Question : 17.10   Macroeconomic Policies and the Current Account 1) Which of the : 1303639

17.10   Macroeconomic Policies and the Current Account

1) Which of the following is TRUE of the current account balance?

A) Monetary expansion has no effect on the current account balance.

B) Monetary expansion decreases the current account balance.

C) Fiscal expansion increases the current account balance.

D) Fiscal expansion has no effect on the current account balance.

E) Monetary expansion increases the current account balance.

2) In the short run

A) monetary expansion causes the CA to increase & fiscal expansion causes the CA to decrease.

B) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to decrease.

C) monetary expansion causes the CA to increase & fiscal expansion causes the CA to increase.

D) monetary expansion causes the CA to decrease & fiscal expansion causes the CA to increase.

E) monetary expansion causes the CA to increase & the effects of fiscal expansion are ambiguous.

3) Which statement best describes the current account balance in the short run?

A) Monetary expansion lowers the current account balance.

B) Monetary expansion keeps the current account balance the same.

C) Fiscal expansion increases the current account balance.

D) Fiscal expansion keeps the current account balance the same.

E) Monetary expansion increases the current account balance.

17.11   Gradual Trade Flow Adjustment and Current Account Dynamics

1) According to historical data, what is the effect of a sharp change in the current account on the exchange rate (both in the short and long run)?

A) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to depreciate.

B) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to depreciate.

C) At first, home currency will appreciate as CA balance rises, but over time, currency will begin to depreciate.

D) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to appreciate.

E) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to appreciate.

2) Which two time periods did the U.S. begin to experience a sharp increase in Current Account deficits?

A) 1981, mid-1990s

B) 1971, mid-1990s

C) 1961, mid-1990s

D) 1971, mid-1980s

E) 1985, mid-1990s

3) The J-curve illustrates which of the following?

A) the effects of depreciation on the home country’s economy

B) the immediate increase in current account caused by a currency depreciation

C) the gradual adjustment of home prices to a currency depreciation

D) the short-term effects of depreciation on the current account

E) the Keynesian view of international trade dynamics

4) The percent by which import prices rise when the home currency depreciates by 1% is the degree of

A) pass-forward from exchange rates to import prices.

B) pass-through from exchange rates to import prices.

C) pass-on from exchange rates to import prices.

D) roll-forward from exchange rates to import prices.

E) pass-beyond from exchange rates to import prices.

5) In practice, many U.S. import prices tend to rise by only around

A) 1/4 of a typical dollar depreciation over the following year.

B) 1/3 of a typical dollar depreciation over the following year.

C) 1/2 of a typical dollar depreciation over the following year.

D) 2/3 of a typical dollar depreciation over the following year.

E) 2/5 of a typical dollar depreciation over the following year.

6) Describe what is a J Curve?