1. A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

    a. its money supplty.

    b. its interest rates.

    c. its level of real GDP.

    d. aggregate demand.

2. One method for a deficit country to correct the situation under a fixed exchange rate system is to

    a. increase aggregate demand with stimulative monetary policy/

    b. increase aggregate supply with tax cuts.

    c. decrease aggregate demand with restrictive fiscal and monetary policy.

    d. decrease aggregate supply with restrictive fiscal policy.

3. The decline in the value of the dollar from 1985 to 1988 was beneficial to _____

    a. American tourists traveling to Europe.

    b. firms importing goods into America.

    c. American exporting businesses.

    d. foreighners holding U.S. government bonds.

4. The different effects of fiscal and monetary policy in an open economy with mobile capital hinges on their different effect on

    a. price levels.

    b. interest rates.

    c. the money supply.

    d. real GDP.

5. The saving rate in the United States fell to nearly zero in the early 2000s. One of the contributing factors to this development was the

    a. decrease in consumer confidence in the late 1990s.

    b. declining real incomes of most American housholds.

    c. increased housing wealth.

    d. rising real interest rates in the United States.