### Macroeconomics Practice Test - 7: Monetary and Fiscal Policy in an Open Economy

##### Click on the correct option. Text colour will change into green if your chosen option is corret and if it is wrong, it will change into red:
1. Which of the following does not result in an increase in U.S. net exports?

1. The U.S. dollar depreciates

2. Output for U.S. trading partners increases

3. Foreign currencies depreciate

4. U.S. trading partners lift tariff barriers

2. An increase in autonomous net exports

1. Shift IS rightward by $${k_e}\Delta \overline X$$

2. Shifts IS leftward by $${k_e}\Delta \overline X$$

3. Increases the slope of IS

4. Decreases the slope of IS

3. Which of the following result in an increase in the value of the dollar in a flexible exchange rate environment?

1. Interest rates in the U.S.A. decrease

2. Interest rates in foreing countries increase

3. The price level in the U.S.A. increases

4. The price level in the U.S.A. decreases

4. In a fixed exchange rate environment, an increase in the U.S. rate of interest result in

1. A depreciation of the dollar

2. An appreciation of the dollar

3. An increase in the U.S. money supply

4. A decrease in the U.S. money supply

5. In the Mundell-Fleming model, an increase in the rate of interest in Country B

1. Increases the world rate

2. Decreases the world rate

3. Results in a depreciation of B's currency in a flexible exchange rate environment

4. Results in an appreciation of B's currency in a flexible exchange rate environment

6. When Country B's rate of interest falls below the world rate in a fixed exchange rate environment,

1. B's exports decrease and IS shifts leftward

2. B's exports increase and IS shifts leftward

3. B's money supply increases and LM shifts rightward

4. B's money supply decreases and LM shifts leftward

7. In the Mundell-Fleming model, an increase in Country B's money supply

1. Increasea B's exports in a flexible exchange rate environment

2. Decreasea B's exports in a flexible exchange rate envirnoment

3. Increasea B's exports in a fixed exchange rate environment

4. Decreases B's exports in a fixed exchange rate environment

8. When exchange rates are flexible, a decrease in Country B's taxes

1. Has no effect upon output in Country B

2. Causes output in Country B to increase

3. Results in an increase in Country B's exports

4. Results in a decrease in the value of country B's currency

9. Which of the following does not increase output when exchange rates are fixed?

1. There is an increase in the money supply

2. There is an increase in government spending

3. There is a decrease in taxes

4. None of the above

10. Which of the following increases output when exchange rates are flexible?

1. There is an increase in the money supply

2. There is an increase in government spending

3. There is a decrease in taxes

4. None of the above