Question 1

An unexpected increase in the U.S.money supply leads to:

Accepted Answer

A) an immediate reduction in the U.S.interest rate 
B) an immediate larger dollar depreciation 
C) a gradual appreciation of the dollar over time 
D) all of the above 
A) an immediate reduction in the U.S.interest rate 
B) an immediate larger dollar depreciation 
C) a gradual appreciation of the dollar over time 
D) all of the above D

Question 2

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

Accepted Answer

A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above 
A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above C

Question 3

The monetary base of the nation refers to the:

Accepted Answer

A) domestic credit created by the nation's monetary authorities or the domestic assets backing of the nation's money supply 
B) international reserves of the nation 
C) domestic credit created by the nation's monetary authorities or the domestic assets backing of the nation's money supply plus the international reserves of the nation 
D) legal reserve requirements in the nation 
A) domestic credit created by the nation's monetary authorities or the domestic assets backing of the nation's money supply 
B) international reserves of the nation 
C) domestic credit created by the nation's monetary authorities or the domestic assets backing of the nation's money supply plus the international reserves of the nation 
D) legal reserve requirements in the nation C

Question 4

According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:

Accepted Answer

A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above 
A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above

Question 5

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

Accepted Answer

A) price stability 
B) fixed exchange rate 
C) price stability or fixed exchange rate 
D) price stability and fixed exchange rate 
A) price stability 
B) fixed exchange rate 
C) price stability or fixed exchange rate 
D) price stability and fixed exchange rate

Question 6

The portfolio balance approach:

Accepted Answer

A) can be regarded as an extension of the monetary approach 
B) deals with money and other domestic and foreign financial assets 
C) can more readily be extended than the monetary approach to deals with the real sector 
D) all of the above 
A) can be regarded as an extension of the monetary approach 
B) deals with money and other domestic and foreign financial assets 
C) can more readily be extended than the monetary approach to deals with the real sector 
D) all of the above

Question 7

Which of the following statements is true with respect to the monetary approach to the balance of payments:

Accepted Answer

A) the interest differential in favor of the dollar equals the expected rate of appreciation of the euro 
B) the interest differential in favor of the dollar equals the expected rate of depreciation of the dollar 
C) the interest differential in favor of the pound equals the expected rate of depreciation of the pound 
D) all of the above 
A) the interest differential in favor of the dollar equals the expected rate of appreciation of the euro 
B) the interest differential in favor of the dollar equals the expected rate of depreciation of the dollar 
C) the interest differential in favor of the pound equals the expected rate of depreciation of the pound 
D) all of the above

Question 8

According to the monetary approach to the balance of payments a non-reserve currency nation:

Accepted Answer

A) has no control over its money supply in the long-run under fixed exchange rates 
B) has no control over its money supply in the short-run under fixed exchange rates 
C) has no control over its money supply in the long-run under flexible exchange rates 
D) retains complete control over its money supply in the long-run 
A) has no control over its money supply in the long-run under fixed exchange rates 
B) has no control over its money supply in the short-run under fixed exchange rates 
C) has no control over its money supply in the long-run under flexible exchange rates 
D) retains complete control over its money supply in the long-run

Question 9

The monetary approach to the balance of payments:

Accepted Answer

A) views the balance of payments as an essentially monetary phenomenon 
B) rests on the purchasing power-parity theory 
C) postulates that money plays the crucial role in the long run both as a disturbance and adjustment in the nation's balance of payments 
D) all of the above 
A) views the balance of payments as an essentially monetary phenomenon 
B) rests on the purchasing power-parity theory 
C) postulates that money plays the crucial role in the long run both as a disturbance and adjustment in the nation's balance of payments 
D) all of the above

Question 10

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

Accepted Answer

A) once-and-for-all balance of payments deficit 
B) once-and-for-all balance of payments surplus 
C) continuous balance of payments deficit 
D) continuous balance of payments surplus 
A) once-and-for-all balance of payments deficit 
B) once-and-for-all balance of payments surplus 
C) continuous balance of payments deficit 
D) continuous balance of payments surplus

Question 11

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

Accepted Answer

A) the demand for domestic money 
B) the demand for the domestic bond 
C) the demand for the foreign bond 
D) the risk premium 
A) the demand for domestic money 
B) the demand for the domestic bond 
C) the demand for the foreign bond 
D) the risk premium

Question 12

The relative purchasing power-parity theory postulates that:

Accepted Answer

A) The equilibrium exchange rate is equal to the ratio of the price level in the two nations 
B) the change in the exchange rate over a period of time should be proportional to the relative change in the price level in the two nations over the same time period 
C) the change in the exchange rate over a period of time should be proportional to the absolute change in the price level in the two nations over the same time period 
D) the exchange rate at a period of time should be proportional to the relative prices in 
A) The equilibrium exchange rate is equal to the ratio of the price level in the two nations 
B) the change in the exchange rate over a period of time should be proportional to the relative change in the price level in the two nations over the same time period 
C) the change in the exchange rate over a period of time should be proportional to the absolute change in the price level in the two nations over the same time period 
D) the exchange rate at a period of time should be proportional to the relative prices in

Question 13

The monetary approach assumes that the following assumption holds:

Accepted Answer

A) domestic and foreign bonds are perfect substitutes 
B) covered interest arbitrage holds 
C) expectations do not affect the future spot exchange rate. 
D) the risk premium is positive 
A) domestic and foreign bonds are perfect substitutes 
B) covered interest arbitrage holds 
C) expectations do not affect the future spot exchange rate. 
D) the risk premium is positive

Question 14

If the legal reserve requirement of the nation is 25%,the money multiplier in the nation is:

Accepted Answer

A) 2 
B) 4 
C) 5 
D) 6 
A) 2 
B) 4 
C) 5 
D) 6

Question 15

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

Accepted Answer

A) an excess in the nation's stock of money supply that is not eliminated or corrected by the nation's monetary authorities 
B) an excess in the stock of money demanded in the nation that is not satisfied by domestic monetary authorities 
C) an excess in the stock of money demanded in the other nation that is not satisfied by the other nation's monetary authorities 
D) an excess of imports over exports in the nation 
A) an excess in the nation's stock of money supply that is not eliminated or corrected by the nation's monetary authorities 
B) an excess in the stock of money demanded in the nation that is not satisfied by domestic monetary authorities 
C) an excess in the stock of money demanded in the other nation that is not satisfied by the other nation's monetary authorities 
D) an excess of imports over exports in the nation

Question 16

The relative PPP theory gives better results:

Accepted Answer

A) in the long run than in the short run 
B) when structural changes take place 
C) the greater is the level of commodity aggregation 
D) in tests including developed and developing countries 
A) in the long run than in the short run 
B) when structural changes take place 
C) the greater is the level of commodity aggregation 
D) in tests including developed and developing countries

Question 17

Which is correct with respect to the absolute PPP theory?

Accepted Answer

A) It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations 
B) it does not take into consideration transportation costs or other obstructions to the flow of international trade 
C) can be very misleading 
D) all of the above 
A) It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations 
B) it does not take into consideration transportation costs or other obstructions to the flow of international trade 
C) can be very misleading 
D) all of the above

Question 18

Which of the following is false with regard to exchange rate dynamics:

Accepted Answer

A) seeks to explain exchange rate fluctuations over time 
B) results because the real sector adjusts instantaneously to disturbances 
C) in the short run,the exchange rate overshoots its long-run equilibrium 
D) results from the stock adjustment in financial assets 
A) seeks to explain exchange rate fluctuations over time 
B) results because the real sector adjusts instantaneously to disturbances 
C) in the short run,the exchange rate overshoots its long-run equilibrium 
D) results from the stock adjustment in financial assets

Question 19

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

Accepted Answer

A) 20 
B) 25 
C) 50 
D) 100 
A) 20 
B) 25 
C) 50 
D) 100

An unexpected increase in the U.S.money supply leads to:

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

The monetary base of the nation refers to the:

According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

The portfolio balance approach:

Which of the following statements is true with respect to the monetary approach to the balance of payments:

According to the monetary approach to the balance of payments a non-reserve currency nation:

The monetary approach to the balance of payments:

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

The relative purchasing power-parity theory postulates that:

The monetary approach assumes that the following assumption holds:

If the legal reserve requirement of the nation is 25%,the money multiplier in the nation is:

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

The relative PPP theory gives better results:

Which is correct with respect to the absolute PPP theory?

Which of the following is false with regard to exchange rate dynamics:

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, Offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, Imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, Present, and Future

Filters

Exam 15: Exchange Rate Determination

An unexpected increase in the U.S.money supply leads to:

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

The monetary base of the nation refers to the:

According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

The portfolio balance approach:

Which of the following statements is true with respect to the monetary approach to the balance of payments:

According to the monetary approach to the balance of payments a non-reserve currency nation:

The monetary approach to the balance of payments:

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

The relative purchasing power-parity theory postulates that:

The monetary approach assumes that the following assumption holds:

If the legal reserve requirement of the nation is 25%,the money multiplier in the nation is:

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

The relative PPP theory gives better results:

Which is correct with respect to the absolute PPP theory?

Which of the following is false with regard to exchange rate dynamics:

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, Offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, Imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, Present, and Future

Filters