Question 1

Explain how does an increase in the real exchange rate affect exports and imports?

Accepted Answer

When the real exchange rate increases, d

Question 2

What is the AA-curve? Why does it have a negative slope? What factors cause it to shift?

Accepted Answer

The AA-curve is the specific levels of E

Question 3

The interest parity condition requires that:

Accepted Answer

A)  all countries have the same interest rate. 
B)  there is a unique exchange rate for every output level. 
C)  purchasing power parity hold. 
D)  interest rates are fixed in the short run. 
E)  the money supply is held constant. 
A)  all countries have the same interest rate. 
B)  there is a unique exchange rate for every output level. 
C)  purchasing power parity hold. 
D)  interest rates are fixed in the short run. 
E)  the money supply is held constant.

Question 4

Temporary tax cuts would cause

Accepted Answer

A)  the AA-curve to shift left. 
B)  the AA-curve to shift right. 
C)  the DD-curve to shift left. 
D)  the DD-curve to shift right. 
E)  a shift in the AA-curve, although the direction is ambiguous. 
A)  the AA-curve to shift left. 
B)  the AA-curve to shift right. 
C)  the DD-curve to shift left. 
D)  the DD-curve to shift right. 
E)  a shift in the AA-curve, although the direction is ambiguous.

Question 5

An increase in the real exchange rate

Accepted Answer

A)  makes imports more expensive. 
B)  makes imports less expensive. 
C)  does not affect import values. 
D)  always makes the number of imports rise. 
E)  makes domestic consumers spend more on only foreign imports. 
A)  makes imports more expensive. 
B)  makes imports less expensive. 
C)  does not affect import values. 
D)  always makes the number of imports rise. 
E)  makes domestic consumers spend more on only foreign imports.

Question 6

Fill in the following table.

Accepted Answer

The answer of Fill in the following table.  ...

Question 7

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  A permanent increase in the money supply cannot have any short-run effects. 
B)  A permanent increase in taxes cannot have any short-run effects. 
C)  A permanent decrease in the money supply cannot have short-run effects. 
D)  A permanent decrease in taxes cannot have short-run effects. 
E)  A permanent increase in money demand can be offset with a permanent increase in the money supply of equal magnitude. 
A)  A permanent increase in the money supply cannot have any short-run effects. 
B)  A permanent increase in taxes cannot have any short-run effects. 
C)  A permanent decrease in the money supply cannot have short-run effects. 
D)  A permanent decrease in taxes cannot have short-run effects. 
E)  A permanent increase in money demand can be offset with a permanent increase in the money supply of equal magnitude.

Question 8

The percent by which import prices rise when the home currency depreciates by 1% is the degree of

Accepted Answer

A)  pass-forward from exchange rates to import prices. 
B)  pass-through from exchange rates to import prices. 
C)  pass-on from exchange rates to import prices. 
D)  roll-forward from exchange rates to import prices. 
E)  pass-beyond from exchange rates to import prices. 
A)  pass-forward from exchange rates to import prices. 
B)  pass-through from exchange rates to import prices. 
C)  pass-on from exchange rates to import prices. 
D)  roll-forward from exchange rates to import prices. 
E)  pass-beyond from exchange rates to import prices.

Question 9

Using a figure show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.

Accepted Answer

A temporarily fiscal expansion will move

Question 10

What have we assumed when we conclude that a real depreciation of the currency improves the current account?

Accepted Answer

A)  The volume effect outweighs the value effect. 
B)  The value effect outweighs the volume effect. 
C)  All else equal and the volume effect outweighs the value effect. 
D)  All else equal and the value effect outweighs the volume effect. 
E)  All else equal and the volume effect equals the value effect. 
A)  The volume effect outweighs the value effect. 
B)  The value effect outweighs the volume effect. 
C)  All else equal and the volume effect outweighs the value effect. 
D)  All else equal and the value effect outweighs the volume effect. 
E)  All else equal and the volume effect equals the value effect.

Question 11

How would you define a DD schedule?

Accepted Answer

A)  the combinations of output and the exchange rate that must hold when the home money market and the foreign exchange market are in equilibrium 
B)  the combinations of output and the exchange rate that must hold when the output market is in short-run equilibrium 
C)  factors of production in the long run 
D)  the aggregate demand in relation to the foreign market value 
E)  the currency depreciation in relation to the exchange rate 
A)  the combinations of output and the exchange rate that must hold when the home money market and the foreign exchange market are in equilibrium 
B)  the combinations of output and the exchange rate that must hold when the output market is in short-run equilibrium 
C)  factors of production in the long run 
D)  the aggregate demand in relation to the foreign market value 
E)  the currency depreciation in relation to the exchange rate

Question 12

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  An increase in the real exchange rate and an increase in disposable income improve the current account. 
B)  A decrease in the real exchange rate and a decrease in disposable income improve the current account. 
C)  A decrease in the real exchange rate and an increase in disposable income improve the current account. 
D)  An increase in the real exchange rate and a decrease in disposable income improve the current account. 
E)  An increase in the real exchange rate and a decrease in disposable income lowers the current account. 
A)  An increase in the real exchange rate and an increase in disposable income improve the current account. 
B)  A decrease in the real exchange rate and a decrease in disposable income improve the current account. 
C)  A decrease in the real exchange rate and an increase in disposable income improve the current account. 
D)  An increase in the real exchange rate and a decrease in disposable income improve the current account. 
E)  An increase in the real exchange rate and a decrease in disposable income lowers the current account.

Question 13

If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause

Accepted Answer

A)  an increase in exchange rate, E. 
B)  a decrease in exchange rate, E. 
C)  an increase in output, Y. 
D)  a decrease in output, Y. 
E)  shifting of the AA curve up and to the right. 
A)  an increase in exchange rate, E. 
B)  a decrease in exchange rate, E. 
C)  an increase in output, Y. 
D)  a decrease in output, Y. 
E)  shifting of the AA curve up and to the right.

Question 14

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value and returns the economy to full employment. 
B)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value and returns the economy to full employment. 
C)  Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment. 
D)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment. 
E)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level beyond its long-run value and lower the level of employment. 
A)  Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value and returns the economy to full employment. 
B)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value and returns the economy to full employment. 
C)  Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment. 
D)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment. 
E)  Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level beyond its long-run value and lower the level of employment.

Explain how does an increase in the real exchange rate affect exports and imports?

What is the AA-curve? Why does it have a negative slope? What factors cause it to shift?

The interest parity condition requires that:

Temporary tax cuts would cause

An increase in the real exchange rate

Fill in the following table.

Which one of the following statements is the MOST accurate?

The percent by which import prices rise when the home currency depreciates by 1% is the degree of

Using a figure show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.

What have we assumed when we conclude that a real depreciation of the currency improves the current account?

How would you define a DD schedule?

Which one of the following statements is the MOST accurate?

If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause

Which one of the following statements is the MOST accurate?

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 17: Output and the Exchange Rate in the Short Run

Explain how does an increase in the real exchange rate affect exports and imports?

What is the AA-curve? Why does it have a negative slope? What factors cause it to shift?

The interest parity condition requires that:

Temporary tax cuts would cause

An increase in the real exchange rate

Fill in the following table.

Which one of the following statements is the MOST accurate?

The percent by which import prices rise when the home currency depreciates by 1% is the degree of

Using a figure show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.

What have we assumed when we conclude that a real depreciation of the currency improves the current account?

How would you define a DD schedule?

Which one of the following statements is the MOST accurate?

If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause

Which one of the following statements is the MOST accurate?

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters