Question 1

An attempt by a central bank to alter the money supply by buying or selling domestic assets

Accepted Answer

A)  will leave both domestic money supply and foreign reserves unchanged. 
B)  will cause an offsetting change in aggregate demand. 
C)  will lead to a rise in domestic employment and output. 
D)  will lead to a decrease in domestic employment and output. 
E)  will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged. 
A)  will leave both domestic money supply and foreign reserves unchanged. 
B)  will cause an offsetting change in aggregate demand. 
C)  will lead to a rise in domestic employment and output. 
D)  will lead to a decrease in domestic employment and output. 
E)  will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.

Question 2

Fiscal expansion

Accepted Answer

A)  stimulates aggregate demand and causes output to decline. 
B)  decreases aggregate demand and causes output to decline. 
C)  stimulates aggregate demand and causes output to rise. 
D)  decreases aggregate demand and causes output to rise. 
E)  decreases government expenditures. 
A)  stimulates aggregate demand and causes output to decline. 
B)  decreases aggregate demand and causes output to decline. 
C)  stimulates aggregate demand and causes output to rise. 
D)  decreases aggregate demand and causes output to rise. 
E)  decreases government expenditures.

Question 3

If the demand for Home exports decreased abroad, the Home fall in output would be greatest

Accepted Answer

A)  if the decrease was temporary and the exchange rate was fixed. 
B)  if the decrease was temporary and the exchange rate was floating. 
C)  if the decrease was permanent and the exchange rate was fixed. 
D)  if the decrease was permanent and the exchange rate was floating. 
E)  if the decrease was permanent and the exchange rate was high. 
A)  if the decrease was temporary and the exchange rate was fixed. 
B)  if the decrease was temporary and the exchange rate was floating. 
C)  if the decrease was permanent and the exchange rate was fixed. 
D)  if the decrease was permanent and the exchange rate was floating. 
E)  if the decrease was permanent and the exchange rate was high.

Question 4

Refer to the payoff matrix below, which ________ a prisoner's dilemma. If both countries cooperate, Home will choose Policy ________ and Foreign will choose Policy ________.

Accepted Answer

A)  is; 1; A 
B)  is; 2; B 
C)  is; 1; B 
D)  is not; 2; B 
E)  is not; 1; A 
A)  is; 1; A 
B)  is; 2; B 
C)  is; 1; B 
D)  is not; 2; B 
E)  is not; 1; A

Question 5

Under the gold standard era of 1870-1914

Accepted Answer

A)  central banks tried to have sharp fluctuations in the balance of payments. 
B)  central banks tried to avoid sharp fluctuations in the current account of the balance of payments. 
C)  central banks tried to avoid sharp fluctuations in the trade account of the balance of payments. 
D)  central banks tried to avoid sharp fluctuations in the capital account of the balance of payments. 
E)  central banks tried to avoid sharp fluctuations in the balance of payments. 
A)  central banks tried to have sharp fluctuations in the balance of payments. 
B)  central banks tried to avoid sharp fluctuations in the current account of the balance of payments. 
C)  central banks tried to avoid sharp fluctuations in the trade account of the balance of payments. 
D)  central banks tried to avoid sharp fluctuations in the capital account of the balance of payments. 
E)  central banks tried to avoid sharp fluctuations in the balance of payments.

Question 6

The gold standard period was

Accepted Answer

A)  up until the first world war. 
B)  between the first and second world wars. 
C)  following the second world war until 1970. 
D)  between 1954 and 1970. 
E)  between 1814 and 1865. 
A)  up until the first world war. 
B)  between the first and second world wars. 
C)  following the second world war until 1970. 
D)  between 1954 and 1970. 
E)  between 1814 and 1865.

Question 7

Federal Reserve Chairman Volcker's policy to fight inflation

Accepted Answer

A)  led to the 1981-1983 recession, but was ultimately successful. 
B)  led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects. 
C)  was perfectly complemented by Reagan's decrease in fiscal spending. 
D)  led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s. 
E)  led to an immediate depreciation of the dollar. 
A)  led to the 1981-1983 recession, but was ultimately successful. 
B)  led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects. 
C)  was perfectly complemented by Reagan's decrease in fiscal spending. 
D)  led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s. 
E)  led to an immediate depreciation of the dollar.

Question 8

A sudden increase in the U.S. price level

Accepted Answer

A)  makes those with dollar debts worse off. 
B)  makes those with dollar debts better off. 
C)  does not affect those with dollar debts. 
D)  makes those with foreign debts better off. 
E)  increases all dollar debts. 
A)  makes those with dollar debts worse off. 
B)  makes those with dollar debts better off. 
C)  does not affect those with dollar debts. 
D)  makes those with foreign debts better off. 
E)  increases all dollar debts.

Question 9

By the end of the 1960s, many countries felt that they were importing inflation from

Accepted Answer

A)  the United States. 
B)  Germany. 
C)  France. 
D)  Japan. 
E)  the United Kingdom. 
A)  the United States. 
B)  Germany. 
C)  France. 
D)  Japan. 
E)  the United Kingdom.

Question 10

In order to bring about a real depreciation of the dollar, the U.S. can hope for

Accepted Answer

A)  a rise in the U.S. price level. 
B)  a fall in foreign price levels. 
C)  a rise in the dollar's nominal value in terms of foreign currencies. 
D)  a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E)  increased output and full employment. 
A)  a rise in the U.S. price level. 
B)  a fall in foreign price levels. 
C)  a rise in the dollar's nominal value in terms of foreign currencies. 
D)  a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E)  increased output and full employment.

Question 11

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

Accepted Answer

A)  appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
B)  depreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products. 
C)  depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
D)  depreciation caused by increasing the money supply would reduce unemployment by increasing the relative price of domestic products. 
E)  depreciation cause by decreasing the money supply would not effect unemployment, but would increase the relative price of domestic products. 
A)  appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
B)  depreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products. 
C)  depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
D)  depreciation caused by increasing the money supply would reduce unemployment by increasing the relative price of domestic products. 
E)  depreciation cause by decreasing the money supply would not effect unemployment, but would increase the relative price of domestic products.

Question 12

Using the II-XX framework, show using a figure that fiscal policies by themselves cannot bring the economy to both internal and external balances.

Accepted Answer

Starting at point 2, fiscal policy is sh

Question 13

Countries with large current account surpluses might be viewed by the market as candidates for

Accepted Answer

A)  devaluation. 
B)  revaluation. 
C)  bankruptcy. 
D)  depreciation. 
E)  investment. 
A)  devaluation. 
B)  revaluation. 
C)  bankruptcy. 
D)  depreciation. 
E)  investment.

Question 14

The case of New Zealand, described in the text, is concerned with the country's

Accepted Answer

A)  prospects for long term growth. 
B)  ability to sustain current account deficits. 
C)  unproductive industrial sector and its prospects for long-run growth. 
D)  labor productivity. 
E)  exchange rate volatility relative to other currencies. 
A)  prospects for long term growth. 
B)  ability to sustain current account deficits. 
C)  unproductive industrial sector and its prospects for long-run growth. 
D)  labor productivity. 
E)  exchange rate volatility relative to other currencies.

Question 15

A current account deficit

Accepted Answer

A)  will not pose a problem, especially if it is accompanied by an expansionary fiscal policy. 
B)  may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. 
C)  may still pose a problem, even if the borrowed funds are channeled into productive domestic investment projects. 
D)  There is no relation between current account surplus and between savings and investment. 
E)  will pose a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later. 
A)  will not pose a problem, especially if it is accompanied by an expansionary fiscal policy. 
B)  may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. 
C)  may still pose a problem, even if the borrowed funds are channeled into productive domestic investment projects. 
D)  There is no relation between current account surplus and between savings and investment. 
E)  will pose a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later.

Question 16

The costs of inflation have been most apparent in the post-war period in countries like

Accepted Answer

A)  Brazil. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan. 
A)  Brazil. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan.

Question 17

Which of the following is NOT a result of a permanent fall in foreign demand on one country's exports under floating exchange rate?

Accepted Answer

A)  The DD curve shifts to the left due to reduction of aggregate demand. 
B)  The AA curve shifts upwards due to the increased expected long-run exchange rate. 
C)  a reduction in output by a smaller degree compared to temporary fall in demand 
D)  depreciation in home country's currency 
E)  a raised level of unemployment 
A)  The DD curve shifts to the left due to reduction of aggregate demand. 
B)  The AA curve shifts upwards due to the increased expected long-run exchange rate. 
C)  a reduction in output by a smaller degree compared to temporary fall in demand 
D)  depreciation in home country's currency 
E)  a raised level of unemployment

Question 18

Which of the following is NOT a result of a temporary fall in foreign demand on one country's exports under floating exchange rate?

Accepted Answer

A)  The DD curve shifts to the left due to reduction of aggregate demand. 
B)  The AA curve shifts downwards due to reduction of money supply. 
C)  a fall in aggregate output 
D)  depreciation in home country's currency 
E)  a fall in the home interest rate 
A)  The DD curve shifts to the left due to reduction of aggregate demand. 
B)  The AA curve shifts downwards due to reduction of money supply. 
C)  a fall in aggregate output 
D)  depreciation in home country's currency 
E)  a fall in the home interest rate

Question 19

L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is

Accepted Answer

A)  an allegorical rendition of the U.S. political struggle over silver. 
B)  an allegorical rendition of the U.S. political struggle over copper. 
C)  an allegorical rendition of the U.S. political struggle over both silver and gold. 
D)  an allegorical rendition of the U.S. political struggle over indebted farmers. 
E)  an allegorical rendition of the U.S. political struggle over gold. 
A)  an allegorical rendition of the U.S. political struggle over silver. 
B)  an allegorical rendition of the U.S. political struggle over copper. 
C)  an allegorical rendition of the U.S. political struggle over both silver and gold. 
D)  an allegorical rendition of the U.S. political struggle over indebted farmers. 
E)  an allegorical rendition of the U.S. political struggle over gold.

Question 20

Which of the following is the MOST accurate?

Accepted Answer

A)  U.S. macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B)  U.S. macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C)  U.S. macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D)  U.S. macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E)  U.S. macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973. 
A)  U.S. macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B)  U.S. macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C)  U.S. macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D)  U.S. macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E)  U.S. macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973.

Exam 19: International Monetary Systems: an Historical Overview

An attempt by a central bank to alter the money supply by buying or selling domestic assets

Fiscal expansion

If the demand for Home exports decreased abroad, the Home fall in output would be greatest

Refer to the payoff matrix below, which ________ a prisoner's dilemma. If both countries cooperate, Home will choose Policy ________ and Foreign will choose Policy ________.

Under the gold standard era of 1870-1914

The gold standard period was

Federal Reserve Chairman Volcker's policy to fight inflation

A sudden increase in the U.S. price level

By the end of the 1960s, many countries felt that they were importing inflation from

In order to bring about a real depreciation of the dollar, the U.S. can hope for

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

Using the II-XX framework, show using a figure that fiscal policies by themselves cannot bring the economy to both internal and external balances.

Countries with large current account surpluses might be viewed by the market as candidates for

The case of New Zealand, described in the text, is concerned with the country's

A current account deficit

The costs of inflation have been most apparent in the post-war period in countries like

Which of the following is NOT a result of a permanent fall in foreign demand on one country's exports under floating exchange rate?

Which of the following is NOT a result of a temporary fall in foreign demand on one country's exports under floating exchange rate?

L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is

Which of the following 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

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Refer to the payoff matrix below, which a prisoner's dilemma. If both countries cooperate, Home will choose Policy and Foreign will choose Policy .