Economics 2162A/B Midterm: Econ_2162_Midtermdocx

The U.S. was on a gold standard from 1879 to 1933. Which of the following was a major disadvantage of being on the gold standard from an economic point of view?

a) the fixed exchange rate made international trade and investment easier.

b) the price of gold varied according to how much gold the government bought.

c) countries on the gold standard could not do expansionary monetary policy.

d) it causes the currencies on the gold standard to appreciate and makes their trade deficits larger.

6) Which of the following would be the most pessimistic with regard to the ability of the government to reduce unemployment by monetary of fiscal policy? a. Monetarists b. Keynesians c. rational expectations school d. Klingons e. supply-siders

7) Which of the following would tend to increase a country's imports?

a. an increase in the domestic rate of interest

b. an increase in the exchange rate ( i.e an increase in the price of foreign exchange)

c. an increase in domestic income

d. an increase in foreign prices

e. none of the above

8) Which of the following would decrease a country's exports ?

a. a decrease in the exchange rate( i.e a an decrease in the price of foreign exchange)

b. an increase in the domestic rate of interest

c. an increase in domestic price

d. an increase in domestic income

e. none of the above

9) Which of the following would indicate a conflict between the goals of full employment and balance of payments equilibrium ?

a. inflation and a balance of payments deficit

b. unemployment and a balance of payments surplus

c. unemployment and a balance of payments deficit

d. full employment and a balance of payments surplus

e. none of the above would indicate a conflict

10) Which of the following would result if the county's currency depreciated ? a. an increase in both imports and exports

b. a decrease in both imports and exports

c. an increase in imports and a decrease in exports

d. a decrease in imports and an increase in exports

e. a decrease in net capital inflows

11) Under the gold standard, if a nation had a balance of payments surplus, the difference would have been resolved by:

a. gold shipments from the surplus to the deficit country

b.gold shipments from the deficit to the surplus country

c. appreciation of the country's currency in the foreign exchange markets

d. depreciation of the country's currency in the foreign exchange markets

e. human sacrifices in the deficit country

12.Under a system of flexible exchange rates, if a nation had a balance of payments deficit, which of the following would occur ?

a. gold shipment from the surplus to the deficit country

b. gold shipments from the deficit to the surplus country

c. appreciation of the current in the foreign exchange markets

d. depreciation of the currency in the foreign exchange markets

e. the money supply increase

13. Depreciation of a country's currency would generally result in:

a. the aggregate demand curve shifting to the left

b. the aggregate demand curve shifting to the right

c. the aggregate supply curve shifting to the left

d. the aggregate supply curve shifting to the right.

e) both A and B

Q44. Paying off the national debt would redistribute income from the
a. debt holders to the taxpayers
b. taxpayers to the major recipients of transfer payments
c. banks to the taxpayers
d. taxpayers to the debt holders

Q45. When the government uses tax revenue to pay off portions of the national debt, total purchasing power in the economy
a. increases
b. decreases
c. is not affected at any level
d. remains the same but changes individually

Q46. Which of the following would cause a credit to the U. S. balance of payments?
a. a group of U. S. citizens goes to New Zealand for a vacation
b. General Motors pays a dividend to a citizen of Brazil
c. Lloyd's of London makes an insurance payment to a U. S. resident
d. Russia cancels its purchases of U. S. wheat and buys wheat from Argentina

Q47. Under the gold standard, a country experiencing a gold outflow
a. has a balance of payments surplus
b. had an increasing money supply
c. experienced a decline in output
d. experienced an increase in output

Q48. Under the gold standard, a country with a trade deficit should expect
a. gold to flow out of the country to other countries
b. gold to flow into the country from other countries
c. the value of its currency to appreciate
d. the value of its currency to depreciate

Q49. The course of international monetary policy is directed primarily by the
a. Federal Reserve
b. World Bank
c. International Monetary Fund
d. leaders of the Group of Seven nations