Quiz 13

1. a shift of the IP curve.
2. no change in E.
3. an increase in E.
4. an appreciation of the domestic currency.

1. require a reduction in the money supply.
2. cause no change in the domestic interest rate.
3. cause a reduction in Y.
4. all of the above

1. domestic goods and foreign currency
2. domestic bonds and foreign currency
3. foreign goods and domestic currency
4. domestic and foreign bonds
5. none of the above

1. an increase in the exchange rate, E
2. an appreciation of the domestic currency
3. an increase in net exports
4. all of the above
5. none of the above

1. exports
2. net exports
3. the exchange rate, E
4. all of the above
5. none of the above

1. a depreciation.
2. a devaluation.
3. an appreciation.
4. a revaluation.

1. output
2. interest rate
3. exchange value of domestic currency
4. all of the above
5. none of the above

1. neither a shift nor movement along the IP curve.
2. a movement along the IP curve.
3. the IP curve to shift to the left.
4. the IP curve to shift to the right.

1. Consumption decreases.
2. The domestic currency appreciates.
3. Investment spending decreases.
4. all of the above
5. none of the above

1. a drop in the interest rate.
2. an increase in the exchange rate, E.
3. a rise in output.
4. all of the above
5. both A and B

1. could change its interest rate only if other countries changed theirs as well.
2. had complete freedom in choosing the interest rate it wanted.
3. could never change its interest rate.
4. must apply to a special European Commission in order to change its interest rate.
5. had complete freedom in choosing its interest rate only if it is a very small country.

1. a permanent reduction in the monetary base.
2. a change in the composition of the monetary base.
3. a permanent increase in the monetary base.
4. a gradual reduction in the domestic interest rate.

1. the foreign interest rate plus the expected rate of depreciation of the foreign currency.
2. the expected rate of appreciation of the domestic currency.
3. the foreign interest rate.
4. the expected rate of depreciation of the domestic currency.
5. the foreign interest rate plus the expected rate of depreciation of the domestic currency.

1. Fiscal policy will become a less effective tool for changing output.
2. Both fiscal and monetary policy will become more effective in changing GDP.
3. Both fiscal and monetary policy will become completely ineffective in changing GDP.
4. Monetary policy will become a more effective tool for changing output.
5. none of the above

1. the relative output effects are ambiguous.
2. the change in output in A will be greater than in B.
3. the change in output in B will be greater than in A.
4. the change in output will be the same in both countries.

1. a reduction in i and an increase in E.
2. no change in output.
3. a reduction in investment.
4. an increase in imports.
5. no change in net exports.

1. an increase in E.
2. a reduction in the domestic interest rate.
3. a reduction in investment.
4. a reduction in E.
5. none of the above

1. an increase in investment.
2. an increase in imports.
3. an increase in net exports.
4. all of the above

1. the U.K. interest rate exceeds the U.S. interest rate.
2. U.S. and U.K. interest rates are equal.
3. the U.S. interest rate exceeds the U.K. interest rate.
4. individuals will prefer to hold U.S. bonds because the U.S. interest rate exceeds the U.K. interest rate.
5. none of the above

1. appreciate by 2%.
2. depreciate by 10%.
3. depreciate by 2%.
4. appreciate by 4%.
5. appreciate by 6%.

1. The Marshall-Lerner condition must hold.
2. The foreign and domestic interest rates must be equal.
3. The expected rate of depreciation of the domestic currency must be zero.
4. Interest parity must hold.
5. none of the above

1. an increase in net exports
2. a decrease in imports
3. an increase in demand for domestic output
4. an increase in exports
5. none of the above

1. undervalued currencies.
2. overvalued currencies.
3. high inflation.
4. low budget deficits.
5. high real interest rates.

1. A contractionary fiscal policy will require that the central bank decrease the money supply.
2. The central bank cannot use monetary policy to affect domestic output.
3. The domestic and foreign interest rates must be equal.
4. all of the above
5. none of the above

1. a float.
2. a crawling peg.
3. a fixed rate within a band.
4. the EMS.
5. none of the above