Question 1

When the value of one currency increases relative to the value of another currency, it has experienced:

Accepted Answer

A)   exchange rate depreciation.
B)   exchange rate appreciation.
C)   interest rate depreciation.
D)   net capital inflow.E) C) and D)
F) None of the above

Question 2

A country that has a trade surplus:

Accepted Answer

A)   imports more than it exports.
B)   has a negative trade balance.
C)   sells more goods abroad than it buys from abroad.
D)   buys more goods at home that it buys abroad.E) A) and C)
F) A) and D)

Question 3

An advantage of foreign direct investment versus domestic investment for businesses can be to:

Accepted Answer

A)   cut costs of production.
B)   reduce overall risk relative to financial investments available at home.
C)   increase profit without having to pay taxes on the earnings.
D)   encourage the flourishment of 'sweatshops'.E) All of the above
F) A) and D)

Question 4

The type of good with the smallest trade deficit in the U.S. based on data from 2016 is:

Accepted Answer

A)   foods, feeds, and beverages.
B)   capital goods.
C)   industrial goods.
D)   automotive goods.E) B) and C)
F) None of the above

Question 5

When the U.S. government runs a deficit, the resulting higher interest rate:

Accepted Answer

A)   reduces firms' desire to invest, and "crowds out" domestic investment.
B)   increases firms' desire to invest, but "crowds out" domestic investment.
C)   reduces foreigners' willingness to invest in the U.S., but still "crowds out" domestic investment.
D)   increases foreigners' willingness to invest in the U.S., which "crowds out" domestic investment.E) A) and B)
F) All of the above

Question 6

When people invest at home, it is called _____, and when they invest abroad it is called _______.

Accepted Answer

A)   I; NCO
B)   I; NX
C)   S; I
D)   S; NCOE) All of the above
F) A) and D)

Question 7

When a country suffers from a speculative attack:

Accepted Answer

A)   the supply of currency available shifts right.
B)   it lowers the equilibrium exchange rate.
C)   it forces the government to spend its reserves to defend its fixed exchange rate.
D)   All of these statements are true.E) A) and C)
F) B) and C)

Question 8

A main trading partner with the U.S. is:

Accepted Answer

A)   Hungary.
B)   Russia.
C)   Italy.
D)   Canada.E) A) and B)
F) All of the above

Question 9

Who is most likely to benefit when the dollar appreciates against the euro?

Accepted Answer

A)   U.S. buyers of foreign goods
B)   Foreign buyers of U.S. goods
C)   U.S. buyers of U.S. goods
D)   Foreign buyers of foreign goodsE) C) and D)
F) B) and C)

Question 10

In 2015, exports represented:

Accepted Answer

A)   about 13 percent of U.S. GDP.
B)   about 1 percent of U.S. GDP.
C)   about 30 percent of U.S. GDP.
D)   nearly 20 percent of U.S. GDP.E) All of the above
F) B) and D)

Question 11

In an economy with a fixed exchange rate, when the market forces try to change the exchange rate, the government:

Accepted Answer

A)   must buy or sell its currency using its own reserve to bring equilibrium in the market to where it has "fixed" it.
B)   declares it can't change, and holds it constant.
C)   often has to deal with an unhappy domestic population who are constantly dealing with shortages or surpluses of their currency.
D)   None of these statements is true.E) B) and C)
F) A) and B)

Question 12

In the market for loanable funds in an open economy, international investment captures all of the following sources except:

Accepted Answer

A)   capital outflow.
B)   capital inflow.
C)   money invested outside its originating country.
D)   national savings.E) A) and D)
F) All of the above

Question 13

The Argentinian crisis of 2001 was brought about by:

Accepted Answer

A)   debt crisis.
B)   exchange rate crisis.
C)   excessive loss of national resources.
D)   None of these statements is true.E) C) and D)
F) A) and D)

Question 14

When multiple countries are trying to boost their economies by lowering the value of their currency, it causes a situation referred to as:

Accepted Answer

A)   competitive revaluation.
B)   competitive devaluation.
C)   a speculative attack.
D)   speculative war.E) C) and D)
F) A) and D)

Question 15

Expansionary monetary policy:

Accepted Answer

A)   raises interest rates, raising both investment and net exports.
B)   lowers interest rates, increasing investment and decreasing net exports.
C)   lowers interest rates, increasing both investment and net exports.
D)   raises interest rates, decreasing both investment and net exports.E) A) and D)
F) B) and D)

Question 16

When the Fed decides to enact expansionary monetary policy, the supply of loanable funds:

Accepted Answer

A)   increases, while the demand for loanable funds decreases.
B)   decreases, while the demand for loanable funds increases.
C)   and the demand for loanable funds both decrease.
D)   and the demand for loanable funds both increase.E) A) and B)
F) None of the above

Question 17

Who is most likely to benefit when the dollar depreciates against the euro?

Accepted Answer

A)   U.S. exporters
B)   Foreign sellers to U.S. buyers
C)   U.S. buyers of foreign goods
D)   Foreign saversE) B) and C)
F) A) and D)

Question 18

Your Uncle Harry gives you stock in Samsung for your birthday. The stock is an example of:

Accepted Answer

A)   foreign direct investment.
B)   foreign portfolio investment.
C)   importing.
D)   exporting.E) All of the above
F) B) and C)

Question 19

If the cost of a typical basket of goods in the U.S. is $100 and in Mexico it is 800 pesos, and the nominal exchange rate is 25 pesos per dollar, what is the real exchange rate?

Accepted Answer

A)   0.33.
B)   1.33.
C)   1.50.
D)   3.13.E) None of the above
F) C) and D)

Question 20

If a country has a floating exchange rate, it means their currency:

Accepted Answer

A)   is set by the government.
B)   has a value determined by the market for loanable funds.
C)   can be freely traded and their value is determined by the market.
D)   All of these statements are true.E) A) and D)
F) A) and C)

Exam 18: Open-Market Macroeconomics

A main trading partner with the U.S. is:

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An advantage of foreign direct investment versus domestic investment for businesses can be to:

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Who is most likely to benefit when the dollar depreciates against the euro?

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Your Uncle Harry gives you stock in Samsung for your birthday. The stock is an example of:

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In an economy with a fixed exchange rate, when the market forces try to change the exchange rate, the government:

Correct AnswerverifiedShow Answer

When multiple countries are trying to boost their economies by lowering the value of their currency, it causes a situation referred to as:

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If a country has a floating exchange rate, it means their currency:

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The Argentinian crisis of 2001 was brought about by:

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The type of good with the smallest trade deficit in the U.S. based on data from 2016 is:

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If the cost of a typical basket of goods in the U.S. is $100 and in Mexico it is 800 pesos, and the nominal exchange rate is 25 pesos per dollar, what is the real exchange rate?

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When the value of one currency increases relative to the value of another currency, it has experienced:

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When people invest at home, it is called _____, and when they invest abroad it is called _______.

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A country that has a trade surplus:

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Who is most likely to benefit when the dollar appreciates against the euro?

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In the market for loanable funds in an open economy, international investment captures all of the following sources except:

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In 2015, exports represented:

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When a country suffers from a speculative attack:

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When the Fed decides to enact expansionary monetary policy, the supply of loanable funds:

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Expansionary monetary policy:

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When the U.S. government runs a deficit, the resulting higher interest rate:

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When people invest at home, it is called _, and when they invest abroad it is called ___.

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