Question 1

A capital inflow occurs when

Accepted Answer

A)  a domestic resident purchases a domestic asset. 
B)  a domestic resident purchases a foreign asset. 
C)  a foreign resident purchases a domestic asset. 
D)  a foreign resident purchases a foreign asset. 
E)  imports exceed exports. 
A)  a domestic resident purchases a domestic asset. 
B)  a domestic resident purchases a foreign asset. 
C)  a foreign resident purchases a domestic asset. 
D)  a foreign resident purchases a foreign asset. 
E)  imports exceed exports.

Question 2

Purchasing power parity holds if

Accepted Answer

A)  inflation is low so purchasing power increases. 
B)  real wage rates adjust so that purchasing power is the same across all countries. 
C)  prices of all goods in the world economy were equal, corrected for nominal exchange rates. 
D)  countries are small and underdeveloped. 
E)  purchases are made in the short run and long run. 
A)  inflation is low so purchasing power increases. 
B)  real wage rates adjust so that purchasing power is the same across all countries. 
C)  prices of all goods in the world economy were equal, corrected for nominal exchange rates. 
D)  countries are small and underdeveloped. 
E)  purchases are made in the short run and long run.

Question 3

According to purchasing power parity, the relationship among the domestic price (P), the foreign price
(P*), and the nominal exchange rate (e), can be written as

Accepted Answer

A)  P = e - P*. 
B)  P = P* - e. 
C)  P = eP*. 
D)  P = e/P*. 
E)  e = P/P*. 
A)  P = e - P*. 
B)  P = P* - e. 
C)  P = eP*. 
D)  P = e/P*. 
E)  e = P/P*.

Question 4

Dollarization is a policy action that

Accepted Answer

A)  tries to stabilize the value of the local currency vs. the U.S. dollar. 
B)  adopts the currency of another country as the national medium of exchange. 
C)  mimics policy actions taken by the Bank of Canada. 
D)  outlaws the holding of foreign currencies other than the U.S. dollar. 
E)  buys and sells foreign exchange reserves in the foreign exchange market. 
A)  tries to stabilize the value of the local currency vs. the U.S. dollar. 
B)  adopts the currency of another country as the national medium of exchange. 
C)  mimics policy actions taken by the Bank of Canada. 
D)  outlaws the holding of foreign currencies other than the U.S. dollar. 
E)  buys and sells foreign exchange reserves in the foreign exchange market.

Question 5

In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from

Accepted Answer

A)  both real and nominal shocks from abroad. 
B)  real shocks from abroad, but not from nominal shocks from abroad. 
C)  nominal shocks from abroad, but not from real shocks from abroad. 
D)  neither real nor nominal shocks from abroad. 
E)  increases in foreign interest rates, but not from increases in foreign price levels. 
A)  both real and nominal shocks from abroad. 
B)  real shocks from abroad, but not from nominal shocks from abroad. 
C)  nominal shocks from abroad, but not from real shocks from abroad. 
D)  neither real nor nominal shocks from abroad. 
E)  increases in foreign interest rates, but not from increases in foreign price levels.

A capital inflow occurs when

Purchasing power parity holds if

According to purchasing power parity, the relationship among the domestic price (P), the foreign price (P*), and the nominal exchange rate (e), can be written as

Dollarization is a policy action that

In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 17: Money in the Open Economy

A capital inflow occurs when

Purchasing power parity holds if

According to purchasing power parity, the relationship among the domestic price (P), the foreign price (P*), and the nominal exchange rate (e), can be written as

Dollarization is a policy action that

In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money, Inflation, and Banking: A Deeper Look

Filters