11) When the real exchange rate rises
A) imports measured in terms of domestic output will rise.
B) imports measured in terms of domestic output will fall.
C) imports measured in terms of domestic output will never be affected.
D) imports measured in terms of domestic output may rise or fall.
E) imports measured in terms of foreign output will rise.
12) Which one of the following statements is the MOST accurate?
A) An increase in disposable income improves the current account.
B) An increase in disposable income does not affect the current account.
C) An increase in disposable income worsens the current account.
D) An increase in income worsens the current account.
E) An increase in income improves the current account.
13) Which one of the following statements is the MOST accurate?
A) An increase in the real exchange rate and an increase in disposable income improve the current account.
B) A decrease in the real exchange rate and a decrease in disposable income improve the current account.
C) A decrease in the real exchange rate and a increase in disposable income improve the current account.
D) An increase in the real exchange rate and a decrease in disposable income improve the current account.
E) An increase in the real exchange rate and a decrease in disposable income lowers the current account.
14) Disposable income is defined as
A) Y - C.
B) Y - T.
C) C - T.
D) I - C.
E) Y - I.
15) The real exchange rate is:
A) how much of a foreign currency you can buy with the domestic currency.
B) foreign CPI divided by the domestic CPI.
C) the price of foreign goods in terms of domestic goods.
D) the price of foreign goods in dollars.
E) the domestic currency divided by the price level.
16) An increase in the real exchange rate
A) makes imports more expensive.
B) makes imports less expensive.
C) does not affect import values.
D) always makes the number of imports rise.
E) makes domestic consumers spend more on only foreign imports.
17) Which of the following compete to determine whether the current account improves or worsens following a rise in the real exchange rate?
A) appreciation and depreciation
B) crowding Out effect and producers effect
C) volume effect and value effect
D) volume effect and inflation
E) producers effect and value effect
18) Assuming that the value effect dominates, the current account will increase if
A) the real exchange rate decreases.
B) the real exchange rate increases.
C) disposable income increases.
D) exports fall.
E) domestic prices fall.
19) Which of the following would cause the current account to decrease?
A) an increase in the nominal exchange rate, E
B) an appreciation of the home currency
C) an increase in disposable income
D) an increase in foreign prices, P
E) a decrease in domestic prices, P
20) What is the best way to describe aggregate demand?
A) quantity required to satisfy equilibrium
B) exports decrease; imports increase
C) amount of a country's goods and services demanded by household and firms throughout the world
D) individual's demand
E) domestic demand of foreign imports.
21) What have we assumed when we conclude that a real depreciation of the currency improves the current account?
A) The volume effect outweighs the value effect.
B) The value effect outweighs the volume effect.
C) All else equal and the volume effect outweighs the value effect.
D) All else equal and the value effect outweighs the volume effect.
E) All else equal and the volume effect equals the value effect.
22) A country's domestic currency's real exchange rate, q, is best described by
A) the price of similar goods in the same market.
B) the price of the domestic basket in terms of the foreign one.
C) the price of a domestic basket.
D) the price of the foreign basket in terms of the domestic basket.
E) the price of different goods baskets in the same market.
