Question 1

Which of the countries below are inflation targeting?

Accepted Answer

A)  Japan 
B)  U.S. 
C)  Canada 
D)  Mexico 
E)  Nicaragua 
A)  Japan 
B)  U.S. 
C)  Canada 
D)  Mexico 
E)  Nicaragua

Question 2

An individual's need for liquidity would be up if:

Accepted Answer

A)  the average value of transactions carried out by the individual fell. 
B)  the average value of transactions carried out by the individual rose. 
C)  the individual got a raise. 
D)  the individual received a new ATM card. 
E)  the individual wanted to avoid risks. 
A)  the average value of transactions carried out by the individual fell. 
B)  the average value of transactions carried out by the individual rose. 
C)  the individual got a raise. 
D)  the individual received a new ATM card. 
E)  the individual wanted to avoid risks.

Question 3

Using year-by-year data from 1987-2007 shows that

Accepted Answer

A)  there is a strong positive relation between average Latin American money-supply growth and inflation. 
B)  there is a strong negative relation between average Latin American money-supply growth and inflation. 
C)  there is a strong positive relation between average Latin American money-supply growth and deflation. 
D)  it is difficult to find a strong positive relation between average Latin American money-supply growth and inflation. 
E)  there is a weak positive relation between average Latin American money-supply growth and inflation. 
A)  there is a strong positive relation between average Latin American money-supply growth and inflation. 
B)  there is a strong negative relation between average Latin American money-supply growth and inflation. 
C)  there is a strong positive relation between average Latin American money-supply growth and deflation. 
D)  it is difficult to find a strong positive relation between average Latin American money-supply growth and inflation. 
E)  there is a weak positive relation between average Latin American money-supply growth and inflation.

Question 4

The money supply schedule is

Accepted Answer

A)  horizontal because MS is set by the central bank while P is taken as given. 
B)  horizontal because MS is set by the central bank. 
C)  vertical because MS is set by the households and firms while P is taken as given. 
D)  vertical because MS and P are set by the central bank. 
E)  vertical because MS is set by the central bank while P is taken as given. 
A)  horizontal because MS is set by the central bank while P is taken as given. 
B)  horizontal because MS is set by the central bank. 
C)  vertical because MS is set by the households and firms while P is taken as given. 
D)  vertical because MS and P are set by the central bank. 
E)  vertical because MS is set by the central bank while P is taken as given.

Question 5

Which of the following can help to explain why higher inflation may lead to currency appreciations?

Accepted Answer

A)  The interest rate is not the prime target of monetary policy. 
B)  Most central banks adjust their policy interest rates expressly so as to keep inflation in check. 
C)  Central banks increase the money supply leading to overshooting of the exchange rate. 
D)  Inflation will increase the purchasing power of a currency. 
E)  The world market does not adjust their currency trade to reflect inflation. 
A)  The interest rate is not the prime target of monetary policy. 
B)  Most central banks adjust their policy interest rates expressly so as to keep inflation in check. 
C)  Central banks increase the money supply leading to overshooting of the exchange rate. 
D)  Inflation will increase the purchasing power of a currency. 
E)  The world market does not adjust their currency trade to reflect inflation.

Question 6

Money includes

Accepted Answer

A)  currency. 
B)  checking deposits held by households and firms. 
C)  deposits in the foreign exchange markets. 
D)  currency and checking deposits held by households and firms. 
E)  futures and deposits in the foreign exchange market. 
A)  currency. 
B)  checking deposits held by households and firms. 
C)  deposits in the foreign exchange markets. 
D)  currency and checking deposits held by households and firms. 
E)  futures and deposits in the foreign exchange market.

Question 7

The family summer house on Cape Cod pays a return in the form of

Accepted Answer

A)  interest rate. 
B)  capital gains. 
C)  the pleasure of vacations at the beach. 
D)  stock options. 
E)  capital gains and pleasure. 
A)  interest rate. 
B)  capital gains. 
C)  the pleasure of vacations at the beach. 
D)  stock options. 
E)  capital gains and pleasure.

Question 8

The aggregate demand for money can be expressed by:

Accepted Answer

A)  Md = P × L(R,Y). 
B)  Md = L × P(R,Y). 
C)  Md = P × Y(R, L). 
D)  Md = R × L(P,Y). 
E)  Md = R × L(R, P). 
A)  Md = P × L(R,Y). 
B)  Md = L × P(R,Y). 
C)  Md = P × Y(R, L). 
D)  Md = R × L(P,Y). 
E)  Md = R × L(R, P).

Question 9

Changes in the money supply growth rate

Accepted Answer

A)  are neutral in the short run. 
B)  need not be neutral in the short run. 
C)  are neutral in the long run. 
D)  need not be neutral in the long run. 
E)  affect the real output of the economy. 
A)  are neutral in the short run. 
B)  need not be neutral in the short run. 
C)  are neutral in the long run. 
D)  need not be neutral in the long run. 
E)  affect the real output of the economy.

Question 10

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rate.

Accepted Answer

An increase in the U.S. money supply wil

Question 11

Money demand behavior may

Accepted Answer

A)  change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities. 
B)  change only as a result of demographic trends. 
C)  change only as a result of financial innovations such as electronic cash-transfer facilities. 
D)  not change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities. 
E)  change as a result of demographic trends but not as a result of financial innovations such as electronic cash-transfer facilities. 
A)  change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities. 
B)  change only as a result of demographic trends. 
C)  change only as a result of financial innovations such as electronic cash-transfer facilities. 
D)  not change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities. 
E)  change as a result of demographic trends but not as a result of financial innovations such as electronic cash-transfer facilities.

Question 12

What term means an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use?

Accepted Answer

A)  superinflation 
B)  stagflation 
C)  hyperinflation 
D)  maginflation 
E)  deflation 
A)  superinflation 
B)  stagflation 
C)  hyperinflation 
D)  maginflation 
E)  deflation

Question 13

A change in the money supply creates demand and cost pressures that lead to future increases in the price level from which main sources? I. Excess demand for output and labor
II) Inflationary expectations
III) Raw materials prices

Accepted Answer

A)  I 
B)  II 
C)  II and III 
D)  I and II 
E)  I, II, and III 
A)  I 
B)  II 
C)  II and III 
D)  I and II 
E)  I, II, and III

Question 14

Explain the exchange rate over-shooting hypothesis.

Accepted Answer

Many prices in the economy are written i

Question 15

Which one of the following statements is the most accurate?

Accepted Answer

A)  Given PUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. 
B)  Given YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. 
C)  Given PUS and YUS, when the money supply decreases, the dollar interest rate declines and the dollar depreciates against the euro. 
D)  Given PUSand YUS, when the money supply rises, the dollar interest rate declines and the dollar appreciates against the euro. 
E)  Given PUSand YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. 
A)  Given PUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. 
B)  Given YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro. 
C)  Given PUS and YUS, when the money supply decreases, the dollar interest rate declines and the dollar depreciates against the euro. 
D)  Given PUSand YUS, when the money supply rises, the dollar interest rate declines and the dollar appreciates against the euro. 
E)  Given PUSand YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.

Question 16

What are the main factors determining the aggregate money demand?

Accepted Answer

Three main factors: interest rate, the p

Question 17

Given PUS and YUS,

Accepted Answer

A)  An increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. 
B)  An increase in the European money supply causes the euro to appreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. 
C)  An increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. 
D)  An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium. 
E)  An increase in the European money supply causes the euro to depreciate against the dollar, and disturbing the U.S. money market equilibrium. 
A)  An increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. 
B)  An increase in the European money supply causes the euro to appreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. 
C)  An increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. 
D)  An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium. 
E)  An increase in the European money supply causes the euro to depreciate against the dollar, and disturbing the U.S. money market equilibrium.

Question 18

The exchange rate between currencies depends on

Accepted Answer

A)  the interest rate that can be earned on deposits of those currencies. 
B)  the interest rate that can be earned on deposits of those currencies and the expected future exchange rate. 
C)  the expected future exchange rate. 
D)  national output. 
E)  the interest rate that can be earned on deposits of those countries and the national output. 
A)  the interest rate that can be earned on deposits of those currencies. 
B)  the interest rate that can be earned on deposits of those currencies and the expected future exchange rate. 
C)  the expected future exchange rate. 
D)  national output. 
E)  the interest rate that can be earned on deposits of those countries and the national output.

Question 19

In a world where the price level could adjust immediately to its new long-run level after a money supply increase,

Accepted Answer

A)  The dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising. 
B)  The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising. 
C)  The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing. 
D)  The dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing. 
E)  The dollar interest rate would fall because prices would not be able to prevent the money supply from rising. 
A)  The dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising. 
B)  The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising. 
C)  The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing. 
D)  The dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing. 
E)  The dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

Question 20

In a world with money and bonds only,

Accepted Answer

A)  it is not risky to hold money. 
B)  it is risky to hold money. 
C)  risk is an important factor in the demand for money. 
D)  there is no relationship between risk and holding money. 
E)  assets become meaningless. 
A)  it is not risky to hold money. 
B)  it is risky to hold money. 
C)  risk is an important factor in the demand for money. 
D)  there is no relationship between risk and holding money. 
E)  assets become meaningless.

Exam 15: Money, Interest Rates, and Exchange Rates

Which of the countries below are inflation targeting?

An individual's need for liquidity would be up if:

Using year-by-year data from 1987-2007 shows that

The money supply schedule is

Which of the following can help to explain why higher inflation may lead to currency appreciations?

Money includes

The family summer house on Cape Cod pays a return in the form of

The aggregate demand for money can be expressed by:

Changes in the money supply growth rate

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rate.

Money demand behavior may

What term means an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use?

A change in the money supply creates demand and cost pressures that lead to future increases in the price level from which main sources? I. Excess demand for output and labor II) Inflationary expectations III) Raw materials prices

Explain the exchange rate over-shooting hypothesis.

Which one of the following statements is the most accurate?

What are the main factors determining the aggregate money demand?

Given PUS and YUS,

The exchange rate between currencies depends on

In a world where the price level could adjust immediately to its new long-run level after a money supply increase,

In a world with money and bonds only,

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

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

International Monetary Systems: An Historical Overview

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters

Given P_US and Y_US,