Which of the following might you believe if you say that "it's no one's fault" that the United States runs a trade deficit?
A. The United States is a successful rich economy that can afford a lot of imports.
B. Other countries have used nontariff barriers to keep out U.S. exports.
C. U.S. manufacturers are incompetent and unable to compete with foreign producers.
D. American consumers borrow too much to buy imported goods like cars and electronics.
Answer: A
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The supply of dollars in the foreign exchange market decreases and that means that the supply curve of dollars shifts leftward if
A) the U.S. interest rate differential decreases. B) the expected future exchange rate rises. C) the exchange rate for the dollar rises. D) the U.S. interest rate decreases.
One of the advantages of floating exchange rates is that:
a. consumers always know how much imported goods cost. b. businesses always know, in advance, what future exchange rates will be. c. countries are free to pursue their own macroeconomic policies without maintaining exchange rates. d. countries cannot act independently and must thus coordinate their macroeconomic policies. e. the global interest rate tends to decline to the lowest possible level.
Estimates by economists of the natural rate of unemployment in the U.S. economy in the early 2000s run at about
a. 3.5% to 4.5%. b. 4.5% to 5.5%. c. 5.5% to 6.5%. d. 6.5% to 7.5%.
Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy. If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2017, which of the following will be higher than if the Fed had taken no action?
A) Real GDP and then inflation rate B) real GDP and the unemployment rate C) real GDP and potential GDP D) potential GDP and the inflation rate