Question 1

In an IS-LM model with flexible exchange rates and perfect capital mobility, restrictive fiscal policy will

Accepted Answer

A) cause an appreciation of the domestic currency 
B) shift first the LM-curve and then the IS-curve to the left 
C) not change the overall level of output, but will change its composition 
D) cause a decrease in net exports 
E) lower the level of output but leave the interest rate unchanged 
A) cause an appreciation of the domestic currency 
B) shift first the LM-curve and then the IS-curve to the left 
C) not change the overall level of output, but will change its composition 
D) cause a decrease in net exports 
E) lower the level of output but leave the interest rate unchanged

Question 2

Restrictive monetary policy in the U.S.

Accepted Answer

A) raises U.S. interest rates and lowers U.S. GDP 
B)  increases the value of the dollar relative to other currencies 
C)  increases U.S. net exports 
D) both A and B 
E) both A and C 
A) raises U.S. interest rates and lowers U.S. GDP 
B)  increases the value of the dollar relative to other currencies 
C)  increases U.S. net exports 
D) both A and B 
E) both A and C

Question 3

Which of the following is the equation for the real exchange rate?

Accepted Answer

A) R = Pf/P 
B) R = P/Pf 
C) R = e(Pf/P) 
D) R = e/(P/Pf) 
E) R = e /(Pf - P) 
A) R = Pf/P 
B) R = P/Pf 
C) R = e(Pf/P) 
D) R = e/(P/Pf) 
E) R = e /(Pf - P)

Question 4

As of 2013, which of the following countries had not yet adopted the euro as their currency?

Accepted Answer

A) Belgium 
B) Denmark 
C) Greece 
D) Luxembourg 
E) Spain 
A) Belgium 
B) Denmark 
C) Greece 
D) Luxembourg 
E) Spain

Question 5

If exchange rates are determined in the foreign exchange market, they are never

Accepted Answer

A) fixed 
B) flexible 
C) managed 
D) floating 
E) influenced by actions of the central bank 
A) fixed 
B) flexible 
C) managed 
D) floating 
E) influenced by actions of the central bank

Question 6

The increase in the real exchange rate shows

Accepted Answer

A) the increase in the ratio of domestic to foreign prices 
B) the increase in foreign prices expressed in U.S. dollars relative to prices of goods produced in the U.S. 
C) the decrease in foreign prices expressed in U.S. dollars relative to prices of goods produced in the U.S. 
D) the decrease in competitiveness of U.S. goods 
E) the decrease in the dollar price of foreign exchange 
A) the increase in the ratio of domestic to foreign prices 
B) the increase in foreign prices expressed in U.S. dollars relative to prices of goods produced in the U.S. 
C) the decrease in foreign prices expressed in U.S. dollars relative to prices of goods produced in the U.S. 
D) the decrease in competitiveness of U.S. goods 
E) the decrease in the dollar price of foreign exchange

Question 7

Under fixed exchange rates, when a foreign central bank devalues its currency it

Accepted Answer

A) lowers the dollar price of its currency 
B) raises the dollar price of its currency 
C) purchases dollars in the foreign exchange market 
D) sells dollars in the foreign exchange market 
E) adds a variety of other foreign currencies to its reserves 
A) lowers the dollar price of its currency 
B) raises the dollar price of its currency 
C) purchases dollars in the foreign exchange market 
D) sells dollars in the foreign exchange market 
E) adds a variety of other foreign currencies to its reserves

Question 8

Which of the following is FALSE?

Accepted Answer

A) a rise in foreign income always improves a country's trade balance and leads to an increase in aggregate demand 
B) a rise in domestic interest rates improves a country's trade balance since it decreases imports 
C) an exchange rate depreciation improves a country's trade balance and thus increases aggregate demand 
D) an increase in domestic income worsens a country's trade balance since it increases spending on imports 
E) a decrease in exports leads to lower interest rates and a currency depreciation 
A) a rise in foreign income always improves a country's trade balance and leads to an increase in aggregate demand 
B) a rise in domestic interest rates improves a country's trade balance since it decreases imports 
C) an exchange rate depreciation improves a country's trade balance and thus increases aggregate demand 
D) an increase in domestic income worsens a country's trade balance since it increases spending on imports 
E) a decrease in exports leads to lower interest rates and a currency depreciation

Question 9

A country's balance-of-payments surplus is equal to

Accepted Answer

A) the decrease in the country's official exchange reserves 
B) net capital outflow minus the current account deficit 
C) the current account surplus plus private net capital inflow 
D) exports minus imports 
E) imports minus exports 
A) the decrease in the country's official exchange reserves 
B) net capital outflow minus the current account deficit 
C) the current account surplus plus private net capital inflow 
D) exports minus imports 
E) imports minus exports

Question 10

Under flexible exchange rates and perfect capital mobility

Accepted Answer

A) monetary policy is ineffective while fiscal policy is very effective in changing the level of output 
B) monetary and fiscal policy are both very effective in changing the level of output 
C) monetary policy is effective while fiscal policy is ineffective in changing the level of output 
D) monetary and fiscal policy are both fairly ineffective in changing the level of output 
E) monetary and fiscal policy have to be carefully coordinated if the level of output needs to be changed 
A) monetary policy is ineffective while fiscal policy is very effective in changing the level of output 
B) monetary and fiscal policy are both very effective in changing the level of output 
C) monetary policy is effective while fiscal policy is ineffective in changing the level of output 
D) monetary and fiscal policy are both fairly ineffective in changing the level of output 
E) monetary and fiscal policy have to be carefully coordinated if the level of output needs to be changed

In an IS-LM model with flexible exchange rates and perfect capital mobility, restrictive fiscal policy will

Restrictive monetary policy in the U.S.

Which of the following is the equation for the real exchange rate?

As of 2013, which of the following countries had not yet adopted the euro as their currency?

If exchange rates are determined in the foreign exchange market, they are never

The increase in the real exchange rate shows

Under fixed exchange rates, when a foreign central bank devalues its currency it

Which of the following is FALSE?

A country's balance-of-payments surplus is equal to

Under flexible exchange rates and perfect capital mobility

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Income and spending

Money, interest, and income

Monetary and fiscal policy

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters

Exam 13: International linkages

In an IS-LM model with flexible exchange rates and perfect capital mobility, restrictive fiscal policy will

Restrictive monetary policy in the U.S.

Which of the following is the equation for the real exchange rate?

As of 2013, which of the following countries had not yet adopted the euro as their currency?

If exchange rates are determined in the foreign exchange market, they are never

The increase in the real exchange rate shows

Under fixed exchange rates, when a foreign central bank devalues its currency it

Which of the following is FALSE?

A country's balance-of-payments surplus is equal to

Under flexible exchange rates and perfect capital mobility

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Income and spending

Money, interest, and income

Monetary and fiscal policy

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters