Economics

Suppose there are two countries that are identical in every way with the following exception. ...

Suppose there are two countries that are identical in every way with the following exception. ...

Suppose there are two countries that are identical in every way with the following exception. Country A is pursuing a fixed exchange rate regime and country B is pursuing a flexible exchange rate regime. Suppose taxes are increased in both countries

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Assume the interest parity condition holds and that initially i = i*. A reduction in the foreign ...

Assume the interest parity condition holds and that initially i = i*. A reduction in the foreign ...

Assume the interest parity condition holds and that initially i = i*. A reduction in the foreign interest rate (i*) will cause
A) an increase in the demand for the domestic currency.
B) an increase in E.
C) an expected depreciation of

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In a flexible exchange rate regime, a reduction in the expected future exchange rate will cause

In a flexible exchange rate regime, a reduction in the expected future exchange rate will cause

In a flexible exchange rate regime, a reduction in the expected future exchange rate will cause
A) the IP curve to shift to the left/up.
B) the IP curve to shift to the right/down.
C) a movement along the IP curve.
D) neither a sh

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For this question, assume that there is a simultaneous increase in government spending and monetary ...

For this question, assume that there is a simultaneous increase in government spending and monetary ...

For this question, assume that there is a simultaneous increase in government spending and monetary contraction. In a flexible exchange rate regime, we know with certainty that such a policy mix will cause which of the following?
A) an increase

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In the early 1990s, which nation took the lead in driving up European interest rates?

In the early 1990s, which nation took the lead in driving up European interest rates?

In the early 1990s, which nation took the lead in driving up European interest rates?
A) Spain
B) France
C) Germany
D) England
E) none of the above

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A common argument for fixed exchange rates is that they

A common argument for fixed exchange rates is that they

A common argument for fixed exchange rates is that they
A) give central banks greater freedom in adjusting their economy's level of output.
B) forever free the central bank from have to adjust the exchange rate to fundamental changes i

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For this question, assume that the economy is operating in a fixed exchange rate regime and that ...

For this question, assume that the economy is operating in a fixed exchange rate regime and that ...

For this question, assume that the economy is operating in a fixed exchange rate regime and that perfect capital mobility exists. Given this information, which of the following will occur?
A) the domestic and foreign interest rates must be equal

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Under a "crawling peg" system, a country's exchange rate

Under a "crawling peg" system, a country's exchange rate

Under a "crawling peg" system, a country's exchange rate
A) is fixed except for small, surprise changes.
B) changes at a predetermined rate against the dollar or some other major currency.
C) can fluctuate within a narro

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The exchange rate policy of the United States is

The exchange rate policy of the United States is

The exchange rate policy of the United States is
A) the EMS.
B) a crawling peg.
C) a float.
D) a fixed rate within a band.
E) none of the above

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In an open economy under flexible exchange rates and represented by the IS-LM-IP model, a reduction ...

In an open economy under flexible exchange rates and represented by the IS-LM-IP model, a reduction ...

In an open economy under flexible exchange rates and represented by the IS-LM-IP model, a reduction in government spending will cause a reduction in which of the following?
A) net exports
B) the exchange rate, E
C) exports
D) all

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In order for an individual to be indifferent between holding foreign or domestic bonds,

In order for an individual to be indifferent between holding foreign or domestic bonds,

In order for an individual to be indifferent between holding foreign or domestic bonds,
A) the Marshall-Lerner condition must hold.
B) the foreign and domestic interest rates must be equal.
C) the expected rate of depreciation of the d

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An increase in private saving (S) can be reflected in

An increase in private saving (S) can be reflected in

An increase in private saving (S) can be reflected in
A) a reduction in the budget deficit.
B) a reduction in investment.
C) an increase in net exports.
D) all of the above

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The quantity of imports will decrease when there is

The quantity of imports will decrease when there is

The quantity of imports will decrease when there is
A) an increase in the real exchange rate.
B) a reduction in domestic output.
C) a reduction in foreign output.
D) all of the above
E) none of the above

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A reduction in private saving (S) can be reflected in

A reduction in private saving (S) can be reflected in

A reduction in private saving (S) can be reflected in
A) an increase in the budget deficit.
B) an increase in investment.
C) a reduction in net exports.
D) all of the above

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Suppose the rest of the world experiences a recession that causes a reduction in foreign income ...

Suppose the rest of the world experiences a recession that causes a reduction in foreign income ...

Suppose the rest of the world experiences a recession that causes a reduction in foreign income (Y*). From the domestic economy's perspective, this reduction in foreign income will cause which of the following as the domestic economy adjusts to

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Suppose policy makers want to increase Y and increase NX. Which of the following policies would most ...

Suppose policy makers want to increase Y and increase NX. Which of the following policies would most ...

Suppose policy makers want to increase Y and increase NX. Which of the following policies would most likely achieve this?
A) an increase in government spending
B) a real depreciation
C) a reduction in taxes and an increase in the real

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For this question, assume that the Marshall-Lerner condition does NOT hold. A reduction in the real ...

For this question, assume that the Marshall-Lerner condition does NOT hold. A reduction in the real ...

For this question, assume that the Marshall-Lerner condition does NOT hold. A reduction in the real exchange rate will tend to cause which of the following to occur?
A) a reduction in NX and a reduction in foreign output (Y*)
B) a reduction

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For an open economy, which of the following expressions represents saving (S)?

For an open economy, which of the following expressions represents saving (S)?

For an open economy, which of the following expressions represents saving (S)?
A) I + T - G + NX
B) I + T - G - NX
C) I + G - T + NX
D) G - T + NX - I
E) none of the above

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We will generally observe that the more open an economy

We will generally observe that the more open an economy

We will generally observe that the more open an economy
A) the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
B) the larger the effect of fiscal policy on output and the smalle

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An increase in the marginal propensity to import will cause

An increase in the marginal propensity to import will cause

An increase in the marginal propensity to import will cause
A) the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
B) the multiplier to increase and a given change in governme

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An increase in the marginal propensity to import will cause

An increase in the marginal propensity to import will cause

An increase in the marginal propensity to import will cause
A)  the ZZ line to become flatter and a given change in government spending (G) to have a larger effect on domestic output.
B) the ZZ line to become flatter and a given change

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Assume a country is open. Given this information, which of the following must occur?

Assume a country is open. Given this information, which of the following must occur?

Assume a country is open. Given this information, which of the following must occur?
A) demand for domestic goods will be equal to the domestic demand for goods
B) demand for domestic goods will be greater than the domestic demand for goods

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An increase in which of the following variables will cause a reduction in the demand for domestic ...

An increase in which of the following variables will cause a reduction in the demand for domestic ...

An increase in which of the following variables will cause a reduction in the demand for domestic goods?
A) foreign income
B) the real exchange rate
C) consumer confidence
D) domestic income
E) all of the above

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Which of the following conditions must be satisfied for the demand for domestic goods to be equal to ...

Which of the following conditions must be satisfied for the demand for domestic goods to be equal to ...

Which of the following conditions must be satisfied for the demand for domestic goods to be equal to the domestic demand for goods?
A) X = εIM
B) X = 0
C) G - T = 0
D) S = I
E) X = IM/ε

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An open economy with a low saving rate (private and public) must have

An open economy with a low saving rate (private and public) must have

An open economy with a low saving rate (private and public) must have
A) low investment only.
B) high investment only.
C) a trade surplus only.
D) low investment or a trade deficit.
E) low investment or a trade surplus.

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In an open economy, net exports will be equal to which of the following?

In an open economy, net exports will be equal to which of the following?

In an open economy, net exports will be equal to which of the following?
A)  X — IM/ε
B) T - G
C) DD
D) Z
E) S - I

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A real depreciation will initially cause a reduction in output when which of the following holds?

A real depreciation will initially cause a reduction in output when which of the following holds?

A real depreciation will initially cause a reduction in output when which of the following holds?
A) the Marshall-Lerner condition
B) the J-Curve effect
C) net exports are initially zero
D) net exports are initially negative

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The Marshall-Lerner condition is less likely to hold when

The Marshall-Lerner condition is less likely to hold when

The Marshall-Lerner condition is less likely to hold when
A) imports and exports are very price-sensitive.
B) the trade deficit is large
C) the marginal propensity to consume is very large.
D) the marginal propensity to consume if

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Which of the following would make the spending multiplier smaller?

Which of the following would make the spending multiplier smaller?

Which of the following would make the spending multiplier smaller?
A) a reduction in marginal propensity to save
B) a small initial trade deficit
C) a reduction in the marginal propensity to import
D) a real appreciation
E) n

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Which of the following occurs when the goods market is in equilibrium?

Which of the following occurs when the goods market is in equilibrium?

Which of the following occurs when the goods market is in equilibrium?
A) domestic output (Y) equals the demand for domestic goods.
B) Y equals the domestic demand for goods.
C) Y equals the domestic demand for domestic goods.
D)

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Which of the following represents the domestic demand for goods?

Which of the following represents the domestic demand for goods?

Which of the following represents the domestic demand for goods?
A) C + I + G
B) C + I + G + X
C) C + I + G — IM/ε
D) C + I + G + X - εM/ε
E) C + I + G + X + εIM

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From the perspective of the United States, a reduction in the nominal exchange rate will cause which ...

From the perspective of the United States, a reduction in the nominal exchange rate will cause which ...

From the perspective of the United States, a reduction in the nominal exchange rate will cause which of the following?
A) the dollar becomes more expensive to foreigners.
B) foreign goods are less expensive to Americans
C) foreign curr

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Suppose the domestic interest rate is 3% and that the foreign interest rate is 6%. And finally, ...

Suppose the domestic interest rate is 3% and that the foreign interest rate is 6%. And finally, ...

Suppose the domestic interest rate is 3% and that the foreign interest rate is 6%. And finally, assume that the domestic currency is expected to appreciate by 4% during the coming year. Given this information, we know that
A) individuals will on

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For this question, assume that the domestic interest rate is 6% and that the foreign interest rate ...

For this question, assume that the domestic interest rate is 6% and that the foreign interest rate ...

For this question, assume that the domestic interest rate is 6% and that the foreign interest rate 4%. And finally, assume that the domestic currency is expected to appreciate by 3% during the coming year. Given this information, we know that
A)

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Which of the following conditions will occur when two countries are engaged in a credible, fixed ...

Which of the following conditions will occur when two countries are engaged in a credible, fixed ...

Which of the following conditions will occur when two countries are engaged in a credible, fixed exchange rate regime?
A) E = 1
B) E > 1
C) i = i*
D) E < 1

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For this question, assume the interest parity conditions holds. Also assume that the domestic ...

For this question, assume the interest parity conditions holds. Also assume that the domestic ...

For this question, assume the interest parity conditions holds. Also assume that the domestic interest rate is 10% and that the foreign interest rate is 7%. Given this information, we would expect that
A) individuals will only hold foreign bonds

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Which of the following expressions represents the amount of foreign currency you can obtain with one ...

Which of the following expressions represents the amount of foreign currency you can obtain with one ...

Which of the following expressions represents the amount of foreign currency you can obtain with one U.S. dollar?
A) Et
B) Eet+1
C) 1/ Eet+1
D) εt
E) none of the above

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Which of the following events will cause the smallest change in the real exchange rate (ε)?

Which of the following events will cause the smallest change in the real exchange rate (ε)?

Which of the following events will cause the smallest change in the real exchange rate (ε)?
A) a 6% drop in E and a 6% increase in the foreign price level (P*)
B) a 6% increase in the domestic price level (P) and a 6% reduction in P*
C

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Which of the following will cause a real appreciation?

Which of the following will cause a real appreciation?

Which of the following will cause a real appreciation?
A) a reduction in E
B) a decrease in P
C) an increase in P*
D) none of the above

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Which of the following expressions represents the real exchange rate (ε)?

Which of the following expressions represents the real exchange rate (ε)?

Which of the following expressions represents the real exchange rate (ε)?
A) E/P.
B) EP*/P.
C) EP*.
D) EP/P*.
E) none of the above

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