1.When a country such as the US runs a trade deficit, which of the following economic conditions is likely to be observed at the same time

Select one:

A.A high savings rate in the private sector

B.A federal government budget deficit

C.Both of the above

D.None of the above

2.Which of the following events would likely cause the dollar to decrease in value relative to foreign currencies?

Select one:

A.More tourists decide to travel to the US on vacation

B.Mercedes builds a new factory in Georgia

C.McDonalds cuts the prices of Big Macs in New York City

D.Lower interest rates in the US

3.How does depreciation in a country's exchange rate affect its trade deficit?

Select one:

A.Reduces imports, raises exports, raises trade deficit

B.Increases imports, reduces exports, lowers trade deficit

C.Reduces imports, raises exports, lowers trade deficit

D.Increases exports and imports, no change in trade deficit

4.If the exchange rate changes from $1.25 per euro to $1.40 per euro, then

Select one:

A.More US residents will go to Europe on vacation next summer

B.The exchange rate will soon fall back down to $1.25 per euro

C.European Union exports to the US will decrease

D.US residents will buy more stocks and bonds in European markets

5.Exchange rates are hard to predict. In which of the following situations would we expect the dollar to appreciate relative to foreign currencies?

Select one:

A.The US trade deficit increases

B.Inflation in the US increases

C.Tariffs are imposed by the US on auto imports

D.Interest rates in the US increase

6.The US currently runs a sizable trade deficit as it exports fewer goods and services than it imports. Which of the following would make the trade deficit smaller?

Select one:

A.Increase in GDP

B.Depreciation of the dollar

C.A larger federal budget deficit

D.Higher interest rates in the US than overseas

7. This question is based on the NYT article on bringing back manufacturing jobs.You are CEO of one of the major American automobile manufacturers.You would like to see the dollar depreciate because

Select one:

a.it would lead to higher stock prices

b.it would lower interest rates

c.it would make raw materials for cars less expensive

d.it would make Japanese and European cars more expensive

8. According to the NYT article on bringing back manufacturing jobs, one of the main reasons the dollar has become overvalued is that

Select one:

a.the US is running large trade deficits

b.China has manipulated its currency

c.foreign investors are selling their holdings of US stocks and bonds

d.the federal budget deficit is at record highs

9. Let's time travel back to January 2020 before the pandemic.You are advising Congress about how best to manage government spending and tax policy to ensure low unemployment and low inflation. The economy is at full employment and inflation is below the Fed's target rate. Which of the following actions would be in the economy's best interest from a macroeconomic perspective?

Select one:

A.Increase government spending to shift aggregate demand right

B.Impose a large tax on petroleum-based products to shift aggregate supply left

C.Do nothing on the tax, transfer and government spending front

D.Raise personal income tax rates to shift aggregate demand left

10. You work for Caterpillar and are responsible for forecasting demand for Cat products in Brazil. Which of the following steps could the Brazilian government take to increase GDP and thereby increase demand for Cat products in Brazil?

Select one:

A.Cut Social Security benefits to balance the budget

B.Cut taxes on capital investments such as buildings and structures

C.Cut spending on the military because foreign relations with neighboring countries have improved

D.Impose a carbon tax

11. he actual impact of a tax cut on GDP is difficult to predict because

Select one:

A.We are not exactly sure what the multiplier is

B.We do not know what will happen to interest rates and investment

C.Some of the tax cut will be saved, not spent

D.All of the above

12. When federal spending is above tax revenue, the US Treasury

Select one:

a.Asks the Federal Reserve to print more money to pay federal employees

b.Sells bonds to foreign and domestic entities to finance the deficit

c.Auctions off assets such as federal land to pay off the deficit

d.Raises the discount rate at the Federal Reserve

13. Which of the following is the best example of an automatic stabilizer?

Select one:

A.The Trump tax cut of 2017

B.Tariffs on steel and aluminum

C.Graduated federal income tax brackets, where tax rates rise with income

D.Interest on the federal debt

14. John Cochrane, Stanford professor and author of the Grumpy Economist blog, thinks that the biggest risk of continuing to have a debt to GDP ratio of 100 percent or more is that

Select one:

a.interest rates will creep up from near zero to two or three percent over the next five years

b.a debt crisis where investors will stop buying US Treasury securities, resulting either in severe inflation or dramatically higher interest rates

c.drastic cuts will have to be made to Social Security and Medicare to balance the budget

d.the trade deficit will widen much further, resulting in a loss of American manufacturing jobs

15. According to the NYT article "The Clash of Liberal Wonks," the biggest disagreementcenter-left economists who advised Clinton and Obama have with those serving Biden is

Select one:

a.the need to provide continued relief during the current pandemic and recession

b.how high the corporate income tax should be raised

c.whether the $1.9 trillion stimulus package is too large compared to the output gap

d.all of the above

16. According to the NYT article "The Clash of Liberal Wonks," which of the following is the biggest risk if the Biden $1.9 trillion stimulus package proves to be too large?

Select one:

a.the US will default on Treasury bonds

b.the economy will become addicted to $2 trillion packages every year

c.inflation will go from one percent to three percent for a year or two

d.inflation will get out of control forcing the Fed to raise interest rates