Question 1

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 2

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

Accepted Answer

A)  Only two of the three aspects of internal and external balance can be accommodated simultaneously. 
B)  Only three of the four aspects of internal and external balance can be accommodated simultaneously. 
C)  Only one of the three aspects of internal and external balance can be accommodated simultaneously. 
D)  Only two of the four aspects of internal and external balance can be accommodated simultaneously. 
E)  Only one of the four aspects of internal and external balance can be accommodated simultaneously. 
A)  Only two of the three aspects of internal and external balance can be accommodated simultaneously. 
B)  Only three of the four aspects of internal and external balance can be accommodated simultaneously. 
C)  Only one of the three aspects of internal and external balance can be accommodated simultaneously. 
D)  Only two of the four aspects of internal and external balance can be accommodated simultaneously. 
E)  Only one of the four aspects of internal and external balance can be accommodated simultaneously.

Question 3

The focus of policy in the 1990s was:

Accepted Answer

A)  increasing trade. 
B)  increasing employment. 
C)  maintaining stable exchange rates. 
D)  holding down inflation and increasing domestic output. 
E)  levying beggar-thy-neighbor tariffs. 
A)  increasing trade. 
B)  increasing employment. 
C)  maintaining stable exchange rates. 
D)  holding down inflation and increasing domestic output. 
E)  levying beggar-thy-neighbor tariffs.

Question 4

A current account surplus

Accepted Answer

A)  poses a problem if domestic savings are being invested more profitably abroad than they would be at home. 
B)  may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. 
C)  may pose no problem if domestic savings are being invested less profitably abroad than they would be at home. 
D)  there is no relation between current account surplus and between savings and investment. 
E)  poses a problem if domestic savings are being invested less profitably abroad than they would be at home. 
A)  poses a problem if domestic savings are being invested more profitably abroad than they would be at home. 
B)  may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. 
C)  may pose no problem if domestic savings are being invested less profitably abroad than they would be at home. 
D)  there is no relation between current account surplus and between savings and investment. 
E)  poses a problem if domestic savings are being invested less profitably abroad than they would be at home.

Question 5

By external balance, most economists means,

Accepted Answer

A)  avoiding excessive imbalances in international payments. 
B)  balance between exports and imports. 
C)  balance between trade account and service account. 
D)  fixed exchange rate. 
E)  balance in internal transactions like full employment or stable prices. 
A)  avoiding excessive imbalances in international payments. 
B)  balance between exports and imports. 
C)  balance between trade account and service account. 
D)  fixed exchange rate. 
E)  balance in internal transactions like full employment or stable prices.

Question 6

"No central bank can be indifferent to its currency's value in the foreign exchange market." Discuss.

Accepted Answer

despite the "Monetary Policy Autonomy" t

Question 7

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 8

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 9

(a) Assume that R denotes the domestic interest rate and R denotes the foreign interest rate. Under a fixed exchange rate what is the relation between R and R
(b) Assume E denotes the domestic currency price of the dollar for a country which is not the United States. If one wants to analyze only the short run effects of a policy, what does one assume about the Home and Foreign price levels, P and P, respectively.
(c) Assume that there is no ongoing balance of payment crisis. What is this assumption really assume?
(d) Assume a fixed exchange rate system. What does this tell you about E?
(e) Under the above assumptions what are the conditions for internal balance?
(f) How is your answer to Part D above would change if P is unstable due to foreign inflation.
(g) Given the definitions above, how one defines the real exchange rate?
(h) Write the condition for internal balance.
(i) Define the variable not defined before in Part G above.
(j) Using the equation for internal balance derived above, given our assumptions analyze the effects of a fiscal expansion.
(k) What would happen if the government of that country, which is not the United States under Bretton Woods, decides to devaluate its currency?
(l) What would happen if the government of that country, which is not the United States under Bretton Woods, decides to use monetary policy rather than fiscal policy?
(m) 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?
(n) Assume that the economy is at internal balance. What will happen if G goes up for a given level of E?
(o) Assume that the economy is at internal balance. What will happen if G goes down for a given level of E?

Accepted Answer

(a) R = R
(b) Constant prices.
(c) That

Question 10

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 11

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 12

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 13

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 14

Explain how a country with a current account deficit is a ripe candidate for currency devaluation.

Accepted Answer

If, for example, Great Britain had a cur

Question 15

What is the difference between an expenditure-changing policy and an expenditure-switching policy?

Accepted Answer

An expenditure-changing policy alters th

Question 16

Which one of the following statements is true?

Accepted Answer

A)  Countries with strong investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
B)  Countries with weak investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
C)  Countries with weak investment opportunities should invest more at home. 
D)  Countries with weak investment opportunities should invest little abroad. 
E)  Countries with weak investment opportunities should invest little abroad and channel their savings into more productive investment activity domestically. 
A)  Countries with strong investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
B)  Countries with weak investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
C)  Countries with weak investment opportunities should invest more at home. 
D)  Countries with weak investment opportunities should invest little abroad. 
E)  Countries with weak investment opportunities should invest little abroad and channel their savings into more productive investment activity domestically.

Question 17

A sudden decrease 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 better off. 
E)  makes those with dollar debts better 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 better off. 
E)  makes those with dollar debts better off.

Question 18

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 19

What are the outcomes of the following games, assuming the max-min criteria is used?

Accepted Answer

There are two equilibria in th

Question 20

The following figure introduces the relationship between industrial production and wholesale price index changes between the years 1929-1935. What is the purpose of the following figure?

Accepted Answer

The purpose is to show that countries th

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

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

The focus of policy in the 1990s was:

A current account surplus

By external balance, most economists means,

"No central bank can be indifferent to its currency's value in the foreign exchange market." Discuss.

The XX schedule shows how much

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

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

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

The view of mercantilists can be summarized as follows:

Explain how a country with a current account deficit is a ripe candidate for currency devaluation.

What is the difference between an expenditure-changing policy and an expenditure-switching policy?

Which one of the following statements is true?

A sudden decrease in the U.S. price level

The gold standard period was

What are the outcomes of the following games, assuming the max-min criteria is used?

The following figure introduces the relationship between industrial production and wholesale price index changes between the years 1929-1935. What is the purpose of the following figure?

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

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 19: International Monetary Systems: An Historical Overview

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

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

The focus of policy in the 1990s was:

A current account surplus

By external balance, most economists means,

"No central bank can be indifferent to its currency's value in the foreign exchange market." Discuss.

The XX schedule shows how much

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

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

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

The view of mercantilists can be summarized as follows:

Explain how a country with a current account deficit is a ripe candidate for currency devaluation.

What is the difference between an expenditure-changing policy and an expenditure-switching policy?

Which one of the following statements is true?

A sudden decrease in the U.S. price level

The gold standard period was

What are the outcomes of the following games, assuming the max-min criteria is used?

The following figure introduces the relationship between industrial production and wholesale price index changes between the years 1929-1935. What is the purpose of the following figure?

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

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters