QUESTION 1
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
Policymakers are concerned that GDP growth is weakening after moderate growth in 2017, because of lower business confidence and the rising exchange value of their currency.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 2
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
Now that high inflation has decreased substantially, the central bank in this country is cutting interest rates.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 3
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
In this country, uncertainty about future trade policy is causing businesses to delay investment, which has reduced real GDP growth.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 4
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
When the United States threatened to put tariffs on this country’s steel and aluminum exports, the country threatened to retaliate by putting tariffs on U.S. goods.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 5
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
Policymakers in this country hope that a shortage of labor will cause wages to rise, and that this will increase consumption spending, and increase inflation.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 6
Here is a statement describing one of the articles you read. Match the statement to the country. Each country will be the answer to at least one question. Some countries will be an answer to more than one question.
If China puts tariffs on U.S. soybeans, they may buy them from farmers in this country instead, increasing this country’s exports.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom

QUESTION 7
Consider the data tables and articles about each country. Here is a description of the goods market.
Equilibrium output is increasing but is still below potential output.
Which two countries’ goods markets does this statement describe, for the year 2017?
a. Brazil and Europe
b. Japan and United Kingdom
c. Brazil and Japan
d. Europe and United Kingdom

QUESTION 8
Here are two descriptions of monetary policy, from the articles and the data table.
Central banks in two countries are planning to raise interest rates, or are under pressure to increase them, while the central banks in two other countries plan to maintain interest rates at current levels, or are decreasing rates.
Which countries match these policies?
a. Increase: Europe and Japan.       Maintain or Decrease: Brazil and United Kingdom.
b. Increase: Japan and Brazil.    Maintain or Decrease: United Kingdom and Europe.
c. Increase: United Kingdom and Europe. Maintain or Decrease: Brazil and Japan.
d. Increase: United Kingdom and Brazil. Maintain or Decrease: Japan and Europe.

QUESTION 9
Consider the articles and the data tables. In some countries fiscal policy has been stimulative (expansionary), in others it has been restrictive (contractionary). Which countries have followed which policies, in which years? (Consider Brazil from 2014-17, all others 2015-17.)
a. Stimulative: Europe 2015-17, UK 2015-17. Restrictive: Brazil 2014-17, Japan 2015-17.
b. Stimulative: Brazil 2014-17, Japan 2015-17. Restrictive: Europe 2015-17, UK 2015-17.
c. Stimulative: Japan 2015-17, UK 2015-17.    Restrictive: Brazil 2014-17, Europe 2015-17.
d. Stimulative: Brazil 2014-17, Europe 2015-17 Restrictive: Japan 2015-17, UK 2015-17.

QUESTION 10
Here is one way that the money, exchange and goods markets can interact. Consider the data tables about each country. Use the real interest rate as the measure of central bank policy. Compare the first and last years for each country.
The central bank reduces interest rates. The world’s lenders look elsewhere for higher rates, so the demand for the nation’s currency decreases in the exchange market. The exchange value of the currency falls. Exports become less expensive and imports become more expensive, increasing the trade balance (making exports minus imports less negative or more positive).
In which countries and in which years did this happen?
a. Brazil in 2012-15, Europe in 2012-14, United Kingdom in 2013-15.
b. Europe in 2014-16, Japan in 2012-15, United Kingdom in 2015-17.
c. Japan in 2015-17, Europe in 2016-17, Brazil in 2015-17.

QUESTION 11
According to the data and the articles, in two countries the fall in the exchange value of the currency has increased inflation, by raising the prices of imported goods. In which countries and in which years did this happen?
a. United Kingdom in 2012-15, and Japan in 2015-17.
b. Japan in 2012-15, and Europe in 2012-14.
c. Europe in 2015-17, and Brazil in 2016-17.
d. Brazil in 2012-15 and United Kingdom in 2015-17.

QUESTION 12
The articles and data about Brazil and the United Kingdom describe the effects of economic changes on exchange rates as of 2017. Which of the following is correct?
a. In Brazil, the economic recovery is encouraging international investment, which is decreasing the value of the real. In the UK, uncertainty about Brexit is discouraging international investment, which is increasing the value of the pound.
b. In Brazil, the economic recovery is encouraging international investment, which is increasing the value of the real. In the UK, uncertainty about Brexit is discouraging international investment, which is decreasing the value of the pound.
c. In Brazil, the large government budget deficit is discouraging international investment, which is decreasing the value of the real. In the UK, optimism about the end of European regulation is increasing international investment, which is increasing the value of the pound.
d. In Brazil, the large government budget deficit is discouraging international investment, which is increasing the value of the real. In the UK, optimism about the end of European regulation is increasing international investment, which is decreasing the value of the pound.

QUESTION 13
Consider the data on the trade balance in Europe and Japan in 2017. Consider the effects of monetary policy on exchange rates (second shift #5) and the effects of exchange rates on exports and imports (second shift #4). Remember that the trade balance is exports minus imports (X-M). What monetary policy would each country have to follow in order to move the trade balance towards zero (X=M)?
a. The central banks in both Europe and Japan would have to increase interest rates.
b. The central banks in both Europe and Japan would have to decrease interest rates.
c. The central bank in Europe would have to increase interest rates, while the central bank in Japan would have to decrease interest rates.
d. The central bank in Europe would have to decrease interest rates, while the central bank in Japan would have to increase interest rates.

QUESTION 14
Match the following description to the country it describes. Use the articles, the data, and what you know about the United States.
Output growth had been moderate in this country, after some years of slow growth. Output has moved above potential and resources are in short supply. Rising government budget deficits have added to spending. Inflation has been very low. The central bank continues to hold interest rates down, trying to stimulate inflation. It is hoped that the resource shortage will raise input costs and add to inflation. Low interest rates helped reduce the exchange value of the currency early in the decade, which increased exports, raising the trade balance considerably.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom
e. United States

QUESTION 15
Match the following description to the country it describes. Use the articles, the data, and what you know about the United States.
The country is slowly climbing out of a recession. Output is growing, but still is well below potential. For several years the country fought recession with expansionary fiscal policy, and the government budget deficit became very large. It is unclear whether the legislature will be able to reduce the deficit. Now that inflation has decreased, the central bank has begun to cut interest rates, and this is contributing to recovery. After years of sharp decline, the exchange value of the currency has stabilized, partly due to increased international investment.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom
e. United States

QUESTION 16
Match the following description to the country it describes. Use the articles, the data, and what you know about the United States.
The country has seen moderate output growth in recent years, and output has moved above potential. Fiscal policy has been restrictive, moving the government’s budget towards balance. Inflation has increased, and the central bank is expected to respond with interest rate increases. The exchange value of the currency has fallen, which has stimulated exports and output growth, but added to inflation by making imports more expensive. The country has been open to trade in the past, but now trade policy uncertainty has reduced investment, which is slowing growth.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom
e. United States

QUESTION 17
Match the following description to the country it describes. Use the articles, the data, and what you know about the United States.
The country expects moderate output growth and low inflation to continue. Output has moved above potential, but future growth may be restricted by slow resource and productivity increases. Projections show that government budget deficits will rise in the long run. A recent tax cut is projected to increase the deficit some more. The central bank has begun raising interest rates, and is expected to raise them more, even though inflation is still below its target rate. Future trade policy is uncertain, but may become more protectionist.

a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom
e. United States

QUESTION 18
Match the following description to the country it describes. Use the articles, the data, and what you know about the United States.

The country’s output has grown moderately in recent years. Inflation has been low, though it has increased recently. Output still is less than potential. Fiscal policy has been restrictive, moving towards a balanced government budget. The central bank cut interest rates to support spending, but has recently reduced its bond purchases. Now that inflation is rising toward its target, the bank is under pressure to increase interest rates. However, business confidence has weakened due to a recent increase in the exchange value of the currency and the threat of tariff increases.
a. Brazil
b. Europe (described as one country)
c. Japan
d. United Kingdom
e. United States

QUESTION 1 Here is a statement describing one of the articles you...