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Economics

David C. Colander

Chapter 36

Macro Policy in a Global Setting - all with Video Answers

Educators

Chapter Questions

03:31

Problem 1

Is it better to have a low or high exchange rate?

Majid Borumand
Majid Borumand
Numerade Educator
00:35

Problem 2

Is it better to have a trade deficit or a trade surplus? $\quad(L O 36-1)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:56

Problem 3

Why can't a country target both its interest rate and exchange rate? $(L O 36-1)$

Pragya Ahuja
Pragya Ahuja
Numerade Educator
00:59

Problem 4

What effect on the U.S. trade deficit would result if China and Japan ran an expansionary monetary policy? $(L O 36-2)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
00:59

Problem 5

What would be the effect on the U.S. trade deficit if China and Japan ran a contractionary fiscal policy? $(L O 36-2)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:06

Problem 6

Draw the schematics to show the effect of expansionary monetary policy on the trade deficit. $(L O 36-2)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
13:03

Problem 7

You observe that over the past decade a country's trade deficit has risen. $\quad(L O 36-2)$
a. What monetary or fiscal policies might have led to such a result?
b. You also observe that interest rates have steadily risen along with a rise in the exchange rate. What policies would lead to this result?
c. Could another explanation be that people in other countries wanted to hold lots of that country's debt?

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
01:30

Problem 8

Congratulations! You have been appointed as an adviser to the IMF. A country that has run trade deficits for many years now has difficulty servicing its accumulated international debt and wants to borrow from the IMF to meet its obligations. The IMF requires that the country set a target trade surplus. $(L O 36-2)$
a. What monetary and fiscal policies would you suggest the IMF require of that country?
b. What would be the likely effect of that plan on the country's domestic inflation and growth?
c. How do you think the country's government will respond to your proposals? Why?

Majid Borumand
Majid Borumand
Numerade Educator
01:59

Problem 9

Congratulations! You've been hired as an economic adviser to the government of a country that has perfectly flexible exchange rates. State what monetary and fiscal policy you might suggest in each of the following situations, and explain why you would suggest those policies. $(L O 36-2)$
a. You want to lower the interest rate, decrease inflationary pressures, and lower the trade deficit.
b. You want to lower the interest rate, decrease inflationary pressures, and lower the trade surplus.
c. You want to lower the interest rate, decrease unemployment, and lower the trade deficit.
d. You want to raise the interest rate, decrease unemployment, and lower the trade deficit.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
01:32

Problem 10

Is the United States justified in complaining about Japan's and China's use of an export-led growth policy? Why or why not? $(L O 36-3)$

Jennifer Stoner
Jennifer Stoner
Numerade Educator
03:10

Problem 11

In the 1990 s, Japan's economic recession was much in the news. $(L O 36-3)$
a. What would you suspect was happening to its trade balance during this time?
b. What policies would you guess other countries (such as those in the Group of Eight) were pressuring Japan to implement?

Alejandro Ruiz
Alejandro Ruiz
Numerade Educator
06:47

Problem 12

According to a study done at J.P. Morgan, as world trade increased from about 12 percent of world output in the 1970 s to about 25 percent of world output in 2000 , global differences in growth rates decreased, from around 3 percent in the 1970 s to about 1 percent in the early $2000 \mathrm{~s} . \quad(L O 36-3)$
a. If that is true, would one expect more or less stabilization coming from trade with other countries?
b. What does this convergence of growth rates suggest about the possibility of a global recession?
c. If a global recession occurred, what policy recommendation would you put forward?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
03:30

Problem 13

How does internationalizing the debt reduce crowding out? $(L O 36-3)$

David Gagnon
David Gagnon
Numerade Educator
01:22

Problem 14

What are the costs of internationalizing the debt? $(L O 36-3)$

Priyanka Sadarangani
Priyanka Sadarangani
Numerade Educator
00:58

Problem 15

Countries must choose an exchange rate policy. $(L O 36-4)$
a. Why is currency stabilization limited through direct purchases?
b. What are a country's other options?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
04:29

Problem 16

Why are there strong political forces to manage exchange rates? $(L O 36-4)$

Rashmi Sinha
Rashmi Sinha
Numerade Educator
01:59

Problem 17

Domestic policy as it relates to a country's currency is related to the state of the economy. $(L O 36-4)$
a. Why didn't the United States have to implement contractionary policy following World War II even though the value of the dollar was high?
b. Why didn't a decline in U.S. competitiveness in the 1970 s require the United States to run contractionary policy?
c. Why is the trade deficit creating a challenge to domestic policy today?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
01:20

Problem 18

Why don't foreign countries want the U.S. dollar to fall precipitously? $(L O 36-4)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator