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(Solution Download) TRUE/FALSE MACRO ANALYSIS HOMEWORK

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In a closed economy, savings = investment is the same as the closed economy goods market equilibrium condition we know as Y = C + I + G.A) True
B) False
2.If income exceeds absorption, then the economy is 'consuming beyond its means.'A) True
B) False
3.In the open economy goods market equilibrium with two large countries, the sum of the absorptions must equal the sum of the incomes produced by the two countries.A) True
B) False
4.Goods market equilibrium in an open economy requires that savings equals investment plus the current account.A) True
B) False
5.If savings exceeds investment then the country is running a trade deficit where NX
B) False
6.If NX is positive then the country is consuming beyond their means and must borrow from the rest of the world.A) True
B) False
7.During the mid 2000s, the current account deficit in the US exceeded 10% of GDP.A) True
B) False
8.We argued that when the economic growth in the US is greater than the (economic) growth rates of our trading partners, the trade deficit in the US should get larger, all else constant.A) True
B) False
9.A country that intervenes in the foreign exchange market to keep their currency weak is consistent with the country being export oriented.A) True
B) False
10.We argued that when the US economy grew briskly during the new economy, the supply of US dollars in exchange for other currencies rose since along with economic growth, our appetite for imports grows as well. This effect, all else constant, would weaken the value of the $.A) True
B) False
11.We argued that the E. Asian and Russian crises would map to our foreign exchange market analysis as a decrease in the supply of dollars resulting in a stronger US dollar.A) True
B) False
12.During the Reagan Administration, the current account became a major economic issue. In particular, the US began running a large current account surplus where US exports were much larger than US imports.A) True
B) False
13.Export oriented countries prefer a weaker currency relative to a stronger currency.A) True
B) False
14.If there is pressure for the Chinese yuan to appreciate against the US dollar, then China can 'fight' this appreciation by buying $ with their yuan.A) True
B) False
15.We argued that one reason that interest rates are low on government securities is due to China's exchange rate regime.A) True
B) False
16.Monetary policy is thought to be stronger in an open economy relative to a closed economy since if the Fed, for example, wanted to prevent the economy from overheating, they would raise interest rates. Along with the normal closed economy impact on consumption and investment, we also would have a stronger dollar which would lower net exports, adding to the power of monetary policy.A) True
B) False
17.One reason fiscal policy is thought to be stronger in an open economy relative to a closed economy is due to the fact that in an open economy setting, the change in the interest rate effects the exchange rate and thus, adds power to fiscal policy through this exchange rate channel.A) True
B) False
18.A rush to the safe haven of $ US during a financial crisis is depicted in the supply / demand model in the $ US market as an increase in the demand to exchange foreign currencies in for $. The end result should be $ US appreciation, all else constant.A) True
B) False
19.We argued that the $ US was appreciating in the early years of the Reagan Administration due to the expansionary fiscal policy during this time.A) True
B) False
20.When people refer to the twin deficits in the US they are most likely referring to the new economy years since this was the time twin deficits occurred in the US economy.A) True
B) False

 







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