In which market should you begin your analysis if immigration of low-skilled workers increases?
a. Foreign exchange market, with a shift in the supply of domestic currency
b. Foreign exchange market, with a shift in the demand for domestic currency
c. Real goods market with, a shift in aggregate supply
d. Real goods market with, a shift in aggregate demand
e. Real loanable funds market, with a shift in the supply of real loanable funds
Question 2 - How can inflation affect the international competitiveness of a country?
a. Through an increase in nominal interest rates.
b. Through an increase in real interest rates.
c. The competitiveness is harmed by any inflation rate that is higher than in other countries, as long as it is offset by exchange rate changes.
d. The competitiveness is harmed by any inflation rate that is higher than in other countries, as long as it is not offset by exchange rate changes.
e. Inflation is a domestic issue and therefore does not affect the international competitiveness
Question 3 - In which market should you begin your analysis if immigration of low-skilled workers increases?
a. Foreign exchange market, with a shift in the demand for domestic currency
b. Real loanable funds market, with a shift in the demand for real loanable funds
c. Foreign exchange market, with a shift in the supply of domestic currency
d. Real goods market with, a shift in aggregate supply
e. Real loanable funds market, with a shift in the supply of real loanable funds
Question 4 - Unexpectedly high inflation:
a. Is only a problem for private individuals and not for businesses or the government.
b. Tends to redistribute income more than it harms the nation as a whole.
c. Makes everyone worse off.
d. Reduces business profitability.
e. Is only a problem for the government.
Question 5 - In which market should you begin your analysis if immigration of low-skilled workers increases?
a. Real loanable funds market, with a shift in the supply of real loanable funds
b. Real loanable funds market, with a shift in the demand for real loanable funds
c. Foreign exchange market, with a shift in the supply of domestic currency
d. Foreign exchange market, with a shift in the demand for domestic currency
e. Real goods market with, a shift in aggregate supply
Question 6 - Who benefits from a higher than expected inflation rate?
a. Lenders and workers.
b. Lenders and businesses.
c. Borrowers and workers.
d. Borrowers and businesses.
e. None of the above.
Question 7 - A good way to start every Three-Sector-Model analysis is to:
a. Describe what is happening in the foreign exchange market and then proceed to explain what happens in the other two markets simultaneously.
b. Identify the economic effects that result from an economic change and then work your way backward to identify the most important part of the analysis, which is the economic shock that started it all.
c. Analyze the chain reaction of economic interactions.
d. Gather basic information about the three markets and describe qualitatively the economic setting in each market.
Question 8 - Which of the following is not a way in which high inflation reduces productivity?
a. High rates of inflation increase menu costs.
b. Rapid inflation destroys work incentives and encourages speculation.
c. Variable rates of inflation create insecurity.
d. High inflation rates also have the power to deteriorate international competitiveness.
e. High rates of expected inflation increase the real interest rate and thus reduce investment.
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