CHAPTER 15—EXCHANGE-RATE ADJUSTMENTS AND THE BALANCE OF PAYMENTS
MULTIPLE CHOICE
1. According to the absorption approach, the economic circumstances that best warrant a currency
devaluation is where the domestic economy faces:
a. Unemployment coupled with a payments deficit
b. Unemployment coupled with a payments surplus
c. Full employment coupled with a payments deficit
d. Full employment coupled with a payments surplus
ANS: A PTS: 1
2. According to the J-curve effect, when the exchange value of a country's currency appreciates, the
country's trade balance:
a. First moves toward deficit, then later toward surplus
b. First moves toward surplus, then later toward deficit
c. Moves into deficit and stays there
d. Moves into surplus and stays there
ANS: B PTS: 1
3. Assume that Brazil has a constant money supply and that it devalues its currency. The monetary
沙基裤approach to devaluation reasons that one of the following tends to occur for Brazil:
a. Domestic prices ri--purchasing power of money falls--consumption falls
b. Domestic prices ri--purchasing power of money ris--consumption ris
c. Domestic prices fall--purchasing power of money ris--consumption falls
d. Domestic prices fall--purchasing power of money ris--consumption ris
ANS: A PTS: 1
4. According to the Marshall-Lerner approach, a currency depreciation will best lead to an
improvement on the home country's trade balance when the:
a. Home demand for imports is inelastic--foreign export demand is inelastic
b. Home demand for imports is inelastic--foreign export demand is elastic
c. Home demand for imports is elastic--foreign export demand is inelastic
d. Home demand for imports is elastic--foreign export demand is elastic
ANS: D PTS: 1
5. Assume an economy operates at full employment and faces a trade deficit. According to the
absorption approach, currency devaluation will improve the trade balance if domestic:
a. Interest rates ri, thus encouraging investment spending
b. Income ris, thus stimulating consumption
c. Output falls to a lower level
d. Spending is cut, thus freeing resources to produce exports
ANS: D PTS: 1
6. An appreciation of the U.S. dollar tends to:
a. Discourage foreigners from making investments in the United States
b. Discourage Americans from purchasing foreign goods and rvices
c. Increa the number of dollars that could be bought with foreign currencies
d. Discourage Americans from traveling overas
ANS: A PTS: 1
7. The Marshall-Lerner condition deals with the impact of currency depreciation on:
a. Domestic income
b. Domestic absorption
c. Purchasing power of money balances
d. Relative prices
ANS: D PTS: 1
8. According to the J-curve concept, which of the following is fal--that the effects of a currency
depreciation on the balance of payments are:
a. Transmitted primarily via the income adjusted mechanism
b. Likely to be adver or negative in the short run
c. In the long run positive, given favorable elasticity conditions
d. Influenced by offtting devaluations made by other countries
ANS: A PTS: 1
9. Which of the following is true for the J-curve effect? It:
a. Applies to the interest rate effects of currency depreciation
b. Applies to the income effects of currency depreciation
c. Suggests that demand tends to be most elastic over the long run
d. Suggests that demand tends to be least elastic over the long run
ANS: C PTS: 1
10. American citizens planning a vacation abroad would welcome:
a. Appreciation of the dollar
b. Depreciation of the dollar
c. Higher wages extended to foreign workers
d. Lower wages extended to foreign workers
ANS: A PTS: 1
我的梦想演讲
11. Assume the Canadian demand elasticity for imports equals 0.2, while the foreign demand
elasticity for Canadian exports equals 0.3. Responding to a trade deficit, suppo the Canadian dollar depreciates by 20 percent. For Canada, the depreciation would lead to a:
a. Worning trade balance--a larger deficit
b. Improving trade balance--a smaller deficit
c. Unchanged trade balance
d. None of the above
ANS: A PTS: 1
笨拙
12. Assume the Canadian demand elasticity for imports equals 1.2, while the foreign demand
elasticity for Canadian exports equals 1.8. Responding to a trade deficit, suppo the Canadian dollar depreciates by 10 percent. For Canada, the depreciation would lead to a(n):
a. Worning trade balance--a larger deficit
b. Improving trade balance--a smaller deficit
c. Unchanged trade balance
d. None of the above
ANS: B PTS: 1
13. From 1985 to 1988 the U.S. dollar depreciated over 50 percent against the yen, yet Japane
export prices to Americans did not come down the full extent of the dollar depreciation. This is best explained by:
a. Partial currency pass-through
b. Complete currency pass-through
浙大录取分数线2020是多少分c. Partial J-curve effect
d. Complete J-curve effect
ANS: A PTS: 1
14. Becau of the J-curve effect and partial currency pass-through, a depreciation of the domestic
currency tends to increa the size of a:surrender是什么意思
a. Trade surplus in the short run
legacyb. Trade surplus in the long run
c. Trade deficit in the short run
d. Trade deficit in the long run
ANS: C PTS: 1
ling15. According to the Marshall-Lerner condition, a currency depreciation is least likely to lead to an
improvement in the home country's trade balance when:
a. Home demand for imports is inelastic and foreign export demand is inelastic
b. Home demand for imports is elastic and foreign export demand is inelastic
c. Home demand for imports is inelastic and foreign export demand is elastic
d. Home demand for imports is elastic and foreign export demand is elastic
ANS: A PTS: 1
16. If foreign manufacturers cut manufacturing costs and profit margins in respon to a depreciation
in the U.S. dollar, the effect of the actions is to:
a. Shorten the amount of time in which the depreciation leads to a smaller trade deficit
b. Shorten the amount of time in which the depreciation leads to a smaller trade surplus
c. Lengthen the amount of time in which the depreciation leads to a smaller trade deficit
d. Lengthen the amount of time in which the depreciation leads to a smaller trade surplus
ANS: C PTS: 1
17. The shift in focus toward imperfectly competitive markets in domestic and international trade
questions the concept of:
a. Official exchange rates
b. Complete currency pass-through
c. Exchange arbitrage
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d. Trade-adjustment assistance
ANS: B PTS: 1
18. The extent to which a change in the exchange rate leads to changes in import and export prices is
known as:
a. The J-curve effect
b. The Marshall-Lerner effect
c. The absorption effect
d. Pass-through effect
ANS: D PTS: 1
19. Complete currency pass-through aris when a 10 percent depreciation in the value of the dollar
caus U.S.:
a. Import prices to fall by 10 percent
engagementsb. Import prices to ri by 10 percent
c. Export prices to ri by 10 percent
d. Export prices to ri by 20 percent
ANS: B PTS: 1
20. Which approach predicts that if an economy operates at full employment and faces a trade deficit,
currency devaluation (depreciation) will improve the trade balance only if domestic spending is cut, thus freeing resources to produce exports?
a. The absorption approach
b. The Marshall-Lerner approach
c. The monetary approach
d. The elasticities approach
ANS: A PTS: 1
21. Which approach analyzes a nation's balance of payments in terms of money demand and money
supply?
a. Expenditures approach
b. Absorption approach
c. Elasticities approach
d. Monetary approach
ANS: D PTS: 1
22. The ____ effect suggests that following a currency depreciation a country's trade balance
worns for a period before it improves.
a. Marshall-Lerner
b. J-curve
c. Absorption
d. Pass-through
ANS: B PTS: 1
23. The J-curve effect implies that following a currency appreciation, a country's trade balance:
a. Worns before it improves
b. Continually worns
c. Improves before it worns
d. Continually improves
ANS: C PTS: 1
24. Which analysis considers the extent by which foreign and domestic prices adjust to a change in
the exchange rate in the short run:
a. Monetary analysis
b. Absorption analysis
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c. Expenditures analysis
d. Pass-through analysis
ANS: D PTS: 1
