1. With everything else being equal, if the price level in the USA increases relative to foreign countries, then which of the following happens?

a. the real exchange rate increases

b.  the real exchange rate decreases

c. the real exchange rate remains unaffected

d. none of the above

2. If the real exchange rate between the USA and Japan is 0.35 then it means:

a. the price level in Japan is more expensive than the USA

b. the price level in the USA is more expensive than in Japan

c. none of the above

3. If the domestic price level relative to the foreign price level increases, then which of the following is true?

a. the real exchange rate appreciates

b. net exports decrease

c. both a & b

d. none of the above

4. If the USA experiences an economic boom relative to its trading partners, then:

a. the supply of US dollar in the market increases

b. the US dollar depreciates

c. both A & B

5. If foreign countries increase their interest rates, then?

a. the US dollar will appreciate

b. the US dollar will depreciate

c. the US dollar will remain unaffected

6. If China , a key trading partner of the USA, experiences a recession, then

a. US net exports to China will increase

b. US net exports to China will decrease

c. US net exports to Chine will remain unaffected

7. Suppose the Government of the USA decided to increases it's spending over next one year. How will this expansionary fiscal policy affect the US economy?

a. output, interest rates, and prices will incrase but net exports will decrease

b. output and interest rates will increase but prices and net exports will decrease

c. all four variables will increase

d. output will increase but interest rates , prices and net exports will decrease

8. With everything else being equal, which of the following statement is true about money supply and reserve ratio?

a. if the central bank increases the reserve ratio, then money supply increases

b. if the central bank decrease the reserve ratio, then money supple increases

c. there is no relationship between reserve ratio and money supply

d. none of the above

9. The deficit is :

a. the amount by which the government purchases, transfers, and net interest exceed tax revenues

b. the amount by which government purchases and transfers exceeds tax revenues

c. the primary deficit minus net interest payments

d. total tax revenues minus net interest minus government expenditures