Question 1

Inflation can occur under conditions of full employment

Accepted Answer

A) only if the central bank continues to inject money into the economy and the agents' expectations of inflation are supported by the bank's activities. 
B) only if the central bank continues to inject money into the economy. 
C) only if the central bank continues to withdraw money from the economy. 
D) only if the central bank continues to inject money into the economy and all agents expect that inflation will not occur. 
E) only if the central bank fails to inject money into the economy. 
A) only if the central bank continues to inject money into the economy and the agents' expectations of inflation are supported by the bank's activities. 
B) only if the central bank continues to inject money into the economy. 
C) only if the central bank continues to withdraw money from the economy. 
D) only if the central bank continues to inject money into the economy and all agents expect that inflation will not occur. 
E) only if the central bank fails to inject money into the economy.

Question 2

The dollar of the United States became the postwar world's key currency because of all EXCEPT

Accepted Answer

A) the early convertibility of the U.S.dollar in 1945. 
B) the special position of the dollar under the Bretton Woods system. 
C) the strength of the American economy relative to the devastated economies of Europe and Japan. 
D) central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets. 
E) the ease of transporting U.S.dollars compared with other currencies. 
A) the early convertibility of the U.S.dollar in 1945. 
B) the special position of the dollar under the Bretton Woods system. 
C) the strength of the American economy relative to the devastated economies of Europe and Japan. 
D) central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets. 
E) the ease of transporting U.S.dollars compared with other currencies.

Question 3

Countries where investment is

Accepted Answer

A) relatively unproductive should have current account deficits. 
B) relatively productive should have current account surpluses. 
C) relatively productive should have current account deficits. 
D) relatively productive should have balanced current accounts. 
E) relatively unproductive should have balanced current accounts. 
A) relatively unproductive should have current account deficits. 
B) relatively productive should have current account surpluses. 
C) relatively productive should have current account deficits. 
D) relatively productive should have balanced current accounts. 
E) relatively unproductive should have balanced current accounts.

Question 4

Under the gold standard

Accepted Answer

A) a perpetual surplus is possible. 
B) a perpetual deficit is possible. 
C) a perpetual surplus is impossible,but a perpetual deficit is possible. 
D) a perpetual deficit is impossible,but a perpetual surplus is possible. 
E) a perpetual surplus is impossible. 
A) a perpetual surplus is possible. 
B) a perpetual deficit is possible. 
C) a perpetual surplus is impossible,but a perpetual deficit is possible. 
D) a perpetual deficit is impossible,but a perpetual surplus is possible. 
E) a perpetual surplus is impossible.

Question 5

When the exchange rate,E,and the foreign price level,P*,is fixed,domestic inflation depends primarily on

Accepted Answer

A) amount of aggregate demand. 
B) home price level set by IMF. 
C) current account balance. 
D) government tax policy. 
E) foreign interest rates. 
A) amount of aggregate demand. 
B) home price level set by IMF. 
C) current account balance. 
D) government tax policy. 
E) foreign interest rates.

Question 6

Which of the following does NOT occur if Home starts a policy of permanent fiscal expansion:

Accepted Answer

A) Home's exchange rate increases. 
B) Foreign's interest rate rises. 
C) Home output rises. 
D) Foreign output rises. 
E) Current Account Balance increases. 
A) Home's exchange rate increases. 
B) Foreign's interest rate rises. 
C) Home output rises. 
D) Foreign output rises. 
E) Current Account Balance increases.

Question 7

Under fixed exchange rates

Accepted Answer

A) monetary policy is not an effective policy. 
B) fiscal policy is not an effective policy. 
C) monetary policy and fiscal policy are not effective. 
D) both monetary and fiscal policies are effective. 
E) monetary policy has an unpredictable effect on the domestic money supply. 
A) monetary policy is not an effective policy. 
B) fiscal policy is not an effective policy. 
C) monetary policy and fiscal policy are not effective. 
D) both monetary and fiscal policies are effective. 
E) monetary policy has an unpredictable effect on the domestic money supply.

Question 8

Under fixed exchange rate,the response of an economy to a temporary fall in foreign demand for its exports is

Accepted Answer

A) the currency appreciates,and output falls. 
B) the currency depreciates,and output falls. 
C) the currency remains the same,and output decreases. 
D) the currency depreciates,and output remains constant. 
E) the currency appreciates,and output remains the same. 
A) the currency appreciates,and output falls. 
B) the currency depreciates,and output falls. 
C) the currency remains the same,and output decreases. 
D) the currency depreciates,and output remains constant. 
E) the currency appreciates,and output remains the same.

Question 9

The AA schedule shows

Accepted Answer

A) Interest rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium. 
B) Exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium. 
C) Interest rate and output pairs at which only the foreign exchange market is in equilibrium. 
D) Exchange rate and output pairs at which only the foreign exchange market is in equilibrium. 
E) Exchange rate and output pairs at which only the domestic money market are in equilibrium. 
A) Interest rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium. 
B) Exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium. 
C) Interest rate and output pairs at which only the foreign exchange market is in equilibrium. 
D) Exchange rate and output pairs at which only the foreign exchange market is in equilibrium. 
E) Exchange rate and output pairs at which only the domestic money market are in equilibrium.

Question 10

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 11

If most of the shocks that buffet the economy come from the output market shocks,then

Accepted Answer

A) fixed exchange rates are better than flexible exchange rates. 
B) flexible exchange rates are better than fixed exchange rates. 
C) which system is chosen is not important. 
D) fixed exchange rates are better than flexible exchange rates only in the short run. 
E) flexible exchange rates are better than fixed exchange rates only in the short-run. 
A) fixed exchange rates are better than flexible exchange rates. 
B) flexible exchange rates are better than fixed exchange rates. 
C) which system is chosen is not important. 
D) fixed exchange rates are better than flexible exchange rates only in the short run. 
E) flexible exchange rates are better than fixed exchange rates only in the short-run.

Question 12

Refer to the graph below.The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic ________ and ________.

Accepted Answer

A) overemployment;trade surplus 
B) unemployment;trade surplus 
C) overemployment;trade deficit 
D) unemployment;trade deficit 
E) inflation;unemployment 
A) overemployment;trade surplus 
B) unemployment;trade surplus 
C) overemployment;trade deficit 
D) unemployment;trade deficit 
E) inflation;unemployment

Question 13

Mercantilism held that

Accepted Answer

A) silver alone was the mainstay of national wealth. 
B) gold alone was the mainstay of national wealth. 
C) silver and gold were the mainstays of national wealth. 
D) silver and gold are not important for national wealth of a country. 
E) labor forces were the mainstay of national wealth. 
A) silver alone was the mainstay of national wealth. 
B) gold alone was the mainstay of national wealth. 
C) silver and gold were the mainstays of national wealth. 
D) silver and gold are not important for national wealth of a country. 
E) labor forces were the mainstay of national wealth.

Question 14

Which of the two features of the IMF Articles of Agreement helped promote flexibility in external adjustment?

Accepted Answer

A) IMF members helped countries maintain full employment. 
B) IMF allowed countries to attain internal balance. 
C) New countries would enter the agreement if they fixed their exchange rate. 
D) IMF members contributed their currency to form a pool of resources that IMF could lend to countries in need and parities in the exchange rate against the dollar could be adjusted with agreement of IMF. 
E) IMF members argued against the use of floating exchange rates. 
A) IMF members helped countries maintain full employment. 
B) IMF allowed countries to attain internal balance. 
C) New countries would enter the agreement if they fixed their exchange rate. 
D) IMF members contributed their currency to form a pool of resources that IMF could lend to countries in need and parities in the exchange rate against the dollar could be adjusted with agreement of IMF. 
E) IMF members argued against the use of floating exchange rates.

Question 15

How did the international monetary system influence macroeconomic policy-making and performance during the interwar period (1918-1939)?

Accepted Answer

Governments effectively suspended the go

Question 16

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 17

Use the following table to illustrate the importance of macroeconomic policy coordination.Show that the two governments would have been happier if the two of them had adopted looser monetary policies,but given the policies that the other government did adopt,it is not in the interest of any individual government to change its course.Assume that each country wishes to get the biggest reduction in inflation rate at the lowest cost in terms of unemployment.This means that each country maximizes-ΔΠ/ΔU,the inflation reduction per point of increased unemployment.

Accepted Answer

One needs to translate the outcomes of t

Question 18

Once the United States Civil War broke out,the United States moved to a

Accepted Answer

A) gold standard. 
B) silver standard. 
C) bimetallic monetary standard consisting of silver and gold. 
D) bimetallic monetary standard consisting of copper and gold. 
E) paper currency,called the "greenback." 
A) gold standard. 
B) silver standard. 
C) bimetallic monetary standard consisting of silver and gold. 
D) bimetallic monetary standard consisting of copper and gold. 
E) paper currency,called the "greenback."

Question 19

Countries where investment is relatively

Accepted Answer

A) productive should have current account deficits. 
B) productive should have current account surpluses. 
C) unproductive should have current account surpluses. 
D) productive should balanced current account surpluses. 
E) productive should have low outputs. 
A) productive should have current account deficits. 
B) productive should have current account surpluses. 
C) unproductive should have current account surpluses. 
D) productive should balanced current account surpluses. 
E) productive should have low outputs.

Question 20

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

Exam 19: International Monetary Systems: An Historical Overview

Inflation can occur under conditions of full employment

The dollar of the United States became the postwar world's key currency because of all EXCEPT

Countries where investment is

Under the gold standard

When the exchange rate,E,and the foreign price level,P*,is fixed,domestic inflation depends primarily on

Which of the following does NOT occur if Home starts a policy of permanent fiscal expansion:

Under fixed exchange rates

Under fixed exchange rate,the response of an economy to a temporary fall in foreign demand for its exports is

The AA schedule shows

A sudden increase in the U.S.price level

If most of the shocks that buffet the economy come from the output market shocks,then

Refer to the graph below.The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic ________ and ________.

Mercantilism held that

Which of the two features of the IMF Articles of Agreement helped promote flexibility in external adjustment?

How did the international monetary system influence macroeconomic policy-making and performance during the interwar period (1918-1939)?

Under the gold standard era of 1870-1914

Once the United States Civil War broke out,the United States moved to a

Countries where investment is relatively

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

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 graph below.The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic and .

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