Question 1

A revaluation can help reduce a(n) : I. inflationary gap
II)  deflationary gap

Accepted Answer

A)   I only
B)   II only
C)   I and II
D)   neither I nor IIE) B) and D)
F) All of the above

Question 2

A country's balance of payments is made up of:

Accepted Answer

A)   the current account and merchandise trade account.
B)   the current account and financial account.
C)   the financial account and the services account.
D)   the financial account alone.E) All of the above
F) A) and B)

Question 3

The exchange rate ensures that the balance of payments really does balance.

Accepted Answer

A) True 
 B)False

Question 4

All other things being equal, if the economy of Europe expands rapidly and this increases tourism dramatically in the United States:

Accepted Answer

A)   the euro will appreciate.
B)   the U.S. dollar will appreciate.
C)   the demand for the dollar will fall.
D)   the supply of the euro will fall.E) A) and B)
F) C) and D) B

Question 5

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Accepted Answer

A) True 
 B)False

Question 6

When a currency becomes more valuable in terms of other currencies, it appreciates.

Accepted Answer

A) True 
 B)False

Question 7

Countries with government budget surpluses are likely to have capital inflows, all other things equal.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the value of a floating currency is called a revaluation.

Accepted Answer

A) True 
 B)False  False

Question 9

If the U.S. is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) A) and B)
F) A) and C) B

Question 10

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

Accepted Answer

A)   political unrest in developing African nations.
B)   the war against terror.
C)   the decreasing productivity of U.S. workers.
D)   a global savings glut that decreased interest rates and led to an excess of investment over savings in the United States.E) None of the above
F) A) and B)

Question 11

Devaluation is reduction in the:

Accepted Answer

A)   value of a currency due to inflation.
B)   value of a currency in a floating exchange rate system.
C)   value of a currency in a fixed exchange rate system.
D)   rate of inflation of a country.E) A) and D)
F) B) and C)

Question 12

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

A)   current account; from
B)   current account; to
C)   financial account; from
D)   financial account; toE) All of the above
F) A) and C)

Question 13

All of the following are major drawbacks of a fixed exchange rate EXCEPT that:

Accepted Answer

A)   exchange controls must be imposed at the cost of administrative red tape and corruption.
B)   resources must be diverted to the accumulation of large foreign exchange reserves.
C)   monetary policy cannot be used to stabilize output and the inflation rate.
D)   commerce among countries is more uncertain and riskier.E) None of the above
F) B) and C)

Question 14

The exchange rate is the _____ between countries.

Accepted Answer

A)   interest rate differential
B)   balance of trade differential
C)   relative price of currencies
D)   relative price of goldE) None of the above
F) A) and B)

Question 15

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

Accepted Answer

A) True 
 B)False

Question 16

Foreign exchange controls, unlike tariffs and quotas, do not distort incentives for trade between countries.

Accepted Answer

A) True 
 B)False

Question 17

The primary economic disadvantage of adopting the euro for Britain is:

Accepted Answer

A)   the loss of the ability to conduct an independent monetary policy.
B)   the loss of national pride.
C)   a decrease in international trade and growth of GDP.
D)   the risk of a higher rate of unemployment.E) B) and C)
F) B) and D)

Question 18

The current account responds to changes in both real and nominal exchange rates.

Accepted Answer

A) True 
 B)False

Question 19

A devaluation will make exports _____expensive and imports _____ expensive.

Accepted Answer

A)   more; more
B)   more; less
C)   less; less
D)   less; moreE) A) and B)
F) None of the above

Question 20

Use the following to answer questions 
Scenario: Purchasing Power Parity
A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain.
-(Scenario: Purchasing Power Parity)  Look at the scenario Purchasing Power Parity. What is the purchasing power parity of the pound?

Accepted Answer

A)   $5
B)   $2.50
C)   $1.25
D)   $0.80E) B) and C)
F) None of the above

Exam 31: Open-Economy Macroeconomics

A revaluation can help reduce a(n) : I. inflationary gap II) deflationary gap

Correct Answer
verified

A country's balance of payments is made up of:

Correct Answer
verified

The exchange rate ensures that the balance of payments really does balance.

Correct Answer
verified

All other things being equal, if the economy of Europe expands rapidly and this increases tourism dramatically in the United States:

Correct Answer
verified
B

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Correct Answer
verified

When a currency becomes more valuable in terms of other currencies, it appreciates.

Correct Answer
verified

Countries with government budget surpluses are likely to have capital inflows, all other things equal.

Correct Answer
verified

An increase in the value of a floating currency is called a revaluation.

Correct Answer
verified
False

If the U.S. is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.

Correct Answer
verified
B

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

Correct Answer
verified

Devaluation is reduction in the:

Correct Answer
verified

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.

Correct Answer
verified

All of the following are major drawbacks of a fixed exchange rate EXCEPT that:

Correct Answer
verified

The exchange rate is the _____ between countries.

Correct Answer
verified

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

Correct Answer
verified

Foreign exchange controls, unlike tariffs and quotas, do not distort incentives for trade between countries.

Correct Answer
verified

The primary economic disadvantage of adopting the euro for Britain is:

Correct Answer
verified

The current account responds to changes in both real and nominal exchange rates.

Correct Answer
verified

A devaluation will make exports _expensive and imports _ expensive.

Correct Answer
verified

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics

A revaluation can help reduce a(n) : I. inflationary gap II) deflationary gap

Correct AnswerverifiedShow Answer

A country's balance of payments is made up of:

Correct AnswerverifiedShow Answer

The exchange rate ensures that the balance of payments really does balance.

Correct AnswerverifiedShow Answer

All other things being equal, if the economy of Europe expands rapidly and this increases tourism dramatically in the United States:

Correct AnswerverifiedB

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Correct AnswerverifiedShow Answer

When a currency becomes more valuable in terms of other currencies, it appreciates.

Correct AnswerverifiedShow Answer

Countries with government budget surpluses are likely to have capital inflows, all other things equal.

Correct AnswerverifiedShow Answer

An increase in the value of a floating currency is called a revaluation.

Correct AnswerverifiedFalse

If the U.S. is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

Correct AnswerverifiedB

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

Correct AnswerverifiedShow Answer

Devaluation is reduction in the:

Correct AnswerverifiedShow Answer

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Correct AnswerverifiedShow Answer

All of the following are major drawbacks of a fixed exchange rate EXCEPT that:

Correct AnswerverifiedShow Answer

The exchange rate is the _____ between countries.

Correct AnswerverifiedShow Answer

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

Correct AnswerverifiedShow Answer

Foreign exchange controls, unlike tariffs and quotas, do not distort incentives for trade between countries.

Correct AnswerverifiedShow Answer

The primary economic disadvantage of adopting the euro for Britain is:

Correct AnswerverifiedShow Answer

The current account responds to changes in both real and nominal exchange rates.

Correct AnswerverifiedShow Answer

A devaluation will make exports _____expensive and imports _____ expensive.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

If the U.S. is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.

Correct Answer
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B

Correct Answer
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Correct Answer
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A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A devaluation will make exports _expensive and imports _ expensive.

Correct Answer
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Correct Answer
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