Question 1

It is impossible to conduct ________ policy and maintain a _________ exchange rate.

Accepted Answer

A)   monetary; fixed
B)   monetary; floating
C)   fiscal; fixed
D)   fiscal; floatingE) A) and B)
F) A) and C)

Question 2

If Wes in Wisconsin buys $200 worth of stock in Toshiba, and the Japanese use the $200 to buy a wheel of cheese from Wes, then the U.S. net exports:

Accepted Answer

A)   and net capital outflow are both zero.
B)   and net capital outflow both equal $200.
C)   is zero and net capital outflow is $200.
D)   equals $200 and net capital outflow is zero.E) All of the above
F) B) and C)

Question 3

If a country has a fixed exchange rate, it:

Accepted Answer

A)   has a value that is set by the government.
B)   allows for more predictability and stability.
C)   helps attract foreign investment and gives businesses that depend on overseas trade more confidence to invest.
D)   All of these statements are true.E) C) and D)
F) None of the above

Question 4

The real exchange rate is:

Accepted Answer

A)   difficult to calculate because it relies on very different "typical" baskets of goods.
B)   a useful proximity of how far your dollars will go in another country.
C)   the best measurement we have to get a sense of whether purchasing power parity holds or not.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Question 5

The type of good with the largest import in the U.S. is:

Accepted Answer

A)   capital goods.
B)   consumer goods.
C)   industrial goods.
D)   automobiles.E) None of the above
F) C) and D)

Question 6

When a country imports more than it exports, it has a:

Accepted Answer

A)   trade deficit.
B)   trade surplus.
C)   zero trade balance.
D)   policy which forbids exportation.E) A) and B)
F) B) and C)

Question 7

Investment is _________ related to the interest rate, and NCO is __________ related to the interest rate.

Accepted Answer

A)   negatively; negatively
B)   negatively; positively
C)   positively; positively
D)   positively; negativelyE) B) and C)
F) All of the above

Question 8

The "crowding out" effect refers to the:

Accepted Answer

A)   increase in domestic investment by foreigners, leaving little investment choice for domestic investors.
B)   reduction in the interest rate caused by governments running a deficit.
C)   reduction in domestic investment caused by governments running a deficit.
D)   irrational exuberance of the market reducing the number of rational investments available.E) A) and C)
F) A) and D)

Question 9

If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the interest rate:

Accepted Answer

A)   increases, as NCO increases.
B)   falls, as NCO falls.
C)   falls, as NCO increases.
D)   increases, as NCO decreases.E) All of the above
F) A) and B)

Question 10

If $1 is worth 10 yen, then 1 yen is worth:

Accepted Answer

A)   $0.01.
B)   $0.10.
C)   $1.00.
D)   $1.10.E) B) and D)
F) B) and C)

Question 11

If a country has a net capital inflow, it means they have:

Accepted Answer

A)   a trade surplus.
B)   a trade deficit.
C)   more exports than imports.
D)   more capital goods flowing into their country than out of it.E) A) and D)
F) A) and C)

Question 12

If people have a sudden decrease in confidence in the open economy of the U.S. and no longer want to invest there, the NCO:

Accepted Answer

A)   increases, and the demand for loanable funds curve would shift right.
B)   decreases, and the demand for loanable funds curve would shift left.
C)   decreases, and the demand for loanable funds curve would shift right.
D)   increases, and the demand for loanable funds curve would shift left.E) None of the above
F) B) and C)

Question 13

In the market for loanable funds in an open economy, the supply of loanable funds:

Accepted Answer

A)   can come from domestic savers or savers abroad.
B)   is equal to national savings.
C)   is equal to private savings.
D)   is equal to public savings.E) A) and B)
F) A) and C)

Question 14

China imports ___________ from the U.S. compared to how many goods the U.S. imports from China.

Accepted Answer

A)   less
B)   more
C)   about the same
D)   practically nothingE) None of the above
F) B) and C)

Question 15

The sale of each iPhone in the U.S. counts as an:

Accepted Answer

A)   import, because they are assembled in China.
B)   import, because they are assembled in Mexico.
C)   export, because they are assembled in China.
D)   export, because they are produced in the U.S.E) C) and D)
F) A) and C)

Question 16

When Wilma in Wisconsin buys stock in BMW in Germany, NCO:

Accepted Answer

A)   decreases.
B)   is unaffected.
C)   increases.
D)   is zero.E) All of the above
F) B) and D)

Question 17

People in an open economy who wish to invest can either:

Accepted Answer

A)   invest at home or abroad.
B)   buy stocks or bonds.
C)   buy financial assets or durable goods.
D)   invest in private companies or public companies.E) None of the above
F) B) and D)

Question 18

A trade surplus occurs when a country:

Accepted Answer

A)   imports more than it exports.
B)   imports less than it exports.
C)   has a negative balance of trade.
D)   has a zero balance of trade.E) A) and C)
F) A) and B)

Question 19

A country that typically runs a trade deficit is:

Accepted Answer

A)   the United States.
B)   Germany.
C)   China.
D)   Japan.E) None of the above
F) B) and D)

Question 20

When the U.S. dollar drops in value exports tend to:

Accepted Answer

A)   go up, which decreases the trade deficit.
B)   fall, which increases the trade deficit.
C)   go up, which increases the trade deficit.
D)   fall, which decreases the trade deficit.E) None of the above
F) B) and C)

Exam 18: Open-Market Macroeconomics

If a country has a fixed exchange rate, it:

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In the market for loanable funds in an open economy, the supply of loanable funds:

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When the U.S. dollar drops in value exports tend to:

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China imports ___________ from the U.S. compared to how many goods the U.S. imports from China.

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Investment is _________ related to the interest rate, and NCO is __________ related to the interest rate.

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When a country imports more than it exports, it has a:

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If people have a sudden decrease in confidence in the open economy of the U.S. and no longer want to invest there, the NCO:

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When Wilma in Wisconsin buys stock in BMW in Germany, NCO:

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If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the interest rate:

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If Wes in Wisconsin buys $200 worth of stock in Toshiba, and the Japanese use the $200 to buy a wheel of cheese from Wes, then the U.S. net exports:

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The real exchange rate is:

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It is impossible to conduct ________ policy and maintain a _________ exchange rate.

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If a country has a net capital inflow, it means they have:

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A country that typically runs a trade deficit is:

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The type of good with the largest import in the U.S. is:

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A trade surplus occurs when a country:

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The sale of each iPhone in the U.S. counts as an:

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If $1 is worth 10 yen, then 1 yen is worth:

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The "crowding out" effect refers to the:

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People in an open economy who wish to invest can either:

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Investment is _ related to the interest rate, and NCO is __ related to the interest rate.

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It is impossible to conduct policy and maintain a _ exchange rate.

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