Question 1

Money serves as all of the following except

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a symbol that is made of or can be redeemed for a fixed amount of precious metal. 
E)  a highly liquid asset. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a symbol that is made of or can be redeemed for a fixed amount of precious metal. 
E)  a highly liquid asset.

Question 2

The most extreme inflationary conditions occurred

Accepted Answer

A)  in Latin America in the 1990s. 
B)  in Latin America in the 1980s. 
C)  in Eastern Europe in the 1990s. 
D)  in Eastern Europe in the 1980s. 
E)  in Eastern Europe in the 1970s. 
A)  in Latin America in the 1990s. 
B)  in Latin America in the 1980s. 
C)  in Eastern Europe in the 1990s. 
D)  in Eastern Europe in the 1980s. 
E)  in Eastern Europe in the 1970s.

Question 3

What would be the effect of an increase in the European Money Supply in the Dollar Euro Exchange Rate?

Accepted Answer

An increase in the European mo

Question 4

A sustained change in the monetary growth rate will,

Accepted Answer

A)  immediately affect equilibrium real money balances by raising the money interest rate. 
B)  eventually affect equilibrium nominal money balances by raising the money interest rate. 
C)  eventually affect equilibrium real money balances by reducing the money interest rate. 
D)  eventually affect equilibrium real money balances by raising the real interest rate. 
E)  eventually affect equilibrium real money balances by raising the money interest rate. 
A)  immediately affect equilibrium real money balances by raising the money interest rate. 
B)  eventually affect equilibrium nominal money balances by raising the money interest rate. 
C)  eventually affect equilibrium real money balances by reducing the money interest rate. 
D)  eventually affect equilibrium real money balances by raising the real interest rate. 
E)  eventually affect equilibrium real money balances by raising the money interest rate.

Question 5

For a given level of

Accepted Answer

A)  nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
B)  real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule. 
C)  real GNP, changes in interest rates cause an increase of the L(R,Y) schedule. 
D)  nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule. 
E)  real GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
A)  nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule. 
B)  real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule. 
C)  real GNP, changes in interest rates cause an increase of the L(R,Y) schedule. 
D)  nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule. 
E)  real GNP, changes in interest rates cause movements along the L(R,Y) schedule.

Question 6

In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

Accepted Answer

A)  more than 120 percent per year. 
B)  more than 100 percent per year. 
C)  more than 200 percent per year. 
D)  more than 12,000 percent per year. 
E)  more than 1,000 percent per year. 
A)  more than 120 percent per year. 
B)  more than 100 percent per year. 
C)  more than 200 percent per year. 
D)  more than 12,000 percent per year. 
E)  more than 1,000 percent per year.

Question 7

Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.

Accepted Answer

@#IMG-DLM& An increase in the nominal money supply

Question 8

"Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lead to future increase in the price level." Discuss.

Accepted Answer

(See Section 7). The statement

Question 9

In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

Accepted Answer

A)  50 percent per month. 
B)  10 percent per month. 
C)  20 percent per month. 
D)  5 percent per month. 
E)  25 percent per month. 
A)  50 percent per month. 
B)  10 percent per month. 
C)  20 percent per month. 
D)  5 percent per month. 
E)  25 percent per month.

Question 10

The aggregate real money demand schedule L(R,Y)

Accepted Answer

A)  slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B)  slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C)  has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D)  slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E)  slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets. 
A)  slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B)  slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C)  has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D)  slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E)  slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets.

Question 11

Explain the following figure.

Accepted Answer

The figure explains how the money market

Question 12

An economy's long-run equilibrium is

Accepted Answer

A)  the equilibrium that would occur if prices were perfectly flexible. 
B)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D)  the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E)  the equilibrium that would occur if prices were perfectly fixed at the full employment point. 
A)  the equilibrium that would occur if prices were perfectly flexible. 
B)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C)  the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D)  the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E)  the equilibrium that would occur if prices were perfectly fixed at the full employment point.

Question 13

Michael Woodford says the following is an advantage of interest-rate instruments for central banks:

Accepted Answer

A)  Conduct monetary policy without inflation. 
B)  Conduct monetary policy even if checking deposits pay interest at competitive rates. 
C)  Conduct monetary policy without government approval. 
D)  Conduct monetary policy with consumers in mind. 
E)  Conduct monetary policy with workers in mind. 
A)  Conduct monetary policy without inflation. 
B)  Conduct monetary policy even if checking deposits pay interest at competitive rates. 
C)  Conduct monetary policy without government approval. 
D)  Conduct monetary policy with consumers in mind. 
E)  Conduct monetary policy with workers in mind.

Question 14

Explain how the money markets of two countries are linked through the foreign exchange market.

Accepted Answer

The monetary policy actions by the Fed a

Question 15

If individuals are holding more money than they desire,

Accepted Answer

A)  they will attempt to reduce their liquidity by using money to purchase goods. 
B)  they will attempt to reduce their liquidity by using money to purchase interest-bearing assets. 
C)  they will attempt to reduce their liquidity by converting real money holdings into nominal money holdings. 
D)  they will keep their holdings constant. 
A)  they will attempt to reduce their liquidity by using money to purchase goods. 
B)  they will attempt to reduce their liquidity by using money to purchase interest-bearing assets. 
C)  they will attempt to reduce their liquidity by converting real money holdings into nominal money holdings. 
D)  they will keep their holdings constant.

Question 16

Explain the effects of a permanent increase in the U.S. money supply in the short run and in the long run. Assume that the U.S. real national income is constant.

Accepted Answer

An increase in the nominal money supply

Question 17

A change in the level of the supply of money

Accepted Answer

A)  increases the long-run values of the interest rate and real output. 
B)  decreases the long-run values of the interest rate and real output. 
C)  has no effect on the long-run values of the interest rate, but may affect real output. 
D)  has no effect on the long-run values of real output, but may affect the interest rate. 
E)  has no effect on the long-run values of the interest rate and real output. 
A)  increases the long-run values of the interest rate and real output. 
B)  decreases the long-run values of the interest rate and real output. 
C)  has no effect on the long-run values of the interest rate, but may affect real output. 
D)  has no effect on the long-run values of real output, but may affect the interest rate. 
E)  has no effect on the long-run values of the interest rate and real output.

Question 18

An increase in

Accepted Answer

A)  nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply. 
B)  real output decreases the interest rate while a fall in real output increases the interest rate, given the price level. 
C)  real output raises the interest rate while a fall in real output lowers the interest rate, given the money supply. 
D)  nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level. 
E)  real output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply. 
A)  nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply. 
B)  real output decreases the interest rate while a fall in real output increases the interest rate, given the price level. 
C)  real output raises the interest rate while a fall in real output lowers the interest rate, given the money supply. 
D)  nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level. 
E)  real output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply.

Question 19

The aggregate money demand depends on

Accepted Answer

A)  the interest rate. 
B)  the price level. 
C)  real national income. 
D)  the interest rate, price level, and real national income. 
E)  the price level and the liquidity of the asset 
A)  the interest rate. 
B)  the price level. 
C)  real national income. 
D)  the interest rate, price level, and real national income. 
E)  the price level and the liquidity of the asset

Question 20

Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate.

Accepted Answer

The main points are: An increase in the

Exam 15: Money, Interest Rates, and Exchange Rates

Money serves as all of the following except

The most extreme inflationary conditions occurred

What would be the effect of an increase in the European Money Supply in the Dollar Euro Exchange Rate?

A sustained change in the monetary growth rate will,

For a given level of

In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.

"Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lead to future increase in the price level." Discuss.

In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

The aggregate real money demand schedule L(R,Y)

Explain the following figure.

An economy's long-run equilibrium is

Michael Woodford says the following is an advantage of interest-rate instruments for central banks:

Explain how the money markets of two countries are linked through the foreign exchange market.

If individuals are holding more money than they desire,

Explain the effects of a permanent increase in the U.S. money supply in the short run and in the long run. Assume that the U.S. real national income is constant.

A change in the level of the supply of money

An increase in

The aggregate money demand depends on

Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate.

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

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