Question 1

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Accepted Answer

A)  the real exchange rate will decrease with no change in the nominal exchange rate.
B)  the nominal exchange rate will decrease with no change in the real exchange rate.
C)  both the real and nominal exchange rate will decrease.
D)  no change in either the nominal or real exchange rate.
E)  both the real and nominal exchange rate will increase.F) B) and D)
G) B) and C)

Question 2

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

Accepted Answer

A)  the real exchange rate will be permanently higher in the medium run.
B)  the real exchange rate will be permanently lower in the medium run.
C)  the effects of this revaluation on the real exchange rate will be ambiguous in the medium run.
D)  the real exchange rate will be unchanged in medium run.
E)  the nominal exchange will initially fall in the short run and then increase in the medium run.F) B) and D)
G) None of the above

Question 3

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

Accepted Answer

A)  devalue the currency.
B)  increase government spending.
C)  decrease government spending.
D)  decrease government spending and devalue the currency.
E)  increase government spending and revalue the currency.F) All of the above
G) A) and C)

Question 4

Explain the cases for and against flexible and fixed exchange rate regimes.

Accepted Answer

Case for fixed: cannot trust the central...

Question 5

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

Accepted Answer

The standard of list of determinants tha...

Question 6

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Accepted Answer

A)  devalue the currency
B)  increase government spending
C)  decrease government spending
D)  decrease government spending and devalue the currency
E)  increase government spending and revalue the currencyF) D) and E)
G) B) and D)

Question 7

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

Accepted Answer

A)  an increase in the price level
B)  a devaluation of the currency
C)  a reduction in the domestic interest rate
D)  an increase in the foreign price level
E)  none of the aboveF) B) and E)
G) B) and D)

Question 8

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

Accepted Answer

Mundell argued these countries need to s...

Exam 21: Exchange Rate Regimes

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

Correct Answer
verified
The standard of list of determinants tha...
View Answer

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

Correct Answer
verified
Mundell argued these countries need to s...
View Answer

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

Correct Answer
verified

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

Correct Answer
verified

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

Correct Answer
verified

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Correct Answer
verified

Explain the cases for and against flexible and fixed exchange rate regimes.

Correct Answer
verified
Case for fixed: cannot trust the central...
View Answer

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Correct Answer
verified

Exam 21: Exchange Rate Regimes

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

Correct AnswerverifiedThe standard of list of determinants tha...View AnswerShow Answer

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

Correct AnswerverifiedMundell argued these countries need to s...View AnswerShow Answer

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

Correct AnswerverifiedShow Answer

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

Correct AnswerverifiedShow Answer

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

Correct AnswerverifiedShow Answer

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Correct AnswerverifiedShow Answer

Explain the cases for and against flexible and fixed exchange rate regimes.

Correct AnswerverifiedCase for fixed: cannot trust the central...View AnswerShow Answer

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The standard of list of determinants tha...
View Answer

Correct Answer
verified
Mundell argued these countries need to s...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Case for fixed: cannot trust the central...
View Answer

Correct Answer
verified