Exam 24: Floating Exchange Rates and Internal Balance

If there is a shift of international trade away from a country's products, we can expect that the FE and IS curves will shift to the _____, the overall payments balance will move toward _____, and the domestic currency will _____.

The figure given below depicts the IS-LM-FE model with floating exchange rates. The shift of the IS curve from IS₁ to IS₂ was caused by:

Which of the following is most likely to happen if the Thai baht depreciates against the euro?

Under a floating exchange rate regime with a high degree of capital mobility, international crowding out of expansionary fiscal policy occurs when:

Monetary expansion, with perfect capital mobility, is effective in improving international price competitiveness of a country in:

International crowding out is the tendency of expansionary fiscal policy to appreciate the country's currency and worsen the current account.

Under a floating exchange rate regime with a low degree of capital mobility, if the domestic government uses an expansionary fiscal policy:

Major shocks occasionally strike a country's economy. List the types of shock that may occur and discuss the effects of these exogenous changes on a country that has a floating exchange rate.

Explain the possible reasons for and benefits of international macroeconomic policy coordination. What are two different reasons why we actually see little international macroeconomic policy coordination?

Under a floating exchange rate regime, the domestic currency will normally depreciate if the money supply:

In the Plaza Agreement, the United States agreed to reduce its fiscal deficit.

Contractionary fiscal policy with floating exchange rates and very low capital mobility leads to currency depreciation.

Which of the following is NOT a reason why we see little international policy coordination?

With floating exchange rates, the effects of international trade shocks on internal balance are _____ by the effects of the resulting change in the _____.

Under a floating exchange rate regime, with a contraction in the money supply, which of the following is likely to happen in the short-run?

Under a floating exchange rate regime:

Under a floating exchange rate regime, following an expansion in the money supply, monetary authorities will:

The figure given below depicts the IS-LM-FE model with floating exchange rates. The move from point A to point B is caused by:

Which of the following is a possible benefit of international macroeconomic policy coordination?

Under _____ exchange rates, monetary policy is powerful in its effects on internal balance. This conclusion holds _____.