Question 1

A Chilean engineer comes to the United States to work on a one-year project and earns $75,000.In the balance of payments,this transaction is a(n) _____ of $75,000.

Accepted Answer

A)   transfer outflow
B)   income outflow
C)   export
D)   income inflowE) B) and C)
F) A) and D)

Question 2

What is the mechanism,under a fixed exchange rate system,by which an expansionary monetary policy affects the current account?

Accepted Answer

An expansionary policy increases aggrega...

Question 3

An investment by a Malaysian company in a wine production plant in California is included in the _____ account.

Accepted Answer

A)   current
B)   financing
C)   trade
D)   capitalE) B) and C)
F) A) and C)

Question 4

Describe the implications for fiscal and monetary policies of fixed and flexible exchange rate systems.Given the flexible exchange rate system in use today,which type of policy has become more important?

Accepted Answer

Fiscal policies are levels of taxation a...

Question 5

In 2012,the United States ran both a _____ account deficit and a _____ account surplus.

Accepted Answer

A)   current;capital
B)   capital;trade
C)   capital;current
D)   trade;currentE) B) and D)
F) A) and B)

Question 6

Under the gold standard,if a country imported more than it exported:

Accepted Answer

A)   the deficit had to be covered with its inventory of gold.
B)   the deficit was balanced with a surplus in its capital account.
C)   the deficit was balanced by increasing the money supply.
D)   the trade deficit would have to be balanced with a fiscal budget surplus.E) None of the above
F) A) and D)

Question 7

A currency depreciates when:

Accepted Answer

A)   the price of that currency rises in the currency exchange markets.
B)   foreigners make an agreement with each other to increase competition for that currency.
C)   the economy of that country is growing too rapidly.
D)   it becomes less valuable relative to other currencies.E) All of the above
F) B) and C)

Question 8

The components of the current account include imports of goods and services,exports of goods and services,and:

Accepted Answer

A)   net transfers.
B)   any increase in U.S.-owned assets abroad.
C)   military sales.
D)   foreign-held money orders.E) None of the above
F) B) and C)

Question 9

One effect of the international gold standard was that it tended to transmit economic problems across national borders.

Accepted Answer

A) True 
 B)False

Question 10

If the United States increases the interest rate in order to attract foreign currency to support the value of the dollar,then the United States is operating to maintain a _____ exchange rate.

Accepted Answer

A)   fixed
B)   floating
C)   flexible
D)   fortuitousE) A) and D)
F) B) and C)

Question 11

The two main parts of the balance of payments are the:

Accepted Answer

A)   capital and current accounts.
B)   consumption and investment accounts.
C)   public and private accounts.
D)   foreign and domestic accounts.E) None of the above
F) B) and C)

Question 12

In a country with policy of using a _____ exchange rate,the government determines the exchange rates,then adjusts macroeconomic policies to maintain the rates.

Accepted Answer

A)   nominal
B)   fixed
C)   flexible (or floating) 
D)   realE) C) and D)
F) A) and C)

Question 13

The buying and selling of foreign currency is:

Accepted Answer

A)   foreign exchange.
B)   foreign trade.
C)   the balance of payments.
D)   the capital account.E) B) and C)
F) None of the above

Question 14

Describe the differences between fixed and flexible exchange rate systems.How did the type of system in use today evolve?

Accepted Answer

How the monetary and fiscal policies of ...

Question 15

A fixed exchange rate is one in which the currency markets determine the exchange rate.

Accepted Answer

A) True 
 B)False

Question 16

An increase in French domestic income will hurt France's current account as long as exchange rates are flexible.

Accepted Answer

A) True 
 B)False

Question 17

The balance of trade is included in the:

Accepted Answer

A)   current account.
B)   capital account.
C)   surplus account.
D)   None of the answers is correct.E) C) and D)
F) None of the above

Question 18

If the domestic price level equals the foreign country's price level,the real exchange rate:

Accepted Answer

A)   equals one.
B)   equals the nominal exchange rate.
C)   exceeds the nominal exchange rate.
D)   is less than the nominal exchange rate.E) All of the above
F) A) and D)

Question 19

Suppose U.S.monetary authorities increase the money supply to lower interest rates and stimulate the economy.Which of the following is a plausible scenario?

Accepted Answer

A)   The higher money supply will cause unemployment to fall,encouraging more immigrants to come to the United States and bring their funds,which further increases the money supply.
B)   The resulting inflation will cause the dollar to appreciate,encouraging Americans to buy more domestic goods.
C)   The larger money supply will attract borrowers from abroad who will come to the United States and so increase aggregate demand.
D)   The lower interest rates will cause investors to take their funds to other countries,thereby partially offsetting the increase in the domestic money supply.E) None of the above
F) A) and D)

Question 20

Suppose the exchange rate between the U.S.dollar and the euro is $1 = 1.2 euros.A currency trader thinks that the euro will equal $1 in the near future.What profitable trade can be done? Is there any risk in this trade?

Accepted Answer

This trade is risky because th...

Exam 16: Open Economy Macroeconomic

Under the gold standard,if a country imported more than it exported:

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Describe the implications for fiscal and monetary policies of fixed and flexible exchange rate systems.Given the flexible exchange rate system in use today,which type of policy has become more important?

Correct AnswerverifiedFiscal policies are levels of taxation a...View AnswerShow Answer

In a country with policy of using a _____ exchange rate,the government determines the exchange rates,then adjusts macroeconomic policies to maintain the rates.

Correct AnswerverifiedShow Answer

An investment by a Malaysian company in a wine production plant in California is included in the _____ account.

Correct AnswerverifiedShow Answer

One effect of the international gold standard was that it tended to transmit economic problems across national borders.

Correct AnswerverifiedShow Answer

In 2012,the United States ran both a _____ account deficit and a _____ account surplus.

Correct AnswerverifiedShow Answer

If the domestic price level equals the foreign country's price level,the real exchange rate:

Correct AnswerverifiedShow Answer

A Chilean engineer comes to the United States to work on a one-year project and earns $75,000.In the balance of payments,this transaction is a(n) _____ of $75,000.

Correct AnswerverifiedShow Answer

If the United States increases the interest rate in order to attract foreign currency to support the value of the dollar,then the United States is operating to maintain a _____ exchange rate.

Correct AnswerverifiedShow Answer

Describe the differences between fixed and flexible exchange rate systems.How did the type of system in use today evolve?

Correct AnswerverifiedHow the monetary and fiscal policies of ...View AnswerShow Answer

The components of the current account include imports of goods and services,exports of goods and services,and:

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A currency depreciates when:

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The balance of trade is included in the:

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Suppose the exchange rate between the U.S.dollar and the euro is $1 = 1.2 euros.A currency trader thinks that the euro will equal $1 in the near future.What profitable trade can be done? Is there any risk in this trade?

Correct AnswerverifiedThis trade is risky because th...View AnswerShow Answer

What is the mechanism,under a fixed exchange rate system,by which an expansionary monetary policy affects the current account?

Correct AnswerverifiedAn expansionary policy increases aggrega...View AnswerShow Answer

An increase in French domestic income will hurt France's current account as long as exchange rates are flexible.

Correct AnswerverifiedShow Answer

A fixed exchange rate is one in which the currency markets determine the exchange rate.

Correct AnswerverifiedShow Answer

The buying and selling of foreign currency is:

Correct AnswerverifiedShow Answer

Suppose U.S.monetary authorities increase the money supply to lower interest rates and stimulate the economy.Which of the following is a plausible scenario?

Correct AnswerverifiedShow Answer

The two main parts of the balance of payments are the:

Correct AnswerverifiedShow Answer

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Fiscal policies are levels of taxation a...
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In 2012,the United States ran both a _ account deficit and a _ account surplus.

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How the monetary and fiscal policies of ...
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Correct Answer
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This trade is risky because th...
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An expansionary policy increases aggrega...
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Correct Answer
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Correct Answer
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