Question 1

For a given level of

Accepted Answer

A)  nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
B)  real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule. 
C)  real GNP, changes in interest rates cause an increase of the L(R,Y) schedule. 
D)  nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule. 
E)  real GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
A)  nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
B)  real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule. 
C)  real GNP, changes in interest rates cause an increase of the L(R,Y) schedule. 
D)  nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule. 
E)  real GNP, changes in interest rates cause movements along the L(R,Y) schedule.

Question 2

If individuals are holding more money than they desire

Accepted Answer

A)  they will attempt to reduce their liquidity by using money to purchase goods. 
B)  they will attempt to reduce their liquidity by using money to purchase interest-bearing assets. 
C)  they will attempt to reduce their liquidity by converting real money holdings into nominal money holdings. 
D)  they will keep their holdings constant. 
A)  they will attempt to reduce their liquidity by using money to purchase goods. 
B)  they will attempt to reduce their liquidity by using money to purchase interest-bearing assets. 
C)  they will attempt to reduce their liquidity by converting real money holdings into nominal money holdings. 
D)  they will keep their holdings constant.

Question 3

The most extreme inflationary conditions occurred

Accepted Answer

A)  in Zimbabwe in 2008. 
B)  in Chile in 2012. 
C)  in Eastern Europe in the 1990s. 
D)  in Western Europe in the 1980s. 
E)  in Germany in 2013. 
A)  in Zimbabwe in 2008. 
B)  in Chile in 2012. 
C)  in Eastern Europe in the 1990s. 
D)  in Western Europe in the 1980s. 
E)  in Germany in 2013.

Question 4

Using year-by-year data from 1987-2007 shows that

Accepted Answer

A)  there is a strong positive relation between average Latin American money-supply growth and inflation. 
B)  there is a strong negative relation between average Latin American money-supply growth and inflation. 
C)  there is a strong positive relation between average Latin American money-supply growth and deflation. 
D)  it is difficult to find a strong positive relation between average Latin American money-supply growth and inflation. 
E)  there is a weak positive relation between average Latin American money-supply growth and inflation. 
A)  there is a strong positive relation between average Latin American money-supply growth and inflation. 
B)  there is a strong negative relation between average Latin American money-supply growth and inflation. 
C)  there is a strong positive relation between average Latin American money-supply growth and deflation. 
D)  it is difficult to find a strong positive relation between average Latin American money-supply growth and inflation. 
E)  there is a weak positive relation between average Latin American money-supply growth and inflation.

Question 5

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall. 
B)  A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise. 
C)  A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise. 
D)  A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise. 
E)  A decrease in the average value of transactions carried out by a household or a firm causes its demand for real money to rise. 
A)  A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall. 
B)  A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise. 
C)  A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise. 
D)  A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise. 
E)  A decrease in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.

Question 6

A permanent increase in a country's money supply

Accepted Answer

A)  causes a more than proportional increase in its price level. 
B)  causes a less than proportional increase in its price level. 
C)  causes a proportional increase in its price level. 
D)  leaves its price level constant in long-run equilibrium. 
E)  causes an inversely proportional fall in its price level. 
A)  causes a more than proportional increase in its price level. 
B)  causes a less than proportional increase in its price level. 
C)  causes a proportional increase in its price level. 
D)  leaves its price level constant in long-run equilibrium. 
E)  causes an inversely proportional fall in its price level.

Question 7

In the United States at the end of 2012, the total money supply, M1, amounted to approximately

Accepted Answer

A)  16 percent of that year's GNP. 
B)  20 percent of that year's GNP. 
C)  30 percent of that year's GNP. 
D)  40 percent of that year's GNP. 
E)  50 percent of that year's GNP. 
A)  16 percent of that year's GNP. 
B)  20 percent of that year's GNP. 
C)  30 percent of that year's GNP. 
D)  40 percent of that year's GNP. 
E)  50 percent of that year's GNP.

Question 8

If there is an excess supply of money

Accepted Answer

A)  the interest rate falls. 
B)  the interest rate rises. 
C)  the real money supply shifts left to make an equilibrium. 
D)  the real money supply shifts right to make an equilibrium. 
E)  the interest rate stays constant, but consumer confidence falters. 
A)  the interest rate falls. 
B)  the interest rate rises. 
C)  the real money supply shifts left to make an equilibrium. 
D)  the real money supply shifts right to make an equilibrium. 
E)  the interest rate stays constant, but consumer confidence falters.

Question 9

Michael Woodford says the following is an advantage of interest-rate instruments for central banks.

Accepted Answer

A)  Conduct monetary policy without inflation. 
B)  Conduct monetary policy even if checking deposits pay interest at competitive rates. 
C)  Conduct monetary policy without government approval. 
D)  Conduct monetary policy with consumers in mind. 
E)  Conduct monetary policy with workers in mind. 
A)  Conduct monetary policy without inflation. 
B)  Conduct monetary policy even if checking deposits pay interest at competitive rates. 
C)  Conduct monetary policy without government approval. 
D)  Conduct monetary policy with consumers in mind. 
E)  Conduct monetary policy with workers in mind.

Question 10

During hyperinflation, exploding inflation causes real money demand to

Accepted Answer

A)  fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises. 
B)  increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises. 
C)  fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises. 
D)  increase over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises. 
E)  fall over time, and this additional monetary change makes money prices decrease even less quickly than the money supply itself rises. 
A)  fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises. 
B)  increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises. 
C)  fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises. 
D)  increase over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises. 
E)  fall over time, and this additional monetary change makes money prices decrease even less quickly than the money supply itself rises.

Question 11

The aggregate real money demand schedule L(R,Y)

Accepted Answer

A)  slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B)  slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C)  has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D)  slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E)  slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets. 
A)  slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B)  slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C)  has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D)  slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E)  slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets.

Question 12

Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.

Accepted Answer

@#IMG-DLM& An increase in the nominal money supply

Question 13

An economy's long-run equilibrium is

Accepted Answer

A)  the equilibrium that would occur if prices were perfectly flexible. 
B)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D)  the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E)  the equilibrium that would occur if prices were perfectly fixed at the full employment point. 
A)  the equilibrium that would occur if prices were perfectly flexible. 
B)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D)  the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E)  the equilibrium that would occur if prices were perfectly fixed at the full employment point.

Question 14

What are the main factors that determine aggregate money demand?

Accepted Answer

The three main factors are interest rate

Question 15

The exchange rate between currencies depends on

Accepted Answer

A)  the interest rate that can be earned on deposits of those currencies. 
B)  the interest rate that can be earned on deposits of those currencies and the expected future exchange rate. 
C)  the expected future exchange rate. 
D)  national output. 
E)  the interest rate that can be earned on deposits of those countries and the national output. 
A)  the interest rate that can be earned on deposits of those currencies. 
B)  the interest rate that can be earned on deposits of those currencies and the expected future exchange rate. 
C)  the expected future exchange rate. 
D)  national output. 
E)  the interest rate that can be earned on deposits of those countries and the national output.

Question 16

What term means an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use?

Accepted Answer

A)  superinflation 
B)  stagflation 
C)  hyperinflation 
D)  maginflation 
E)  deflation 
A)  superinflation 
B)  stagflation 
C)  hyperinflation 
D)  maginflation 
E)  deflation

Question 17

In a world where the price level could adjust immediately to its new long-run level after a money supply increase

Accepted Answer

A)  the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising. 
B)  the dollar interest rate would not fall because prices would adjust immediately and prevent the money supply from rising. 
C)  the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing. 
D)  the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing. 
E)  the dollar interest rate would fall because prices would not be able to prevent the money supply from rising. 
A)  the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising. 
B)  the dollar interest rate would not fall because prices would adjust immediately and prevent the money supply from rising. 
C)  the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing. 
D)  the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing. 
E)  the dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

Question 18

What are the factors that determine the amount of money an individual desires to hold?

Accepted Answer

Three main factors: first, the expected

Question 19

The long run effects of money supply change has

Accepted Answer

A)  an ambiguous effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the opposite direction. 
B)  a proportional effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the same direction. 
C)  no effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the same direction. 
D)  no effect on the long-run values of the interest rate or real output, no change in the price level's long-run value. 
E)  an ambiguous effect on the long-run values of the interest rate or real output, a disproportional change in the price level's long-run value in the same direction. 
A)  an ambiguous effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the opposite direction. 
B)  a proportional effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the same direction. 
C)  no effect on the long-run values of the interest rate or real output, a proportional change in the price level's long-run value in the same direction. 
D)  no effect on the long-run values of the interest rate or real output, no change in the price level's long-run value. 
E)  an ambiguous effect on the long-run values of the interest rate or real output, a disproportional change in the price level's long-run value in the same direction.

Question 20

What will be the effects of an increase in the money supply on the interest rate?

Accepted Answer

An increase in the money supply will cau

Exam 15: Money, Interest Rates, and Exchange Rates

For a given level of

If individuals are holding more money than they desire

The most extreme inflationary conditions occurred

Using year-by-year data from 1987-2007 shows that

Which one of the following statements is the MOST accurate?

A permanent increase in a country's money supply

In the United States at the end of 2012, the total money supply, M1, amounted to approximately

If there is an excess supply of money

Michael Woodford says the following is an advantage of interest-rate instruments for central banks.

During hyperinflation, exploding inflation causes real money demand to

The aggregate real money demand schedule L(R,Y)

Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.

An economy's long-run equilibrium is

What are the main factors that determine aggregate money demand?

The exchange rate between currencies depends on

What term means an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use?

In a world where the price level could adjust immediately to its new long-run level after a money supply increase

What are the factors that determine the amount of money an individual desires to hold?

The long run effects of money supply change has

What will be the effects of an increase in the money supply on the interest rate?

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

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short 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

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