is the same thing as an expenditure-switching policy. 
E) affects aggregate supply but not aggregate demand. 
A) alters the direction of the economy's total demand for goods and services. 
B) alters the level of the economy's total demand for goods and services. 
C) has no effect on aggregate demand. 
D) is the same thing as an expenditure-switching policy. 
E) affects aggregate supply but not aggregate demand.

Question 7

When all changes in the world are due to

Accepted Answer

A) fiscal policy,purchasing power parity holds true in the long run. 
B) monetary policy,purchasing power parity does not hold true in the long run. 
C) monetary policy,purchasing power parity holds true in the long run. 
D) monetary policy,purchasing power parity holds true even in the short run. 
E) fiscal and monetary policy,purchasing power parity holds true in the long run. 
A) fiscal policy,purchasing power parity holds true in the long run. 
B) monetary policy,purchasing power parity does not hold true in the long run. 
C) monetary policy,purchasing power parity holds true in the long run. 
D) monetary policy,purchasing power parity holds true even in the short run. 
E) fiscal and monetary policy,purchasing power parity holds true in the long run.

Question 8

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

Accepted Answer

A) the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B) consumer fear of stock market instability. 
C) producer fear of rising wages. 
D) the lack of convertibility of gold into silver. 
E) low consumer spending because of balance of payment crises. 
A) the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B) consumer fear of stock market instability. 
C) producer fear of rising wages. 
D) the lack of convertibility of gold into silver. 
E) low consumer spending because of balance of payment crises.

Question 9

Countries with large current account surpluses might be viewed by the market as candidates for

Accepted Answer

A) devaluation. 
B) revaluation. 
C) bankruptcy. 
D) depreciation. 
E) investment. 
A) devaluation. 
B) revaluation. 
C) bankruptcy. 
D) depreciation. 
E) investment.

Question 10

Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible.

Accepted Answer

Since specie inflows drive up domestic p

Question 11

Advocates of flexible exchange rates claim that under flexible exchange rates,a currency

Accepted Answer

A) depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing the world demand for them. 
B) appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing world demand for them. 
C) appreciation caused by decreasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing world demand for them. 
D) appreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products and increasing world demand for them. 
E) appreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products and by decreasing world demand for them. 
A) depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing the world demand for them. 
B) appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing world demand for them. 
C) appreciation caused by decreasing the money supply would reduce unemployment by lowering the relative price of domestic products and increasing world demand for them. 
D) appreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products and increasing world demand for them. 
E) appreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products and by decreasing world demand for them.

Question 12

Which of the following is the MOST accurate?

Accepted Answer

A) U.S.macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B) U.S.macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C) U.S.macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D) U.S.macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E) U.S.macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973. 
A) U.S.macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B) U.S.macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C) U.S.macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D) U.S.macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E) U.S.macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973.

Question 13

Why do governments prefer to avoid excessive current account surpluses? Or,why are growing domestic claims to foreign wealth ever a problem?

Accepted Answer

For a given level of national saving,an

Question 14

Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by

Accepted Answer

A) using tight monetary policy. 
B) using expansionary fiscal policy. 
C) negotiating with the central bank of the United States. 
D) setting their domestic interest rate equal to the U.S.interest rate. 
E) holding their exchange rates constantly pegged to the euro and yen. 
A) using tight monetary policy. 
B) using expansionary fiscal policy. 
C) negotiating with the central bank of the United States. 
D) setting their domestic interest rate equal to the U.S.interest rate. 
E) holding their exchange rates constantly pegged to the euro and yen.

Question 15

What are the components of the trilemma that is encountered when a country chooses its monetary policy and what is the meaning of the term?

Accepted Answer

The components are (1)exchange rates,(2)

Question 16

Which system of interest rates is theoretically worst for policy coordination among the industrial countries of the world? How has this played out since the 1980s?

Accepted Answer

- pro-fixed rate theorists predicted tha

Question 17

Governments prefer to avoid excessive current account surpluses because

Accepted Answer

A) the returns to domestic savings are more difficult to tax than those on assets abroad. 
B) an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income. 
C) foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture. 
D) an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income. 
E) domestic savings increase with more investment abroad. 
A) the returns to domestic savings are more difficult to tax than those on assets abroad. 
B) an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income. 
C) foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture. 
D) an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income. 
E) domestic savings increase with more investment abroad.

Question 18

A sudden decrease in the U.S.price level

Accepted Answer

A) makes those with dollar debts worse off. 
B) makes those with dollar debts better off. 
C) do not affect those with dollar debts. 
D) makes those with DM worse off. 
E) makes creditors worse off. 
A) makes those with dollar debts worse off. 
B) makes those with dollar debts better off. 
C) do not affect those with dollar debts. 
D) makes those with DM worse off. 
E) makes creditors worse off.

Question 19

The costs of inflation have been most apparent in the post-war period in countries like

Accepted Answer

A) Serbia. 
B) Belgium. 
C) the United States. 
D) Canada. 
E) Japan. 
A) Serbia. 
B) Belgium. 
C) the United States. 
D) Canada. 
E) Japan.

Question 20

Fiscal expansion

Accepted Answer

A) stimulates aggregate demand and causes output to decline. 
B) decreases aggregate demand and causes output to decline. 
C) stimulates aggregate demand and causes output to rise. 
D) decreases aggregate demand and causes output to rise. 
E) decreases government expenditures. 
A) stimulates aggregate demand and causes output to decline. 
B) decreases aggregate demand and causes output to decline. 
C) stimulates aggregate demand and causes output to rise. 
D) decreases aggregate demand and causes output to rise. 
E) decreases government expenditures.

Exam 19: International Monetary Systems: An Historical Overview

The case of New Zealand,described in the text,draws what technical conclusion regarding the country's international debt position?

Advocates of flexible exchange rates claim that under flexible exchange rates,the central bank of

Why do governments prefer to avoid current account deficits that are too large?

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

"Fixed exchange rates are not even an option for most countries." Discuss.

An expenditure-changing policy

When all changes in the world are due to

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

Countries with large current account surpluses might be viewed by the market as candidates for

Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible.

Advocates of flexible exchange rates claim that under flexible exchange rates,a currency

Which of the following is the MOST accurate?

Why do governments prefer to avoid excessive current account surpluses? Or,why are growing domestic claims to foreign wealth ever a problem?

Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by

What are the components of the trilemma that is encountered when a country chooses its monetary policy and what is the meaning of the term?

Which system of interest rates is theoretically worst for policy coordination among the industrial countries of the world? How has this played out since the 1980s?

Governments prefer to avoid excessive current account surpluses because

A sudden decrease in the U.S.price level

The costs of inflation have been most apparent in the post-war period in countries like

Fiscal expansion

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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