Chapter 33 — Quiz

Q1. The current account + capital account =: a) GDP b) Approximately zero c) The national debt d) Inflation Q2. Dollar appreciation: a) Helps U.S. exporters b) Hurts U.S. exporters and helps consumers of imports c) Has no effect d) Always causes recession Q3. The impossible trinity says a country cannot simultaneously have: a) Growth, stability, and equity b) Fixed exchange rate, free capital mobility, and independent monetary policy c) Low taxes, high spending, and low debt d) Imports, exports, and saving Q4. The Asian financial crisis (1997) was triggered by: a) High inflation b) Capital flight from countries with fixed exchange rates and open capital accounts c) U.S. monetary tightening d) Trade war Q5. The eurozone's design flaw is: a) Too many members b) Monetary union without fiscal union c) Fixed exchange rates d) No central bank Q6. The U.S. dollar is the world's reserve currency, which means: a) The U.S. must hold gold b) Foreign central banks hold dollars as a safe asset, lowering U.S. borrowing costs c) The dollar is fixed to gold d) No other currencies exist

SA1. Why does the U.S. trade deficit equal foreign capital inflows? SA2. State the impossible trinity in one sentence. SA3. How did the eurozone crisis illustrate the problems of a monetary union without a fiscal union?

TF1. In a floating exchange rate system, the central bank determines the exchange rate. (T/F) TF2. A country can have a fixed rate, free capital, and independent monetary policy simultaneously. (T/F) TF3. Dollar depreciation helps U.S. exporters. (T/F)

Selected answers in appendices/answers-to-selected.md.