ECO 305 Week 11 Quiz – Strayer

ECO 305 Week 11 Quiz – Strayer

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Quiz 10 Chapter 16 and 17

MACROECONOMIC POLICY IN AN OPEN ECONOMY

MULTIPLE CHOICE

1. A nation experiences internal balance if it achieves:
a. Full employment
b. Price stability
c. Full employment and price stability
d. Unemployment and price instability




2. A nation experiences external balance if it achieves:
a. No net changes in its international gold stocks
b. Productivity levels equal to those of its trading partners
c. An increase in its money supply equal to increases overseas
d. Equilibrium in its balance of payments




3. A nation experiences overall balance if it achieves:
a. Balance-of-payments equilibrium, full employment, and price stability
b. Balance-of-payments equilibrium, maximum productivity, and price stability
c. Full employment, price stability and no change in its money supply
d. Full employment, price stability, and maximum productivity




4. Most industrial countries generally considered ____ as the most important economic goal.
a. External balance
b. Internal balance
c. Maximum efficiency for business
d. Maximum efficiency for labor




5. Which policies are expenditure-changing policies?
a. Currency devaluation and revaluation
b. Import quotas and tariffs
c. Monetary and fiscal policy
d. Wage and price controls




6. Which policy is an expenditure-switching policy?
a. Increase in the money supply
b. Decrease in government expenditures
c. Increase in business and household taxes
d. Decrease in import tariffs




7. An expenditure-increasing policy would consist of an increase in:
a. Import tariffs
b. Import quotas
c. Governmental taxes
d. The money supply




8. An expenditure-reducing policy would consist of a decrease in:
a. The par value of a currency
b. Government expenditures
c. Import duties
d. Business or household taxes




9. Given fixed exchange rates, assume Mexico initiates expansionary monetary and fiscal policies to combat recession. These policies will also:
a. Increase both imports and exports
b. Increase exports and reduce imports
c. Reduce a balance-of-payments surplus
d. Reduce a balance-of-payments deficit




10. Given fixed exchange rates, assume Mexico initiates contractionary monetary and fiscal policies to combat inflation. These policies will also:
a. Reduce a balance-of-payments surplus
b. Reduce a balance-of-payments deficit
c. Increases both imports and exports
d. Decrease both imports and exports




11. The appropriate expenditure-switching policy to correct a current account surplus is:
a. Currency revaluation
b. Currency devaluation
c. Expansionary monetary policy
d. Contractionary fiscal policy




12. The appropriate expenditure-switching policy to correct a current account deficit is:
a. Contractionary monetary policy
b. Expansionary fiscal policy
c. Currency devaluation
d. Currency revaluation




13. Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:
a. Recession to become less severe--deficit to become less severe
b. Recession to become more severe--deficit to become less severe
c. Recession to become less severe--deficit to become more severe
d. Recession to become more severe--deficit to become more severe




14. Suppose the United States faces domestic inflation and a current account surplus. Should the United States revalue the dollar, one would expect the:
a. Inflation to become more severe--surplus to become less severe
b. Inflation to become less severe--surplus to become less severe
c. Inflation to become less severe--surplus to become more severe
d. Inflation to become more severe--surplus to become more severe




15. Suppose Brazil faces domestic recession and a current account surplus. Should Brazil revalue its currency, one would expect the:
a. Recession to become less severe--surplus to become less severe
b. Recession to become more severe--surplus to become more severe
c. Recession to become more severe--surplus to become less severe
d. Recession to become less severe--surplus to become more severe




16. Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil devalue its currency, one would expect the:
a. Inflation to become more severe--deficit to become less severe
b. Inflation to become more severe--deficit to become more severe
c. Inflation to become less severe--deficit to become less severe
d. Inflation to become less severe--deficit to become more severe




17. In a closed economy, which of the following will cause the economy's aggregate demand curve to shift to the right?
a. decreases and wages and salaries paid to employees
b. increases in the prices of oil and natural gas
c. decreases in income taxes for households
d. decreases in the productivity of labor




18. Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy
a. cause aggregate demand to increase, thus strengthening the policy's expansionary effect on real output
b. cause aggregate demand to decrease, thus eliminating the policy's expansionary effect on real output
c. have conflicting effects on aggregate demand, thus weakening the policy's expansionary effect on real output
d. have conflicting effects on aggregate demand, thus strengthening the policy's expansionary effect on real output




19. A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:
a. Trade flows only
b. Capital flows only
c. both trade flows and capital flows
d. Neither trade flows nor capital flows




20. Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy
a. cause aggregate demand to increase, thus strengthening the policy's expansionary effect on real output
b. cause aggregate demand to decrease, thus eliminating the policy's expansionary effect on real output
c. have conflicting effects on aggregate demand, thus weakening the policy's expansionary effect on real output
d. have conflicting effects on aggregate demand, thus strengthening the policy's expansionary effect on real output




21. A system of fixed exchange rates and high capital mobility strengthens which policy in combating a recession:
a. Expansionary fiscal policy
b. Expansionary monetary policy
c. Contractionary fiscal policy
d. Contractionary monetary policy




22. A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:
a. Expansionary fiscal policy
b. Expansionary monetary policy
c. Contractionary fiscal policy
d. Contractionary monetary policy




23. Given an open economy with high capital mobility, all of the following statements are true except:
a. fiscal policy is strengthened under fixed exchange rates
b. monetary policy is weakened under fixed exchange rates
c. monetary policy is strengthened under floating exchange rates
d. fiscal policy is strengthened under floating exchange rates




24. Under a system of managed-floating exchange rates with heavy exchange rate intervention:
a. Fiscal policy is successful in promoting internal balance, while monetary policy is unsuccessful
b. Monetary policy is successful in promoting internal balance, while fiscal policy is unsuccessful
c. Both fiscal policy and monetary policy are successful in promoting internal balance
d. Neither fiscal policy nor monetary policy are successful in promoting internal balance




25. Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause
a. the dollar to appreciate and will decrease U.S. net exports
b. the dollar to appreciate and will increase U.S. net exports
c. the dollar to depreciate and will increase U.S. net exports
d. the dollar to depreciate and will decrease U.S. net exports




26. Given a system of floating exchange rates, a contractionary monetary policy by the Federal Reserve will cause
a. the dollar to appreciate and will decrease U.S. net exports
b. the dollar to appreciate and will increase U.S. net exports
c. the dollar to depreciate and will increase U.S. net exports
d. the dollar to depreciate and will decrease U.S. net exports




27. All of the following are obstacles to international economic policy coordination except:
a. Different national objectives and institutions
b. Different national political climates
c. Different phases in the business cycle
d. Different national currencies




28. Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency. This causes the
a. domestic money supply to decrease and a decline in aggregate demand
b. domestic money supply to increase and a decline in aggregate demand
c. domestic money supply to decrease and a rise in aggregate demand
d. domestic money supply to increase and a rise in aggregate demand




29. At the ____, the Group-of-Five nations agreed to intervene in the currency markets to promote a depreciation in the U.S. dollar's exchange value.
a. Plaza Agreement of 1985
b. Louvre Accord of 1987
c. Bonn Summit of 1978
d. Tokyo Summit of 1962




30. The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of:
a. Tariff trade barrier formation
b. Nontariff trade barrier formation
c. International economic policy coordination
d. Beggar-thy-neighbor policies