ECON 335 FINAL EXAM QUESTIONS AND ANSWERS
Effects of dollar appreciation on MS, i, FinI, KF - CORRECT ANSWER✅✅✅MS rises, i falls, FinI falls, KF
falls
Effects of dollar depreciation on MS, i, FinI, KF - CORRECT ANSWER✅✅✅MS falls, i rises, FinI rises,
KF rises
What should the government do to eliminate a trade deficit (CA = S - I)? - CORRECT
ANSWER✅✅✅Increase Savings
What should the government do to eliminate a trade surplus (CA = S - I)? - CORRECT
ANSWER✅✅✅Increase Investment
Conditions for dollar devaluation - CORRECT ANSWER✅✅✅During recession or trade deficit
A supply decrease leads to - CORRECT ANSWER✅✅✅depreciation
A supply increase leading to appreciation - CORRECT ANSWER✅✅✅Foreign Investors' expectations
that the dollar is undervalued
A supply increase leading to appreciation - CORRECT ANSWER✅✅✅The interest rate in the U.S. had
increased relative to the interest rate in Europe
A demand decrease leading to appreciation - CORRECT ANSWER✅✅✅The inflation rate in Europe
has exceeded that in the U.S.
A demand increase leading to depreciation - CORRECT ANSWER✅✅✅Europe has increased the
tariffs on goods imported from the U.S.
Debits in the Balance of Payments (B.O.P.) - CORRECT ANSWER✅✅✅Cash outflows indicated with a
(-)
, Examples of debits or cash outflows - CORRECT ANSWER✅✅✅Imports
Gifts or Aid sent to a country
Compensation of employees
Payments on foreign investment income
Effect of dollar revaluation on inflation and trade balance - CORRECT ANSWER✅✅✅Inflation falls
and trade balance falls
Exchange rate system where Monetary Policy (MP) is most effective - CORRECT ANSWER✅✅✅A
floating exchange rate system
Exchange rate system where Monetary Policy (MP) is weakest - CORRECT ANSWER✅✅✅A fixed
exchange rate system
Exchange rate system where Fiscal Policy (FP) is most effective - CORRECT ANSWER✅✅✅A fixed
exchange rate system
Exchange rate system where Fiscal Policy (FP) is weakest - CORRECT ANSWER✅✅✅A floating
exchange rate system
Long run determinants of e - CORRECT ANSWER✅✅✅Productivity, Inflation, Income, Tastes, and
Trade Policy
Short run determinants of e - CORRECT ANSWER✅✅✅Interest Rates and Expectations
Contractionary Fiscal Policy (FP) - CORRECT ANSWER✅✅✅A type of fiscal policy used to address a
trade deficit.
Expansionary Fiscal Policy (FP) - CORRECT ANSWER✅✅✅A type of fiscal policy used to address a
trade surplus.
Effects of dollar appreciation on MS, i, FinI, KF - CORRECT ANSWER✅✅✅MS rises, i falls, FinI falls, KF
falls
Effects of dollar depreciation on MS, i, FinI, KF - CORRECT ANSWER✅✅✅MS falls, i rises, FinI rises,
KF rises
What should the government do to eliminate a trade deficit (CA = S - I)? - CORRECT
ANSWER✅✅✅Increase Savings
What should the government do to eliminate a trade surplus (CA = S - I)? - CORRECT
ANSWER✅✅✅Increase Investment
Conditions for dollar devaluation - CORRECT ANSWER✅✅✅During recession or trade deficit
A supply decrease leads to - CORRECT ANSWER✅✅✅depreciation
A supply increase leading to appreciation - CORRECT ANSWER✅✅✅Foreign Investors' expectations
that the dollar is undervalued
A supply increase leading to appreciation - CORRECT ANSWER✅✅✅The interest rate in the U.S. had
increased relative to the interest rate in Europe
A demand decrease leading to appreciation - CORRECT ANSWER✅✅✅The inflation rate in Europe
has exceeded that in the U.S.
A demand increase leading to depreciation - CORRECT ANSWER✅✅✅Europe has increased the
tariffs on goods imported from the U.S.
Debits in the Balance of Payments (B.O.P.) - CORRECT ANSWER✅✅✅Cash outflows indicated with a
(-)
, Examples of debits or cash outflows - CORRECT ANSWER✅✅✅Imports
Gifts or Aid sent to a country
Compensation of employees
Payments on foreign investment income
Effect of dollar revaluation on inflation and trade balance - CORRECT ANSWER✅✅✅Inflation falls
and trade balance falls
Exchange rate system where Monetary Policy (MP) is most effective - CORRECT ANSWER✅✅✅A
floating exchange rate system
Exchange rate system where Monetary Policy (MP) is weakest - CORRECT ANSWER✅✅✅A fixed
exchange rate system
Exchange rate system where Fiscal Policy (FP) is most effective - CORRECT ANSWER✅✅✅A fixed
exchange rate system
Exchange rate system where Fiscal Policy (FP) is weakest - CORRECT ANSWER✅✅✅A floating
exchange rate system
Long run determinants of e - CORRECT ANSWER✅✅✅Productivity, Inflation, Income, Tastes, and
Trade Policy
Short run determinants of e - CORRECT ANSWER✅✅✅Interest Rates and Expectations
Contractionary Fiscal Policy (FP) - CORRECT ANSWER✅✅✅A type of fiscal policy used to address a
trade deficit.
Expansionary Fiscal Policy (FP) - CORRECT ANSWER✅✅✅A type of fiscal policy used to address a
trade surplus.
