Question 1

By internal balance,most economists mean

Accepted Answer

A) full employment. 
B) price stability. 
C) full employment and price stability. 
D) full employment and moderate increase in prices. 
E) full employment and high disposable income. 
A) full employment. 
B) price stability. 
C) full employment and price stability. 
D) full employment and moderate increase in prices. 
E) full employment and high disposable income.

Question 2

The effects of an increase in real money demand on an economy

Accepted Answer

A) is an argument against flexible exchange rates. 
B) is an argument in favor of flexible exchange rates. 
C) shows the difficulties in determining which exchange rate regime is better. 
D) is an argument in favor of flexible exchange rates only in the short run. 
E) is an argument against flexible exchange rates only in the short run. 
A) is an argument against flexible exchange rates. 
B) is an argument in favor of flexible exchange rates. 
C) shows the difficulties in determining which exchange rate regime is better. 
D) is an argument in favor of flexible exchange rates only in the short run. 
E) is an argument against flexible exchange rates only in the short run.

Question 3

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

Accepted Answer

A) exchange rate stability 
B) restrictions on international capital movements 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation 
A) exchange rate stability 
B) restrictions on international capital movements 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation

Question 4

A sudden increase in the U.S.price level

Accepted Answer

A) makes creditors in dollars better off. 
B) makes creditors in dollars worse off. 
C) do not affect creditors in dollars. 
D) makes creditors in DM worse off. 
E) makes lenders worse off. 
A) makes creditors in dollars better off. 
B) makes creditors in dollars worse off. 
C) do not affect creditors in dollars. 
D) makes creditors in DM worse off. 
E) makes lenders worse off.

Question 5

The mechanism behind the inflation insulation provided by a floating exchange rate is

Accepted Answer

A) Purchasing Power Parity. 
B) a fixed AA curve. 
C) market speculation. 
D) tight monetary policy. 
E) symmetry. 
A) Purchasing Power Parity. 
B) a fixed AA curve. 
C) market speculation. 
D) tight monetary policy. 
E) symmetry.

Question 6

The view of mercantilists can be summarized as follows

Accepted Answer

A) to sell less to strangers yearly than we consume of theirs in value. 
B) to sell more to strangers yearly than we consume of theirs in value. 
C) to consume more of theirs in value than we sell to strangers. 
D) to consume the same amount as theirs in value as we sell to strangers. 
E) to sell gold and silver to strangers in exchange for services. 
A) to sell less to strangers yearly than we consume of theirs in value. 
B) to sell more to strangers yearly than we consume of theirs in value. 
C) to consume more of theirs in value than we sell to strangers. 
D) to consume the same amount as theirs in value as we sell to strangers. 
E) to sell gold and silver to strangers in exchange for services.

Question 7

Economic theory and experience since 1973 indicate that,under floating exchange rates,a country's fiscal and monetary policies in the short-run and the long-run can

Accepted Answer

A) have both domestic and foreign economic impact. 
B) have domestic or foreign economic impact,but not both. 
C) have domestic but not foreign economic impact. 
D) have foreign but not domestic economic impact. 
E) have neither domestic nor foreign economic impact. 
A) have both domestic and foreign economic impact. 
B) have domestic or foreign economic impact,but not both. 
C) have domestic but not foreign economic impact. 
D) have foreign but not domestic economic impact. 
E) have neither domestic nor foreign economic impact.

Question 8

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 9

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 10

What has been learned since 1973 with regards to the experience with floating exchange rate regime?

Accepted Answer

(1)Monetary policy autonomy: Yes,however

Question 11

Maintaining a fixed exchange rate over the long run is today

Accepted Answer

A) virtually impossible. 
B) more vulnerable to speculative attacks than in the past. 
C) preferable. 
D) possible only in special cases such as maintaining strict capital controls. 
E) aided by technology which allows instant movement of money between financial markets in different countries. 
A) virtually impossible. 
B) more vulnerable to speculative attacks than in the past. 
C) preferable. 
D) possible only in special cases such as maintaining strict capital controls. 
E) aided by technology which allows instant movement of money between financial markets in different countries.

Question 12

Due to macroeconomics interdependence between large countries,the effect of a permanent monetary policy expansion by Home is as follows: Home output

Accepted Answer

A) rises,Home's currency depreciates,and Foreign output may rise or fall. 
B) falls,Home's currency depreciates,and Foreign output may rise or fall. 
C) rises,Home's currency appreciates,and Foreign output may rise or fall. 
D) rises,Home's currency depreciates,and Foreign output rises. 
E) falls,Home's currency appreciates,and Foreign output may rise or fall. 
A) rises,Home's currency depreciates,and Foreign output may rise or fall. 
B) falls,Home's currency depreciates,and Foreign output may rise or fall. 
C) rises,Home's currency appreciates,and Foreign output may rise or fall. 
D) rises,Home's currency depreciates,and Foreign output rises. 
E) falls,Home's currency appreciates,and Foreign output may rise or fall.

Question 13

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 14

Assume that the government has a target value,X,for the current account surplus.
(a)What is the goal of external balance?
(b)Assume that we are dealing with only the short run,what are the values of P and P∗?
(c)Given fixed P and P   ,what would happen if E rises?
(d)Given P and P   ,what would happen if T decreases,i.e. ,an expansionary fiscal policy?
(e)Given P and P   ,what would happen if G increases,i.e. ,an expansionary fiscal policy?
(f)Given all of the above,what is the relation between the exchange rate,E,and fiscal ease,i.e. ,an increase in G or a reduction in T?
(g)Assume that the economy is in external balance.What will happen if the government maintains its current account at X,but devaluates the domestic currency?
(h)Assume that the economy is at external balance.What will happen if the government raises E?
(i)Assume that the economy is at external balance.What will happen if the government lowers E?

Accepted Answer

(a)The goal of external balance requires

Question 15

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

Accepted Answer

A) freedom of international capital movements 
B) exchange rate instability 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation 
A) freedom of international capital movements 
B) exchange rate instability 
C) tariffs and subsidies 
D) restrictions on the migration of labor 
E) global inflation

Question 16

In L.Frank Baum's classic 1900 children's book,The Wonderful Wizard of Oz,the name "oz" is a reference to

Accepted Answer

A) an ounce (oz. )of gold. 
B) an ounce (oz. )of silver. 
C) an ounce (oz. )of copper. 
D) an ounce (oz. )of gold or silver. 
E) an ounce (oz. )of wheat. 
A) an ounce (oz. )of gold. 
B) an ounce (oz. )of silver. 
C) an ounce (oz. )of copper. 
D) an ounce (oz. )of gold or silver. 
E) an ounce (oz. )of wheat.

Question 17

A policy of "beggar-thy-neighbor" is a policy that

Accepted Answer

A) often benefits the home country in the long run. 
B) often benefits the foreign country in the long run. 
C) often benefits foreign country in the short run. 
D) does not often benefits any country in the long run. 
E) benefits the home country's neighbors in the long run. 
A) often benefits the home country in the long run. 
B) often benefits the foreign country in the long run. 
C) often benefits foreign country in the short run. 
D) does not often benefits any country in the long run. 
E) benefits the home country's neighbors in the long run.

Question 18

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

Accepted Answer

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

Question 19

The XX schedule shows how much

Accepted Answer

A) fiscal expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. 
B) monetary expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. 
C) fiscal expansion is needed to hold the current account surplus at X as the currency is evaluated by a given amount. 
D) fiscal and monetary expansions are needed to hold the current account surplus at X as the currency is devalued by a given amount. 
E) foreign funding is needed to hold the current account surplus at X as the currency is devalued by a given amount. 
A) fiscal expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. 
B) monetary expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. 
C) fiscal expansion is needed to hold the current account surplus at X as the currency is evaluated by a given amount. 
D) fiscal and monetary expansions are needed to hold the current account surplus at X as the currency is devalued by a given amount. 
E) foreign funding is needed to hold the current account surplus at X as the currency is devalued by a given amount.

Question 20

Which one of the following statements is the MOST accurate? By the year 1932,the United States

Accepted Answer

A) and Canada alone held more than 70 percent of the world's monetary gold. 
B) and Germany alone held more than 70 percent of the world's monetary gold. 
C) and Britain alone held more than 70 percent of the world's monetary gold. 
D) Britain,and France alone held more than 70 percent of the world's monetary gold. 
E) and France alone held more than 70 percent of the world's monetary gold. 
A) and Canada alone held more than 70 percent of the world's monetary gold. 
B) and Germany alone held more than 70 percent of the world's monetary gold. 
C) and Britain alone held more than 70 percent of the world's monetary gold. 
D) Britain,and France alone held more than 70 percent of the world's monetary gold. 
E) and France alone held more than 70 percent of the world's monetary gold.

Exam 19: International Monetary Systems: An Historical Overview

By internal balance,most economists mean

The effects of an increase in real money demand on an economy

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

A sudden increase in the U.S.price level

The mechanism behind the inflation insulation provided by a floating exchange rate is

The view of mercantilists can be summarized as follows

Economic theory and experience since 1973 indicate that,under floating exchange rates,a country's fiscal and monetary policies in the short-run and the long-run can

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

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

What has been learned since 1973 with regards to the experience with floating exchange rate regime?

Maintaining a fixed exchange rate over the long run is today

Due to macroeconomics interdependence between large countries,the effect of a permanent monetary policy expansion by Home is as follows: Home output

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

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

In L.Frank Baum's classic 1900 children's book,The Wonderful Wizard of Oz,the name "oz" is a reference to

A policy of "beggar-thy-neighbor" is a policy that

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

The XX schedule shows how much

Which one of the following statements is the MOST accurate? By the year 1932,the United States

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

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