1. When the United States recovers from a recession, this tends to shift Germany's AD curve _________________, which _____________ Germany's price level.

a. rightward; lowers

b. rightward; raises

c. leftward; lowers

d. leftward; raises

2. Assuming that the increase in the value of the dollar in the foreign exchange market has a greater impact on aggregate demand than on aggregate supply, an increase in the United States budget deficit will raise Real GDP

a. to the same level irrespective of whether it is a closed or an open economy.

b. more in an open economy than in a closed economy.

c. more in a closed economy than in an open economy.

d. none of the above (i.e. Real GDP will decrease)

3. The United States SRAS curve may shift to the left if we ____________________ Malaysia and the dollar ________________ against the Malaysian ringgit.

a. sell finished goods to; appreciates

b. sell finished goods to; depreciates

c. buy raw materials from; depreciates

d. buy raw materials from; appreciates

4. Proponents of the fixed exchange rate system argue that

a. under a fixed exchange rate system, there would be only one currency.

b. flexible exchange rates may promote international trade, but under a fixed exchange rate system at least we know what the rates will be from day to day.

c. under a flexible exchange rate system, there is no way of knowing what the exchange rate is at any particular point in time.

d. under a flexible exchange rate system, there is too great a chance that the exchange rate will diverge from the equilibrium exchange rate. e. none of the above.