Question 1

Show how a larger government budget deficit tends to lead to an appreciation of the currency.

Accepted Answer

A larger government budget deficit tends...

Question 2

A larger government budget deficit leads to higher interest rates and an inflow of capital.

Accepted Answer

A) True 
 B)False

Question 3

Fiscal policy refers to government changing:

Accepted Answer

A)   its spending.
B)   interest rates.
C)   the money supply.
D)   its quotas.
E)   None of the aboveF) C) and E)
G) A) and E)

Question 4

A contractionary monetary policy generally results in a capital inflow and a current account deficit.

Accepted Answer

A) True 
 B)False

Question 5

As a government adopts an expansionary fiscal policy:

Accepted Answer

A)   the demand for loanable funds increases causing interest rates to rise.
B)   the demand for loanable funds decreases causing interest rates to fall.
C)   the supply of loanable funds increases causing interest rates to rise.
D)   the supply of loanable funds decreases causing interest rates to fall.
E)   the demand for loanable funds does not change.F) A) and E)
G) B) and E)

Question 6

11 Expansionary fiscal policy usually involves some combination of ____ taxes and/or _____ government spending on goods and services.

Accepted Answer

A)   lower, lower
B)   lower, higher
C)   higher, higher
D)   higher, lower
E)   higher, unchangedF) A) and B)
G) B) and D)

Question 7

In a closed economy, expansionary fiscal policy causes:

Accepted Answer

A)   interest rates to rise and aggregate demand to increase.
B)   interest rates to fall and aggregate demand to decrease.
C)   interest rates to rise and aggregate demand to decrease.
D)   interest rates to fall and aggregate demand to increase.
E)   no change in interest rates.F) B) and D)
G) B) and C)

Question 8

A contractionary fiscal policy usually causes an appreciation of the country's currency.

Accepted Answer

A) True 
 B)False

Question 9

An expansionary monetary policy can lead to lower interest rates, a depreciating currency, and a current account deficit.

Accepted Answer

A) True 
 B)False

Question 10

In the short run, the supply of loanable funds is determined by the amount of money the public wishes to save.

Accepted Answer

A) True 
 B)False

Question 11

In a closed economy, an expansionary fiscal policy:

Accepted Answer

A)   leads to an increase in both domestic output and the price level.
B)   leads to a decrease in both domestic output and the price level.
C)   leads to an increase in domestic output and a decrease in the price level.
D)   leads to a decrease in domestic output and an increase in the price level.
E)   has no effect on private investment.F) C) and D)
G) B) and E)

Question 12

Changes in a country's money supply and interest rates are called:

Accepted Answer

A)   fiscal policy.
B)   exchange rate policy.
C)   monetary policy.
D)   commercial policy.
E)   industrial policy.F) A) and B)
G) B) and E)

Question 13

A contractionary monetary policy:

Accepted Answer

A)   puts upward pressure on interest rates causing the currency to appreciate.
B)   puts upward pressure on interest rates causing the currency to depreciate.
C)   puts downward pressure on interest rates causing the currency to appreciate.
D)   puts downward pressure on interest rates causing the currency to depreciate.
E)   None of the aboveF) A) and C)
G) C) and E)

Question 14

With flexible exchange rates, an expansionary fiscal policy will increase output and income.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true?

Accepted Answer

A)   An expansionary fiscal policy will tend to lower interest rates.
B)   Lower interest rates lead to capital outflows.
C)   Higher interest rates cause a depreciation of the currency.
D)   Higher interest rates can lead to a current account surplus.
E)   Interest rates do not affect capital flows.F) D) and E)
G) A) and B)

Question 16

In a closed economy, an expansionary monetary policy causes:

Accepted Answer

A)   interest rates to rise and aggregate demand to increase.
B)   interest rates to fall and aggregate demand to decrease.
C)   interest rates to rise and aggregate demand to decrease.
D)   interest rates to fall and aggregate demand to increase.
E)   no change in interest rates or aggregate demand.F) D) and E)
G) C) and D)

Question 17

With flexible exchange rates, monetary policy is not very effective in changing exchange rates and interest rates.

Accepted Answer

A) True 
 B)False

Question 18

A contractionary fiscal policy generally results in a capital inflow and a current account deficit.

Accepted Answer

A) True 
 B)False

Question 19

The levels of inflation and unemployment that fit the preferences of a country's citizens is known as:

Accepted Answer

A)   microeconomic balance.
B)   full employment balance.
C)   the natural rate of unemployment.
D)   external balance
E)   internal balance.F) A) and E)
G) None of the above

Question 20

Monetary and fiscal policy are usually focused on internal balance because inflation and unemployment are less important than the current account balance.

Accepted Answer

A) True 
 B)False

Exam 17: Macroeconomic Policy and Floating Exchange Rates

In a closed economy, an expansionary monetary policy causes:

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A larger government budget deficit leads to higher interest rates and an inflow of capital.

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The levels of inflation and unemployment that fit the preferences of a country's citizens is known as:

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As a government adopts an expansionary fiscal policy:

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In a closed economy, an expansionary fiscal policy:

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Show how a larger government budget deficit tends to lead to an appreciation of the currency.

Correct AnswerAnswered by ExamLex AIA larger government budget deficit tends...View AnswerShow Answer

A contractionary monetary policy generally results in a capital inflow and a current account deficit.

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With flexible exchange rates, an expansionary fiscal policy will increase output and income.

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Changes in a country's money supply and interest rates are called:

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An expansionary monetary policy can lead to lower interest rates, a depreciating currency, and a current account deficit.

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A contractionary fiscal policy usually causes an appreciation of the country's currency.

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A contractionary monetary policy:

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Fiscal policy refers to government changing:

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With flexible exchange rates, monetary policy is not very effective in changing exchange rates and interest rates.

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A contractionary fiscal policy generally results in a capital inflow and a current account deficit.

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In a closed economy, expansionary fiscal policy causes:

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11 Expansionary fiscal policy usually involves some combination of ____ taxes and/or _____ government spending on goods and services.

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In the short run, the supply of loanable funds is determined by the amount of money the public wishes to save.

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Monetary and fiscal policy are usually focused on internal balance because inflation and unemployment are less important than the current account balance.

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Which of the following statements is true?

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A larger government budget deficit tends...
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11 Expansionary fiscal policy usually involves some combination of taxes and/or _ government spending on goods and services.

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