Macroeconomics in Modules

Paul Krugman, Robin Wells

Chapter 13 Open-Economy Macroeconomics - all with Video Answers

Educators

Chapter Questions

Problem 1

The current account includes which of the following?
I. payments for goods and services
II. transfer payments
III. factor income
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III

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Problem 1

Devaluation of a currency occurs when which of the following happens?

I. The supply of a currency with a floating exchange rate increases.
II. The demand for a currency with a floating exchange rate decreases.
III. The government decreases the fixed exchange rate.
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III

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Problem 1

When the U.S. dollar buys more Japanese yen, the U.S. dollar has
L. become more valuable in terms of the yen
II. appreciated
III. depreciated
a. I only
b. II only
c. III only
d. I and II only
e. I and III only

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Problem 1

Which of the following methods can be used to fix a country's exchange rate at a predetermined level?
I. using foreign exchange reserves to buy its own currency
II. using monetary policy to change interest rates
III. implementing foreign exchange controls
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III

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Problem 2

The balance of payments on the current account plus the balance of payments on the financial account is equal to
a. zero.
b. one.
c. the trade balance.
d. net capital flows.
e. the size of the trade deficit.

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Problem 2

Devaluation of a currency will lead to which of the following?
a. appreciation of the currency
b. an increase in exports
c. an increase in imports
d. a decrease in exports
e. floating exchange rates

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Problem 2

- Changes in exchange rates affect which of the following?
a. the price of imports
b. the price of exports
c. aggregate demand
d. aggregate output
e. all of the above

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Problem 2

The nominal exchange rate at which a given basket of goods and services would cost the same in each country describes
a. the international consumer price index (ICPI).
b. appreciation.
c. depreciation.
d. purchasing power parity.
e. the balance of payments on the current account.

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01:06

Problem 3

What happens to the real exchange rate between the euro and the U.S. dollar (expressed as euros per dollar) if the aggregate price levels in Europe and the United States both fall? It
a. is unaffected.
b. increases.
c. decreases.
d. may increase, decrease, or stay the same.
e. cannot be calculated.

Fuzail Shakir

Numerade Educator

Problem 3

The United States has which of the following exchange rate regimes?
a. fixed
b. floating
c. fixed, but adjusted frequently
d. fixed, but managed
e. floating within a target zone

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Problem 3

The financial account was previously known as the
a. gross national product.
b. capital account.
c. trade deficit.
d. investment account.
e. trade balance.

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Problem 3

Devaluation of a currency is used to achieve which of the following?
a. an elimination of a surplus in the foreign exchange market
b. an elimination of a shortage in the foreign exchange market
c. a reduction in aggregate demand
d. a lower inflation rate
e. a floating exchange rate

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Problem 4

Which of the following would cause the real exchange rate between pesos and U.S. dollars (in terms of pesos per dollar) to decrease?
a. an increase in net capital flows from Mexico to the United States
b. an increase in the real interest rate in Mexico relative to the United States
c. a doubling of prices in both Mexico and the United States
d. a decrease in oil exports from Mexico to the United States
e. an increase in the balance of payments on the current account in the United States

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Problem 4

Which of the following interventions would be required to keep a country's exchange rate fixed if the equilibrium exchange rate in the foreign exchange market were below the fixed exchange rate (measured as units of foreign currency per unit of domestic currency)? The government/central bank
a. buys the domestic currency.
b. sells the domestic currency.
c. buys the foreign currency.
d. lowers domestic interest rates.
e. removes foreign exchange controls.

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Problem 4

The trade balance includes which of the following?
I. imports and exports of goods
II. imports and exports of services
III. net capital flows
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III

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Problem 4

Monetary policy that reduces the interest rate will do which of the following?
a. appreciate the domestic currency
b. decrease exports
c. increase imports
d. depreciate the domestic currency
e. prevent inflation

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Problem 5

Which of the following will decrease the supply of U.S. dollars in the foreign exchange market?
a. U.S. residents increase their travel abroad
b. U.S. consumers demand fewer imports
c. Foreigners increase their demand for U.S. goods
d. Foreigners increase their travel to the United States
e. Foreign investors see increased investment opportunities in the United States

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Problem 5

Which of the following will increase the demand for loanable funds in a country?
a. economic growth
b. decreased investment opportunities
c. a recession
d. decreased private savings rates
e. government budget surpluses

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Problem 5

Which of the following is a benefit of a fixed exchange rate regime?
a. certainty about the value of domestic currency
b. commitment to inflationary policies
c. no need for foreign exchange reserves
d. allows unrestricted use of monetary policy
e. all of the above

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04:28

Problem 5

Which of the following will happen in a country if a trading partner's economy experiences a recession?
a. It will experience an expansion.
b. Exports will decrease.
c. The demand for the country's currency will increase.
d. The country's currency will appreciate.
e. All of the above will occur.

Kaylee Mcclellan

Numerade Educator