Deck 20: Exchange Rates and the Macroeconomy

Question 1

A depreciating currency makes foreign inputs cheaper and shifts the aggregate supply curve outward.

Answer 1

False

Question 2

In an open economy net exports must always be positive.

Answer 2

False

Question 3

Appreciation of the dollar will make imported goods more expensive and shift the aggregate demand curve outward.

Answer 3

False

Question 4

A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

Question 5

An exchange rate depreciation acts to reduce inflation.

Question 6

An exchange rate depreciation appears to consumers as a markdown on foreign products.

Question 7

The appreciation of the dollar in the late 1990s shifted the U.S.aggregate supply curve outward.

Question 8

If the dollar appreciates,American consumers will buy more foreign goods and services.

Question 9

Appreciation of the Japanese yen will lead to a significant balance of trade surplus.

Question 10

An exchange rate appreciation will shift the aggregate demand curve inward.

Question 11

A Japanese recession will be counteracted by an appreciation of the Japanese yen.

Question 12

A depreciation of the dollar will cause an increase in the Consumer Price Index.

Question 13

An economic boom in the United States would cause the aggregate demand curve in other countries to shift outward.

Question 14

A decrease in the price level in Japan will shift the U.S.aggregate demand curve outward.

Question 15

A recession abroad would cause U.S.net exports to rise.

Question 16

Currently,the United States imports more than it exports.

Question 17

Booms and recessions are transmitted to other countries.

Question 18

A currency depreciation will put upward pressure on the price level.

Question 19

In an open economy,aggregate supply consists of domestic production plus imports.

Question 20

An increase in the U.S.price level will increase U.S.net exports.

Question 21

Increases in stock market wealth have caused Americans to increase their saving rate.

Question 22

A currency depreciation is usually inflationary.

Question 23

The elimination of the federal budget deficit in the 1990s put downward pressure on real interest rates.

Question 24

A currency appreciation reduces aggregate demand and increases aggregate supply.

Question 25

An expansionary fiscal policy makes the exchange rate appreciate.

Question 26

International capital flows tend to reduce the impact of fiscal policy.

Question 27

As the international value of the dollar rises,AS shifts outward and AD shifts inward.

Question 28

A rise in the domestic interest rate leads to capital outflows and makes the currency depreciate.

Question 29

If the dollar depreciates,both the aggregate demand curve and the aggregate supply curve shift inward.

Question 30

The monetary expansion of the mid-1990s was expected to lead to a currency appreciation.

Question 31

The depreciation of the Japanese yen in 2002 would ease their problems with regard to recession.

Question 32

A large tax cut in the United States should lead to an increase in the trade deficit.

Question 33

International capital flows tend to reduce the impact of monetary policy.

Question 34

International capital flows tend to strengthen the effects of interest rate changes on aggregate demand.

Question 35

The United States can reduce its trade deficit by limiting imports through tariffs.

Question 36

The sum of capital inflows and the trade balance must be zero.

Question 37

The U.S.trade deficits of the late 1990s were due primarily to low saving rates.

Question 38

An appreciation of the Japanese yen would shift the Japanese aggregate demand curve inward.

Question 39

The U.S.trade deficit is made possible,in part,because of foreigners' demand for U.S.financial assets.

Question 40

Interest rate increases lead to currency appreciation and increases in net exports.

Question 41

If a currency appreciates,a country's net exports

A) fall and AD increases.
B) rise and AD increases.
C) fall and AD decreases.
D) rise and AD decreases.

Question 42

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y rise,all of the following are expected to happen except

A) Country X will export more.
B) Country Y will import more.
C) Net exports will rise for Country X.
D) Trade will boost Country Y GDP.

Question 43

Figure 20-1

Which of the graphs in Figure 20-1 best illustrates the behavior of exports and imports in relation to U.S.real GDP?

A) 1
B) 2
C) 3
D) 4

Question 44

An increase in the value of the U.S.dollar relative to the Japanese yen will

A) increase aggregate demand in the United States.
B) decrease aggregate supply in the United States.
C) increase aggregate demand in Japan.
D) increase aggregate supply in Japan.

Question 45

A favorable supply shock abroad would

A) increase U.S. imports and decrease aggregate demand.
B) decrease U.S. net exports and reduce aggregate supply.
C) decrease U.S. net exports and decrease national income.
D) increase U.S. net exports and increase aggregate demand.

Question 46

The major difference between a closed economy and an open economy is that a(n)

A) closed economy balances budget, while an open economy does not.
B) open economy is a market economy, while a closed economy relies on planning.
C) open economy interacts with the rest of the world, while a closed economy does not.
D) closed economy keeps political affairs secret, while an open economy does not.

Question 47

A recession abroad would

A) increase U.S. net exports and increase aggregate demand.
B) increase U.S. net exports and increase aggregate supply.
C) reduce U.S. net exports and reduce aggregate demand.
D) reduce U.S. net exports and increase aggregate demand.

Question 48

A reduction in net exports shifts the aggregate

A) demand curve inward.
B) demand curve outward.
C) supply curve outward.
D) supply curve inward.

Question 49

If a currency depreciates,a country's net exports

A) fall and AD increases.
B) rise and AD increases.
C) fall and AD decreases.
D) rise and AD decreases.

Question 50

An increase in the U.S.price level relative to the price level of other countries would

A) increase U.S. net exports and increase aggregate demand.
B) increase U.S. net exports and increase aggregate supply.
C) reduce U.S. net exports and reduce aggregate demand.
D) reduce U.S. net exports and increase aggregate demand.

Question 51

If Asian economies suffer a serious economic slump,U.S.net exports will

A) increase and AD will shift outward.
B) increase and AD will shift inward.
C) decrease and AD will shift inward.
D) decrease and AD will shift outward.

Question 52

Figure 20-1

Which of the following is correct?

A) IM + X = G − T
B) I + G + T = S + X − M
C) I + G + X = S + T + IM
D) I + T + G = S − X − IM

Question 53

One of the results of the strong economic growth in the United States relative to the rest of the world is a

A) U.S. trade surplus.
B) U.S. trade deficit.
C) growing U.S. net exports.
D) trade deficit for U.S. trading partners.

Question 54

A sizable appreciation of the U.S.dollar in the mid-1980s

A) raised U.S. exports and imports.
B) raised U.S. exports and reduced imports.
C) reduced U.S. exports and imports.
D) reduced U.S. exports and raised imports.

Question 55

An increase in the price level in Japan relative to the price level in the United States would

A) increase U.S. net exports and increase aggregate demand.
B) increase U.S. net exports and increase aggregate supply.
C) reduce U.S. net exports and reduce aggregate demand.
D) reduce U.S. net exports and increase aggregate demand.

Question 56

An appreciation of the Japanese yen relative to the U.S.dollar will

A) increase aggregate demand in the United States.
B) increase aggregate supply in the United States.
C) increase aggregate demand in Japan.
D) decrease aggregate supply in Japan.

Question 57

A rise in net exports shifts the aggregate

A) demand curve inward.
B) demand curve outward.
C) supply curve outward.
D) supply curve inward.

Question 58

Foreign trade will have no impact on real GDP when

A) exports exceed imports.
B) exports equal imports.
C) imports exceed exports.
D) exports equal zero.

Question 59

Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall,which of the following is expected to happen?

A) Country X will export more.
B) Economy of Country X will be depressed.
C) Net exports will rise for Country X.
D) Country Y will import more.

Question 60

If European economies experience a strong economic recovery,U.S.net exports will

A) increase and AD will shift outward.
B) increase and AD will shift inward.
C) decrease and AD will shift inward.
D) decrease and AD will shift outward.

Question 61

Figure 20-2

Which of the following explains the movements in Figure 20-2?

A) an increase in the U.S. price level
B) a decrease in the U.S. price level
C) an appreciation of the U.S. dollar
D) an expansionary monetary policy

Question 62

Figure 20-3

Which of the situations illustrated in Figure 20-3 shows the effects of a currency appreciation leading to a recession?

A) 1
B) 2
C) 3
D) 4

Question 63

If the dollar rises in value compared to other currencies,what will happen in the United States?

A) an increase in aggregate demand
B) an increase in aggregate supply
C) a decrease in aggregate supply
D) an increase in the U.S. price level

Question 64

If Mexico experiences a period of stable prices while the United States experiences rapid inflation,what will happen in Mexico?

A) an increase in aggregate supply
B) a decrease in aggregate supply
C) a decrease in aggregate demand
D) an increase in aggregate demand

Question 65

Figure 20-3

Which of the situations illustrated in Figure 20-3 shows the effects of a currency appreciation leading to real GDP growth?

A) 1
B) 2
C) 3
D) 4

Question 66

What effect did the decrease in the value of the dollar have on the U.S.trade deficit in the period from 2006 to 2009?

A) It decreased the trade deficit as Americans bought more U.S. capital goods.
B) It decreased the trade deficit as foreigners were attracted to the increased value of U.S. products and Americans bought fewer imports.
C) It increased the trade deficit as U.S. investors bought more domestic financial assets.
D) It increased the trade deficit as Americans bought more imports and foreigners bought fewer U.S. products.

Question 67

If Japan experiences a period of deflation and the United States does not,what will happen in the United States?

A) an increase in aggregate supply
B) a decrease in aggregate supply
C) a decrease in aggregate demand
D) an increase in aggregate demand

Question 68

In an open economy,aggregate supply consists of domestic production

A) plus imports.
B) plus exports.
C) minus imports.
D) minus exports.

Question 69

Suppose the dollar depreciates from 89 Japanese yen to 79 Japanese yen.One would expect

A) U.S. imports to increase
B) U.S. exports to increase.
C) Japanese exports to increase.
D) Japanese net exports to increase.

Question 70

Appreciation of the Japanese Yen would lead to

A) outward shift in the aggregate supply curve for Japan.
B) upward shift in the aggregate demand curve for Japan.
C) downward shift in the aggregate supply curve for Japan.
D) downward shift in the aggregate demand curve for Japan.

Question 71

When the U.S.dollar appreciates,

A) U.S. exports rise.
B) U.S. imports decline.
C) aggregate demand shifts inward.
D) aggregate demand shifts outward.

Question 72

Figure 20-2

Which of the following explains the movements in Figure 20-2?

A) an increase in U.S. imports
B) a decrease in U.S. exports
C) an increase in U.S. exports
D) a decrease in U.S. net exports

Question 73

An increase in the U.S.price level relative to the price level of U.S.trading partners will cause the aggregate expenditures function in the United States to

A) shift up.
B) shift down.
C) get flatter.
D) get steeper.

Question 74

Depreciation of the Japanese Yen would lead to

A) outward shift in the aggregate supply curve for Japan.
B) upward shift in the aggregate demand curve for Japan.
C) downward shift in the aggregate supply curve for Japan.
D) inward shift in the aggregate demand curve for Japan.

Question 75

Theoretically,when a currency depreciates one can predict that

A) the price level will rise and real GDP will rise.
B) the price level will fall and real GDP will fall.
C) real GDP will rise, but price change is not predictable.
D) the price level will rise, but real GDP change is not predictable.

Question 76

If the dollar falls in value compared to other currencies,what will happen in the United States?

A) a decrease in aggregate demand
B) an increase in aggregate supply
C) a decrease in aggregate supply
D) a decrease in the U.S. price level

Question 77

Which of the following would lead to a depreciating dollar?

A) a higher federal deficit
B) lower interest rates
C) higher interest rates
D) contractionary monetary policy

Question 78

If Mexico experiences a period of stable prices while the United States experiences rapid inflation,what will happen in the United States?

A) an increase in U.S. imports
B) an increase in U.S. exports
C) a decrease in U.S. imports
D) an increase in U.S. net exports

Question 79

If European economies experience a period of sustained recession and the United States does not,what will happen in the United States?

A) an increase in aggregate supply
B) a decrease in aggregate supply
C) a decrease in aggregate demand
D) an increase in aggregate demand

Question 80

An increase in the price level in the economies of U.S.trading partners will cause the aggregate expenditures function in the United States to

A) shift up.
B) shift down.
C) get flatter.
D) get steeper.