Question :
17.1 Determinants of Aggregate Demand in an Open Economy
1) How : 1303624
17.1 Determinants of Aggregate Demand in an Open Economy
1) How does an increase in the real exchange rate affect exports and imports?
A) Exports increase; imports decrease.
B) Exports decrease; imports increase.
C) Exports increase; imports change ambiguously.
D) Exports change ambiguously; imports decrease.
E) Exports increase; imports are constant.
2) Which one of the following statements is MOST accurate?
A) In general, consumption demand rises by less than disposable income.
B) In general, consumption demand rises by more than disposable income.
C) In general, consumption demand rises by more than income.
D) In general, consumption demand rises by the same amount as disposable income rises.
E) In general, consumption demand rises are unrelated to disposable income rises.
3) The current account balance is
A) the supply of a country’s exports less the country’s own demand for imports.
B) the demand for a country’s exports plus the country’s own demand for imports.
C) the country’s own demand for imports less the demand for a country’s exports.
D) the demand for a country’s exports less the country’s own demand for imports.
E) the country’s federal reserves minus the national debt.
4) The domestic currency price of a representative foreign expenditure basket is
A) P, the domestic price level.
B) E, the nominal exchange rate.
C) P times E, the domestic price level times the domestic price level.
D) P, the foreign price level.
E) P times E, the foreign price level times the nominal exchange rate.
5) Current account is given by the equation:
A) CA = IM – EX (measured in terms of domestic output).
B) CA = IM – EX (measured in terms of foreign output).
C) CA = EX – IM (measured in terms of domestic output).
D) CA = EX – IM (measured in terms of foreign output).
E) CA = EX + IM (measured in terms of domestic output).
6) The domestic currency price of a representative domestic expenditure basket is
A) P, the domestic price level.
B) E, the nominal exchange rate.
C) P times E, the domestic price level times the domestic price level.
D) P, the foreign price level.
E) P times E, the foreign price level times the nominal exchange rate.
7) The real exchange rate, q, is defined as
A) the price of the foreign basket in terms of the domestic one.
B) the price of the domestic basket in terms of the foreign one.
C) the price of the foreign basket.
D) the price of the domestic basket.
E) the nominal exchange rate in terms of the domestic basket.
8) A country’s domestic currency’s real exchange rate, q, is defined as
A) E.
B) E times P.
C) E times P.
D) (E times P)/P.
E) P/(E times P).
9) If the representative basket of European goods and services costs 40 euros, the representative U.S. basket costs $50, and the dollar/euro exchange rate is $0.90 per euro, then the price of the European basket in terms of U.S. basket is
A) [(0.9 $/euro) (40 euro per a European basket)]/[(50 $/U.S. basket)].
B) [(0.9 $/euro) (50 $/U.S. basket)]/[(40 euro per a European basket)].
C) [(40 euro per a European basket)]/[(50 $/U.S. basket) (0.9 $/euro)].
D) [(50 $/U.S. basket)].
E) [(0.9 $/euro) (40 euro per a European basket) (50 $ U.S. basket)].
10) When EP/P rises
A) IM will rise.
B) IM will fall.
C) IM may rise or fall.
D) IM is not affected.
E) IM and P* will both rise.
