Question 1

Explain why a country might want their currency to appreciate against the currency of a major trading partner in order to fight inflation.
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_____________________________________________________________________________________________

Accepted Answer

The appreciation of domestic currency re...

Question 2

In an open economy,expansionary monetary policy will cause

Accepted Answer

A)   consumption, investment, and net exports to rise.
B)   consumption and investment to rise, but net exports will fall.
C)   consumption to rise, but investment and net exports will fall.
D)   consumption to fall, but investment and net exports will rise.

Question 3

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

Accepted Answer

A)   A positive entry on the trade account
B)   Capital inflow into Australia's financial account
C)   A negative entry on the financial account
D)   An increase in foreign direct investment into Australia

Question 4

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment?
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_____________________________________________________________________________________________

Accepted Answer

For any country,national saving must equ...

Question 5

When the value of a currency is determined ________,the exchange rate system is defined as 'managed float'.

Accepted Answer

A)   only by supply and demand
B)   by the country's government
C)   mostly by supply and demand, but with occasional government intervention
D)   by the country's government, with occasional readjustments in value

Question 6

Suppose that the average price of goods imported from Great Britain increased.Is it likely that the value of the Australian dollar would appreciate or depreciate versus the British pound,ceteris paribus? Is it likely that the average price in British pounds of goods exported from Australia to Great Britain would rise or fall?
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_____________________________________________________________________________________________

Accepted Answer

If the Australian dollar depreciates aga...

Question 7

An example of 'foreign direct investment' is:

Accepted Answer

A)   Holden building a factory in India.
B)   A British investor buying shares in an Australian firm.
C)   An Australian investor buying a Canadian bond.
D)   A British bank buying an Australian government bond.

Question 8

Australia ________ concerned with being a net borrower if Australia is using all of the borrowed funds to ________.

Accepted Answer

A)   should be; finance investment
B)   should not be; finance consumption
C)   should not be; finance imports
D)   should be; pay interest to service debt

Question 9

Today,there are some developing countries that attempt to fix their currencies against the US dollar.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade ________.

Accepted Answer

A)   ¥10 for $0.60
B)   ¥10 for $6.00
C)   ¥10 for $0.17
D)   ¥10 for $0.01

Question 11

Refer to Figure 20.5 for the following questions.
Figure 20.5 
-If the government of Thailand wants to peg the baht to the US dollar at a value below 0.03 baht per US dollar,as seen in Figure 20.5,then

Accepted Answer

A)   the baht will be overvalued.
B)   the supply of baht for US dollars will be greater than the demand of baht for US dollars.
C)   there will be a shortage of baht.
D)   the par exchange rate will be set above the equilibrium exchange rate.

Question 12

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would increase the value of the Australian dollar in the long run?

Accepted Answer

A)   A decrease in inflation in Australia relative to other countries.
B)   A decrease in the demand for Australian goods relative to goods from other countries.
C)   An increase in Australian tariffs on foreign goods.
D)   A decrease in the supply of Australian dollars on the foreign exchange market.

Question 14

Exchange rates under the Bretton Woods System were determined by relative supplies of gold held by countries within the system.

Accepted Answer

A) True 
 B)False

Question 15

The major difference between an open economy and a closed economy is that

Accepted Answer

A)   an open economy interacts with the rest of the world, a closed economy does not.
B)   a closed economy uses rules rather than discretionary policy, an open economy uses discretionary policy.
C)   an open economy is a market economy while a closed economy relies on central planning.
D)   a closed economy balances budgets, an open economy does not.

Question 16

Suppose the price of a mobile phone in Australia is $400 and 30 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Accepted Answer

A)   the yen will depreciate relative to the dollar.
B)   the yen will appreciate relative to the dollar.
C)   the value of the yen relative to the dollar will not change.
D)   both the yen and the dollar will appreciate.

Question 17

Speculators who anticipate that the future value of the dollar relative to the yen will ________,will cause a(n) ______________.

Accepted Answer

A)   increase; increase in the demand for yen
B)   increase; increase in the demand for dollars
C)   decrease; decrease in the demand for yen
D)   decrease; increase in the demand for dollars

Question 18

In an open economy,fiscal policy has

Accepted Answer

A)   a smaller impact on aggregate demand as compared to a closed economy.
B)   the same impact on aggregate demand as compared to a closed economy.
C)   a larger impact on aggregate demand as compared to a closed economy.
D)   no impact on aggregate demand.

Question 19

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain,we would expect the Australian dollar to depreciate in value against the British pound.

Accepted Answer

A) True 
 B)False

Question 20

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

Accepted Answer

A) True 
 B)False

Exam 20: Macroeconomics in an Open Economy

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain,we would expect the Australian dollar to depreciate in value against the British pound.

Correct Answer
verified

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

Correct Answer
verified

Today,there are some developing countries that attempt to fix their currencies against the US dollar.

Correct Answer
verified

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment? _ _

Correct Answer
verified
For any country,national saving must equ...
View Answer

Which of the following would increase the value of the Australian dollar in the long run?

Correct Answer
verified

Explain why a country might want their currency to appreciate against the currency of a major trading partner in order to fight inflation. _ _

Correct Answer
verified
The appreciation of domestic currency re...
View Answer

Refer to Figure 20.5 for the following questions. Figure 20.5 -If the government of Thailand wants to peg the baht to the US dollar at a value below 0.03 baht per US dollar,as seen in Figure 20.5,then

Correct Answer
verified

In an open economy,fiscal policy has

Correct Answer
verified

In an open economy,expansionary monetary policy will cause

Correct Answer
verified

Correct Answer
verified
If the Australian dollar depreciates aga...
View Answer

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Correct Answer
verified

When the value of a currency is determined ________,the exchange rate system is defined as 'managed float'.

Correct Answer
verified

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

Correct Answer
verified

Exchange rates under the Bretton Woods System were determined by relative supplies of gold held by countries within the system.

Correct Answer
verified

Suppose the price of a mobile phone in Australia is $400 and 30 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Correct Answer
verified

An example of 'foreign direct investment' is:

Correct Answer
verified

Australia concerned with being a net borrower if Australia is using all of the borrowed funds to .

Correct Answer
verified

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade ________.

Correct Answer
verified

Speculators who anticipate that the future value of the dollar relative to the yen will ,will cause a(n) ______.

Correct Answer
verified

The major difference between an open economy and a closed economy is that

Correct Answer
verified

Exam 20: Macroeconomics in an Open Economy

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain,we would expect the Australian dollar to depreciate in value against the British pound.

Correct AnswerverifiedShow Answer

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

Correct AnswerverifiedShow Answer

Today,there are some developing countries that attempt to fix their currencies against the US dollar.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFor any country,national saving must equ...View AnswerShow Answer

Which of the following would increase the value of the Australian dollar in the long run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe appreciation of domestic currency re...View AnswerShow Answer

Refer to Figure 20.5 for the following questions. Figure 20.5 -If the government of Thailand wants to peg the baht to the US dollar at a value below 0.03 baht per US dollar,as seen in Figure 20.5,then

Correct AnswerverifiedShow Answer

In an open economy,fiscal policy has

Correct AnswerverifiedShow Answer

In an open economy,expansionary monetary policy will cause

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the Australian dollar depreciates aga...View AnswerShow Answer

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Correct AnswerverifiedShow Answer

When the value of a currency is determined ________,the exchange rate system is defined as 'managed float'.

Correct AnswerverifiedShow Answer

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

Correct AnswerverifiedShow Answer

Exchange rates under the Bretton Woods System were determined by relative supplies of gold held by countries within the system.

Correct AnswerverifiedShow Answer

Suppose the price of a mobile phone in Australia is $400 and 30 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Correct AnswerverifiedShow Answer

An example of 'foreign direct investment' is:

Correct AnswerverifiedShow Answer

Australia ________ concerned with being a net borrower if Australia is using all of the borrowed funds to ________.

Correct AnswerverifiedShow Answer

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade ________.

Correct AnswerverifiedShow Answer

Speculators who anticipate that the future value of the dollar relative to the yen will ________,will cause a(n) ______________.

Correct AnswerverifiedShow Answer

The major difference between an open economy and a closed economy is that

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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For any country,national saving must equ...
View Answer

Correct Answer
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Correct Answer
verified
The appreciation of domestic currency re...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
If the Australian dollar depreciates aga...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Australia concerned with being a net borrower if Australia is using all of the borrowed funds to .

Correct Answer
verified

Correct Answer
verified

Speculators who anticipate that the future value of the dollar relative to the yen will ,will cause a(n) ______.

Correct Answer
verified

Correct Answer
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