Question 1

The acquisition of a new physical asset by a foreign resident is called

Accepted Answer

A) capital outflow. 
B) foreign capital investment. 
C) a portfolio outflow. 
D) foreign direct investment. 
E) a portfolio inflow. 
A) capital outflow. 
B) foreign capital investment. 
C) a portfolio outflow. 
D) foreign direct investment. 
E) a portfolio inflow.

Question 2

The Bretton Woods arrangement

Accepted Answer

A) fixed the value of the U.S. dollar relative to gold. 
B) required that conditions specifying permissible policy actions be placed on member countries. 
C) required foreign central banks to hold certain minimum amounts of gold as foreign exchange reserves. 
D) fixed the value of the U.S. dollar relative to the Euro. 
E) required that member nations, other than the United States, to disband their central banks. 
A) fixed the value of the U.S. dollar relative to gold. 
B) required that conditions specifying permissible policy actions be placed on member countries. 
C) required foreign central banks to hold certain minimum amounts of gold as foreign exchange reserves. 
D) fixed the value of the U.S. dollar relative to the Euro. 
E) required that member nations, other than the United States, to disband their central banks.

Question 3

A flexible exchange rate is determined by

Accepted Answer

A) buying and selling of foreign exchange reserves. 
B) both fiscal and monetary policies only. 
C) the federal government in each country. 
D) the central bank in each country. 
E) forces of supply and demand for the currency in the foreign exchange market. 
A) buying and selling of foreign exchange reserves. 
B) both fiscal and monetary policies only. 
C) the federal government in each country. 
D) the central bank in each country. 
E) forces of supply and demand for the currency in the foreign exchange market.

Question 4

If the real exchange rate is high, greater than 1

Accepted Answer

A) the purchasing power of domestic income has diminished. 
B) the nominal exchange rate is appreciating. 
C) foreign goods would be cheaper than domestic goods. 
D) the nominal exchange rate is depreciating. 
E) it is cheaper to buy goods domestically than abroad. 
A) the purchasing power of domestic income has diminished. 
B) the nominal exchange rate is appreciating. 
C) foreign goods would be cheaper than domestic goods. 
D) the nominal exchange rate is depreciating. 
E) it is cheaper to buy goods domestically than abroad.

Question 5

In the New Keynesian open economy model, government spending

Accepted Answer

A) is an ineffective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate; prices are flexible. 
B) is an effective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate. 
C) always requires the support of the central bank. 
D) is an effective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate. 
E) is an ineffective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate; net exports depends on the relative price of
Foreign goods to domestic goods. 
A) is an ineffective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate; prices are flexible. 
B) is an effective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate. 
C) always requires the support of the central bank. 
D) is an effective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate. 
E) is an ineffective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate; net exports depends on the relative price of
Foreign goods to domestic goods.

Question 6

In the New Keynesian open economy model with a fixed exchange rate, suppose there is an increase in money demand. Which of the following happens?

Accepted Answer

A) output increases 
B) output decreases 
C) nothing 
D) the exchange rate appreciates 
E) the money supply increases 
A) output increases 
B) output decreases 
C) nothing 
D) the exchange rate appreciates 
E) the money supply increases

Question 7

The real exchange rate is the

Accepted Answer

A) domestic currency price of foreign currency. 
B) price of foreign goods in terms of domestic goods. 
C) domestic currency price of domestic currency. 
D) price of domestic goods in terms of foreign goods. 
E) foreign currency price of domestic currency. 
A) domestic currency price of foreign currency. 
B) price of foreign goods in terms of domestic goods. 
C) domestic currency price of domestic currency. 
D) price of domestic goods in terms of foreign goods. 
E) foreign currency price of domestic currency.

Question 8

In the monetary small open-economy model with a fixed exchange rate, a temporary decrease in domestic total factor productivity in the absence of any other shocks

Accepted Answer

A) increases the domestic money supply and decreases the current account surplus. 
B) decreases the current account surplus and increases the price level. 
C) increases the current account surplus and decreases the domestic money supply. 
D) increases the current account surplus and increases the domestic money supply. 
E) decreases the domestic money supply and decreases the current account surplus. 
A) increases the domestic money supply and decreases the current account surplus. 
B) decreases the current account surplus and increases the price level. 
C) increases the current account surplus and decreases the domestic money supply. 
D) increases the current account surplus and increases the domestic money supply. 
E) decreases the domestic money supply and decreases the current account surplus.

Question 9

Which of the following institutions plays the role of an international lender of last resort?

Accepted Answer

A) the European Monetary System 
B) the World Trade Organization 
C) the International Monetary Fund 
D) the World Bank 
E) the U.S. Federal Reserve System 
A) the European Monetary System 
B) the World Trade Organization 
C) the International Monetary Fund 
D) the World Bank 
E) the U.S. Federal Reserve System

The acquisition of a new physical asset by a foreign resident is called

The Bretton Woods arrangement

A flexible exchange rate is determined by

If the real exchange rate is high, greater than 1

In the New Keynesian open economy model, government spending

In the New Keynesian open economy model with a fixed exchange rate, suppose there is an increase in money demand. Which of the following happens?

The real exchange rate is the

In the monetary small open-economy model with a fixed exchange rate, a temporary decrease in domestic total factor productivity in the absence of any other shocks

Which of the following institutions plays the role of an international lender of last resort?

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 16: International Trade in Goods and Assets

The acquisition of a new physical asset by a foreign resident is called

The Bretton Woods arrangement

A flexible exchange rate is determined by

If the real exchange rate is high, greater than 1

In the New Keynesian open economy model, government spending

In the New Keynesian open economy model with a fixed exchange rate, suppose there is an increase in money demand. Which of the following happens?

The real exchange rate is the

In the monetary small open-economy model with a fixed exchange rate, a temporary decrease in domestic total factor productivity in the absence of any other shocks

Which of the following institutions plays the role of an international lender of last resort?

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters