Question 1

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

Accepted Answer

An increase in government purchases fina...

Question 2

An economy that has interactions in trade or finance with other economies is referred to as

Accepted Answer

A)  an open economy.
B)  a closed economy.
C)  a trade-balanced economy.
D)  a net foreign investment economy.E) A) and D)
F) B) and D)

Question 3

Figure 18-1 
-Refer to Figure 18-1.Italians cut back on smoking and cut their demand for American cigarettes in half.Assuming all else remains constant,this would be represented as a movement from

Accepted Answer

A)  B to A.
B)  D to C.
C)  B to C.
D)  A to D.E) B) and C)
F) All of the above

Question 4

If the exchange rate between the Mexican peso and the U.S.dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar,what is the exchange rate when expresses in terms of dollars per peso?

Accepted Answer

If 13.5 pesos = 1 do...

Question 5

How might a budget deficit affect the balance of trade?

Accepted Answer

A)  A budget deficit raises interest rates,which raises exchange rates and increases the balance of trade.
B)  A budget deficit raises interest rates,which raises exchange rates and reduces the balance of trade.
C)  A budget deficit reduces interest rates,which raises exchange rates and reduces the balance of trade.
D)  A budget deficit reduces interest rates,which reduces exchange rates and reduces the balance of trade.E) A) and D)
F) B) and D)

Question 6

Which of the following would decrease net exports in the United States?

Accepted Answer

A)  An American party planner purchases 350 piñatas from Mexico.
B)  The government of Mexico purchases 2,000 Dell laptop computers from the United States.
C)  A Mexican citizen purchases 100 shares of stock in IBM.
D)  The U.S.government donates $25 million to Mexico to help victims of a hurricane in Mexico.E) B) and D)
F) None of the above

Question 7

Suppose the Fed purchases Treasury securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.

Accepted Answer

A)  decrease;appreciate
B)  decrease;depreciate
C)  increase;depreciate
D)  increase;appreciateE) A) and B)
F) A) and C)

Question 8

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

Accepted Answer

A) True 
 B)False

Question 9

Figure 18-1 
-Refer to Figure 18-1.The depreciation of the dollar is represented as a movement from

Accepted Answer

A)  B to A.
B)  D to C.
C)  B to C.
D)  A to C.
E)  A to B.F) A) and E)
G) A) and D)

Question 10

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

Accepted Answer

A)  both the euro and dollar have appreciated.
B)  both the euro and dollar have depreciated.
C)  the euro has appreciated and the dollar has depreciated.
D)  the euro has depreciated and the dollar has appreciated.E) C) and D)
F) B) and D)

Question 11

An appreciating yen makes Japanese products

Accepted Answer

A)  more expensive in foreign markets.
B)  less expensive in foreign markets.
C)  more expensive in the Japanese market.
D)  more expensive in both foreign markets and the Japanese market.E) None of the above
F) C) and D)

Question 12

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

Accepted Answer

A)  consumption
B)  private investment
C)  net exports
D)  government spendingE) None of the above
F) B) and D)

Question 13

Currency traders expect the value of the dollar to rise.What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

Accepted Answer

A)  Demand for dollars will increase,and supply of dollars will decrease.
B)  Demand for dollars will increase,and supply of dollars will increase.
C)  Demand for dollars will decrease,and supply of dollars will increase.
D)  Demand for dollars will decrease,and supply of dollars will decrease.E) B) and C)
F) A) and B)

Question 14

In an open economy,expansionary monetary policy will cause

Accepted Answer

A)  consumption,investment,and net exports to rise.
B)  consumption and investment to rise,but net exports will fall.
C)  consumption to rise,but investment and net exports will fall.
D)  consumption to fall,but investment and net exports will rise.E) A) and B)
F) A) and C)

Question 15

Figure 18-1 
-Refer to Figure 18-1.The depreciation of the euro is represented as a movement from

Accepted Answer

A)  D to A.
B)  C to D.
C)  B to C.
D)  B to A.E) None of the above
F) All of the above

Question 16

Since 1999,the U.S.________ account has recorded relatively minor transactions,such as migrants' transfers,and sales and purchases of nonproduced,nonfinancial assets.

Accepted Answer

A)  current
B)  capital
C)  financial
D)  balance of trade accountE) None of the above
F) A) and D)

Question 17

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

Accepted Answer

A)  The balance on the financial account is positive.
B)  The trade balance is positive.
C)  Net foreign investment is positive.
D)  The balance on the capital account is negative.E) A) and B)
F) A) and C)

Question 18

Which of the following is an example of foreign direct investment in China?

Accepted Answer

A)  U.S.auto entrepreneur Elon Musk buys stock in Alibaba Group Holding Limited of Hangzhou,China.
B)  Chinese Shenzen Airlines company buys a small U.S.midwest airline company,Air Chicago.
C)  The U.S.company Walmart buys a warehouse in Shanghai.
D)  The bank of China purchases U.S.Treasury bonds.
E)  A U.S.foreign exchange speculator buys $200,000 worth of the Chinese currency the yuan.F) C) and D)
G) D) and E)

Question 19

The balance of payments includes all of the following accounts except

Accepted Answer

A)  the current account.
B)  the financial account.
C)  the capital account.
D)  the national debt account.E) C) and D)
F) A) and B)

Question 20

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and Russia decreases from 28 to 23,

Accepted Answer

A)  the prices of U.S.goods and services have decreased by 5% relative to Russia.
B)  the prices of U.S.goods and services have increased by 25.5% relative to Russia.
C)  the prices of U.S.goods and services have decreased by 18% relative to Russia.
D)  the prices of U.S.goods and services have increased by 22% relative to Russia.E) A) and B)
F) B) and D)

Exam 18: Macroeconomics in an Open Economy

Which of the following would decrease net exports in the United States?

Correct AnswerverifiedShow Answer

The balance of payments includes all of the following accounts except

Correct AnswerverifiedShow Answer

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

Correct AnswerverifiedShow Answer

In an open economy,expansionary monetary policy will cause

Correct AnswerverifiedShow Answer

Which of the following is an example of foreign direct investment in China?

Correct AnswerverifiedShow Answer

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

Correct AnswerverifiedAn increase in government purchases fina...View AnswerShow Answer

Figure 18-1 -Refer to Figure 18-1.The depreciation of the euro is represented as a movement from

Correct AnswerverifiedShow Answer

Figure 18-1 -Refer to Figure 18-1.Italians cut back on smoking and cut their demand for American cigarettes in half.Assuming all else remains constant,this would be represented as a movement from

Correct AnswerverifiedShow Answer

Since 1999,the U.S.________ account has recorded relatively minor transactions,such as migrants' transfers,and sales and purchases of nonproduced,nonfinancial assets.

Correct AnswerverifiedShow Answer

An economy that has interactions in trade or finance with other economies is referred to as

Correct AnswerverifiedShow Answer

Suppose the Fed purchases Treasury securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.

Correct AnswerverifiedShow Answer

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and Russia decreases from 28 to 23,

Correct AnswerverifiedShow Answer

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

Correct AnswerverifiedShow Answer

An appreciating yen makes Japanese products

Correct AnswerverifiedShow Answer

If the exchange rate between the Mexican peso and the U.S.dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar,what is the exchange rate when expresses in terms of dollars per peso?

Correct AnswerverifiedIf 13.5 pesos = 1 do...View AnswerShow Answer

How might a budget deficit affect the balance of trade?

Correct AnswerverifiedShow Answer

Currency traders expect the value of the dollar to rise.What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

Correct AnswerverifiedShow Answer

Figure 18-1 -Refer to Figure 18-1.The depreciation of the dollar is represented as a movement from

Correct AnswerverifiedShow Answer

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

Correct AnswerverifiedShow Answer

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

Correct AnswerverifiedShow Answer

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An increase in government purchases fina...
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Suppose the Fed purchases Treasury securities.Interest rates in the United States will and the U.S.dollar will against foreign currencies.

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If 13.5 pesos = 1 do...
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