Question 1

If the United States is trading with Italy and the United States has high inflation while Italy does not,the prices of American goods in Italy will climb.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following items is NOT a component of the balance of payments accounts?

Accepted Answer

A)   commercial account
B)   capital account
C)   current account
D)   financial accountE) B) and D)
F) All of the above

Question 3

Flexible exchange rates hamper fiscal policy but reinforce monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

If one nation is in an economic expansion while other nations are in recession,then that country's currency will appreciate.

Accepted Answer

A) True 
 B)False

Question 5

If European products become more popular in world markets because of excellent marketing,then the _____ can be expected to _____.

Accepted Answer

A)   U.S.dollar;rise
B)   euro;appreciate
C)   euro;drop in value
D)   euro;undergo no change in valueE) A) and D)
F) A) and C)

Question 6

Under a fixed exchange rate system and a neutral monetary policy,an expansionary fiscal policy will be reinforced by an open economy because of the resultant capital _____ U.S.capital markets,which _____ interest rates.

Accepted Answer

A)   outflow from;reduces
B)   outflow from;increases
C)   inflow to;reduces
D)   inflow to;increasesE) A) and B)
F) A) and C)

Question 7

If U.S.exports were $8,300 and U.S imports were $10,300,what is the trade deficit?

Accepted Answer

A)   $8,300
B)   $18,600
C)   $2,000
D)   $10,300E) B) and D)
F) None of the above

Question 8

The capital account includes payments for imports and exports of goods and services,incomes flowing into and out of the country,and net transfers of money.

Accepted Answer

A) True 
 B)False

Question 9

Inflation in France will hurt France's current account as long as exchange rates are flexible.

Accepted Answer

A) True 
 B)False

Question 10

Consider the U.S.dollar and the British pound.When the dollar price per pound rises:

Accepted Answer

A)   the dollar depreciates against the pound.
B)   the pound depreciates against the dollar.
C)   the dollar appreciates against the pound.
D)   U.S.imports from Britain rise.E) A) and B)
F) None of the above

Question 11

In which currency has gold long been priced on global markets?

Accepted Answer

A)   the British pound
B)   the German mark (now the euro) 
C)   the Japanese yen
D)   the U.S.dollarE) A) and C)
F) C) and D)

Question 12

Appreciation of the U.S.dollar versus the British pound may occur when:

Accepted Answer

A)   interest rates in the United States decrease and interest rates in the United Kingdom stay the same.
B)   disposable income in the United States falls and income in the United Kingdom stays the same.
C)   inflation occurs in the United States but not in the United Kingdom.
D)   interest rates in the United States and in the United Kingdom increase.E) None of the above
F) All of the above

Question 13

If the dollar appreciates,aggregate demand _____ and output in the short run _____.

Accepted Answer

A)   rises;expands
B)   rises;decreases
C)   falls;decreases
D)   falls;expandsE) A) and B)
F) A) and D)

Question 14

Which of the following items is NOT a component of the current account?

Accepted Answer

A)   imports
B)   income received
C)   net increase in foreign-owned holdings
D)   net transfersE) None of the above
F) All of the above

Question 15

Which of the following currency trades is NOT consistent with the current exchange rates of 500 Chilean pesos for US$1 and 1 pound sterling for US$1.50?

Accepted Answer

A)   1,000 Chilean pesos for US$2
B)   1,000 Chilean pesos for 2 British pounds
C)   1,000 British pounds for US$1,500
D)   1,500 Chilean pesos for 2 British poundsE) B) and C)
F) B) and D)

Question 16

Until the 1970s:

Accepted Answer

A)   all major currencies were allowed to float.
B)   fixed exchange rates consistently led to economic prosperity.
C)   most industrialized countries used some form of fixed exchange rate.
D)   all international transactions were made with gold.E) B) and C)
F) None of the above

Question 17

If Eddie travels to New Zealand,his lodging and meals will be accounted for as:

Accepted Answer

A)   a subtraction from the U.S.current account.
B)   an addition to the U.S.current account.
C)   a subtraction from the U.S.capital account.
D)   an addition to the U.S.capital account.E) A) and B)
F) A) and C)

Question 18

As long as assets are perfectly substitutable,an increase in the interest rate in France relative to Canada will cause:

Accepted Answer

A)   capital to move from Canada to France.
B)   capital to move from France to Canada.
C)   an interest rate decrease in Canada.
D)   nothing to happen because the assets are perfectly substitutable.E) C) and D)
F) All of the above

Question 19

Under flexible exchange rates,an open economy _____ monetary policy and _____ fiscal policy.

Accepted Answer

A)   hampers;reinforces
B)   reinforces;hampers
C)   hampers;hampers
D)   reinforces;reinforcesE) B) and C)
F) B) and D)

Question 20

Which of the following currency trades is consistent with the current exchange rates of 500 Chilean pesos for US$1 and 1 British pound for US$1.50?

Accepted Answer

A)   1,250 Chilean pesos for 2 British pounds
B)   1,000 Chilean pesos for 2 British pounds
C)   10 British pounds for 750 Chilean pesos
D)   1,500 Chilean pesos for 2 British poundsE) A) and B)
F) A) and C)

Exam 16: Open Economy Macroeconomic

If the United States is trading with Italy and the United States has high inflation while Italy does not,the prices of American goods in Italy will climb.

Correct AnswerverifiedShow Answer

Appreciation of the U.S.dollar versus the British pound may occur when:

Correct AnswerverifiedShow Answer

Which of the following items is NOT a component of the current account?

Correct AnswerverifiedShow Answer

If the dollar appreciates,aggregate demand _____ and output in the short run _____.

Correct AnswerverifiedShow Answer

If Eddie travels to New Zealand,his lodging and meals will be accounted for as:

Correct AnswerverifiedShow Answer

The capital account includes payments for imports and exports of goods and services,incomes flowing into and out of the country,and net transfers of money.

Correct AnswerverifiedShow Answer

If one nation is in an economic expansion while other nations are in recession,then that country's currency will appreciate.

Correct AnswerverifiedShow Answer

Which of the following items is NOT a component of the balance of payments accounts?

Correct AnswerverifiedShow Answer

In which currency has gold long been priced on global markets?

Correct AnswerverifiedShow Answer

Consider the U.S.dollar and the British pound.When the dollar price per pound rises:

Correct AnswerverifiedShow Answer

Under a fixed exchange rate system and a neutral monetary policy,an expansionary fiscal policy will be reinforced by an open economy because of the resultant capital _____ U.S.capital markets,which _____ interest rates.

Correct AnswerverifiedShow Answer

If European products become more popular in world markets because of excellent marketing,then the _____ can be expected to _____.

Correct AnswerverifiedShow Answer

Flexible exchange rates hamper fiscal policy but reinforce monetary policy.

Correct AnswerverifiedShow Answer

As long as assets are perfectly substitutable,an increase in the interest rate in France relative to Canada will cause:

Correct AnswerverifiedShow Answer

Which of the following currency trades is consistent with the current exchange rates of 500 Chilean pesos for US$1 and 1 British pound for US$1.50?

Correct AnswerverifiedShow Answer

If U.S.exports were $8,300 and U.S imports were $10,300,what is the trade deficit?

Correct AnswerverifiedShow Answer

Under flexible exchange rates,an open economy _____ monetary policy and _____ fiscal policy.

Correct AnswerverifiedShow Answer

Which of the following currency trades is NOT consistent with the current exchange rates of 500 Chilean pesos for US$1 and 1 pound sterling for US$1.50?

Correct AnswerverifiedShow Answer

Inflation in France will hurt France's current account as long as exchange rates are flexible.

Correct AnswerverifiedShow Answer

Until the 1970s:

Correct AnswerverifiedShow Answer

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If the dollar appreciates,aggregate demand _ and output in the short run _.

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Under a fixed exchange rate system and a neutral monetary policy,an expansionary fiscal policy will be reinforced by an open economy because of the resultant capital _ U.S.capital markets,which _ interest rates.

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If European products become more popular in world markets because of excellent marketing,then the _ can be expected to _.

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Under flexible exchange rates,an open economy _ monetary policy and _ fiscal policy.

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