08 Jun Question 17. The U.S. was on a “gold standard” fr
Question
17. The U.S. was on a “gold standard” from 1879 to 1933. Which of the following was a
a major disadvantage of being on the gold standard from an economic point of view?
(a) the fixed exchange rate made international trade and investment easier.
(b) the price of gold varied according to how much gold the government bought.
(c) countries on the gold standard could not do expansionary monetary policy
(d) it causes the currencies on the gold standard to appreciate and makes their trade
deficits larger.
18. If Intel was manufacturing chips in the United States that were exported to China to
be made into cell phones for the Chinese market, but now is building a chip
manufacturing plant in China to provide chips to make cell phones in China for the
Chinese market, this action would directly:
(a) increase imports to the United States
(b) decrease imports to the United States
(c) increase U.S. exports
(d) decrease U.S. exports.
19. If the U.S. economy were to grow rapidly, this would:
(a) increase both U.S. imports and economic growth in the Rest of the World.
(b) decrease U.S. imports and increase economic growth in the Rest of the World.
(c) increase U.S. imports and decrease economic growth in the Rest of the World.
(d) decrease both U.S. imports and economic growth in the Rest of the World.
20. If the government had an easy money policy of lowering interest rates, then:
(a) the U.S. dollar would appreciate, causing net exports to decrease.
(b) the U.S. dollar would depreciate, causing net exports to increase.
(c) the U.S. dollar would depreciate, causing net exports to decrease.
(d) the U.S. dollar would appreciate, causing net exports to increase.
21. The United States has become a net debtor nation where the rest of the world owns
more assets in the United States than the United States owns assets in the rest of the
world. The United States external debt is directly caused by:
(a) years of households borrowing more and more to buy expensive homes.
(b) years of large U.S. Federal government budget deficits.
(c) the low value of the U.S. dollar, which makes it cheap for the Rest of the World
to buy U.S. assets and expensive for Americans to buy assets in the Rest of the World.
(d) years of large U.S. current account deficits
22. Which of the following is a possible negative result of the large U.S. external debt is:
(a) that the U.S. government will default on bonds sold to the Rest of the World.
(b) a soft landing where the U.S. dollar slowly depreciates that causes Aggregate
Demand to go up, leading to an expansion.
(c) a hard landing where rapid depreciation of the U.S. dollar causes Aggregate
Supply to go down, causing stagflation.
(d) that the U.S. will stop buying imports from the Rest of the World.
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