Question 1

What are the predictions for the long-run equilibrium of the Monetary Approach?

Accepted Answer

The answer of What are the predictions for the long-run...

Question 2

Which of the following are theories meant to explain "Why price levels are lower in poorer countries"?

Accepted Answer

A)  only Bhagwati-Kravis-Lipsey 
B)  only Balassa-Samuelson 
C)  only Goldberg-Knetter 
D)  Bhagwati-Kravis-Lipsey and Balassa-Samuelson 
E)  Bhagwati-Kravis-Lipsey and Goldberg-Knetter 
A)  only Bhagwati-Kravis-Lipsey 
B)  only Balassa-Samuelson 
C)  only Goldberg-Knetter 
D)  Bhagwati-Kravis-Lipsey and Balassa-Samuelson 
E)  Bhagwati-Kravis-Lipsey and Goldberg-Knetter

Question 3

To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation.

Accepted Answer

The answer of To answer the following question, please refer...

Question 4

When the domestic money prices of goods are held constant

Accepted Answer

A)  a nominal dollar appreciation makes U.S. goods cheaper compared with foreign goods. 
B)  a nominal dollar depreciation makes U.S. goods less appealing in foreign markets. 
C)  a nominal dollar appreciation does not affect the prices of U.S. goods. 
D)  a nominal dollar depreciation makes U.S. goods more expensive compared with foreign goods. 
E)  a nominal dollar depreciation makes U.S. goods cheaper compared with foreign goods and a nominal dollar appreciation makes U.S. goods more expensive compared with foreign goods. 
A)  a nominal dollar appreciation makes U.S. goods cheaper compared with foreign goods. 
B)  a nominal dollar depreciation makes U.S. goods less appealing in foreign markets. 
C)  a nominal dollar appreciation does not affect the prices of U.S. goods. 
D)  a nominal dollar depreciation makes U.S. goods more expensive compared with foreign goods. 
E)  a nominal dollar depreciation makes U.S. goods cheaper compared with foreign goods and a nominal dollar appreciation makes U.S. goods more expensive compared with foreign goods.

Question 5

Which of the following statements is the MOST accurate?

Accepted Answer

A)  The law of one price applies only to the general price level. 
B)  The law of one price applies to the general price level while PPP applies to individual commodities. 
C)  The law of one price applies to individual commodities while PPP applies to both the general price level and to individual commodities. 
D)  PPP applies only to individual commodities. 
E)  The law of one price applies to individual commodities while PPP applies to the general price level. 
A)  The law of one price applies only to the general price level. 
B)  The law of one price applies to the general price level while PPP applies to individual commodities. 
C)  The law of one price applies to individual commodities while PPP applies to both the general price level and to individual commodities. 
D)  PPP applies only to individual commodities. 
E)  The law of one price applies to individual commodities while PPP applies to the general price level.

Question 6

Interest rate differences between countries depend on

Accepted Answer

A)  differences in expected inflation, but not on expected changes in the real exchange rate. 
B)  differences in expected changes in the real exchange rate, but not on expected inflation. 
C)  neither differences in expected inflation, nor on expected changes in the real exchange rate. 
D)  differences in expected inflation and nothing else. 
E)  differences in expected inflation, and on expected changes in the real exchange rate. 
A)  differences in expected inflation, but not on expected changes in the real exchange rate. 
B)  differences in expected changes in the real exchange rate, but not on expected inflation. 
C)  neither differences in expected inflation, nor on expected changes in the real exchange rate. 
D)  differences in expected inflation and nothing else. 
E)  differences in expected inflation, and on expected changes in the real exchange rate.

Question 7

Which of the following statements is the MOST accurate?

Accepted Answer

A)  The prices of identical commodity baskets, when converted to a single currency, are the same across countries. 
B)  The prices of identical commodity baskets, when converted to a single currency, differ substantially across countries. 
C)  The prices of identical commodity baskets, when converted to a single currency, do not differ substantially across countries. 
D)  The prices of identical commodity baskets, when converted to a single currency, are often the same across countries. 
E)  The prices of identical commodity baskets, when converted to a single currency, are the same across countries more than 50% of the time. 
A)  The prices of identical commodity baskets, when converted to a single currency, are the same across countries. 
B)  The prices of identical commodity baskets, when converted to a single currency, differ substantially across countries. 
C)  The prices of identical commodity baskets, when converted to a single currency, do not differ substantially across countries. 
D)  The prices of identical commodity baskets, when converted to a single currency, are often the same across countries. 
E)  The prices of identical commodity baskets, when converted to a single currency, are the same across countries more than 50% of the time.

Question 8

Which of the following statements is MOST accurate?

Accepted Answer

A)  In the money market, an increase in U.S. money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate. 
B)  In the money market, an increase in European money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate. 
C)  In the money market, an increase in U.S. money supply growth rate leads to a decrease in the long-run nominal dollar/euro exchange rate. 
D)  In the money market, an increase in European money supply growth leads to an increase in the long-run nominal dollar/euro exchange rate. 
E)  In the money market, an increase in U.S. money supply level leads to a proportional decrease in the long-run nominal dollar/euro exchange rate. 
A)  In the money market, an increase in U.S. money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate. 
B)  In the money market, an increase in European money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate. 
C)  In the money market, an increase in U.S. money supply growth rate leads to a decrease in the long-run nominal dollar/euro exchange rate. 
D)  In the money market, an increase in European money supply growth leads to an increase in the long-run nominal dollar/euro exchange rate. 
E)  In the money market, an increase in U.S. money supply level leads to a proportional decrease in the long-run nominal dollar/euro exchange rate.

Question 9

Which of the following statements is the MOST accurate?

Accepted Answer

A)  Relative PPP is not a reasonable approximation to the data. 
B)  Relative PPP is sometimes a reasonable approximation to the data but often performs poorly. 
C)  Relative PPP is sometimes a reasonable approximation to the data. 
D)  PPP is sometimes a reasonable approximation to the data. 
E)  PPP is sometimes a reasonable approximation to the data but usually performs poorly. 
A)  Relative PPP is not a reasonable approximation to the data. 
B)  Relative PPP is sometimes a reasonable approximation to the data but often performs poorly. 
C)  Relative PPP is sometimes a reasonable approximation to the data. 
D)  PPP is sometimes a reasonable approximation to the data. 
E)  PPP is sometimes a reasonable approximation to the data but usually performs poorly.

Question 10

What are the predictions of the PPP theory with regards to the real exchange rates?

Accepted Answer

The real exchange rate between two count

Question 11

Discuss the differences between Absolute PPP and Relative PPP.

Accepted Answer

Absolute PPP states that the exchange ra

Question 12

Which of the following statements is the MOST accurate?
In general, under the monetary approach to the exchange rate

Accepted Answer

A)  the interest rate is not independent of the money supply growth rate in the short run. 
B)  the interest rate is independent of the money supply growth rate in the long run. 
C)  the interest rate is not independent of the money supply growth rate in the long run, but independent in the short run. 
D)  the interest rate is not independent of the money supply growth rate in the long run. 
E)  the interest rate is a factor of the money supply growth rate only in the short term. 
A)  the interest rate is not independent of the money supply growth rate in the short run. 
B)  the interest rate is independent of the money supply growth rate in the long run. 
C)  the interest rate is not independent of the money supply growth rate in the long run, but independent in the short run. 
D)  the interest rate is not independent of the money supply growth rate in the long run. 
E)  the interest rate is a factor of the money supply growth rate only in the short term.

Question 13

In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make?

Accepted Answer

A)  Only that there are no transportation costs and restrictions on trade. 
B)  Only that the markets are perfectly competitive, i.e., P = MC. 
C)  The factors of production are identical between countries. 
D)  No arbitrage exists. 
E)  HK and the U.S. are perfectly competitive and there are no transportation costs or restrictions on trade. 
A)  Only that there are no transportation costs and restrictions on trade. 
B)  Only that the markets are perfectly competitive, i.e., P = MC. 
C)  The factors of production are identical between countries. 
D)  No arbitrage exists. 
E)  HK and the U.S. are perfectly competitive and there are no transportation costs or restrictions on trade.

Question 14

The difference between nominal and real interest rates is that

Accepted Answer

A)  nominal interest rates are measured in terms of a country's output, while real interest rates are measured in monetary terms. 
B)  nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output. 
C)  nominal interest rates can fluctuate, while real interest rates always remain fixed. 
D)  real interest rates can fluctuate, while nominal interest rates always remain fixed. 
E)  real interest rates are the same in every country, while nominal interest rates are different for every country. 
A)  nominal interest rates are measured in terms of a country's output, while real interest rates are measured in monetary terms. 
B)  nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output. 
C)  nominal interest rates can fluctuate, while real interest rates always remain fixed. 
D)  real interest rates can fluctuate, while nominal interest rates always remain fixed. 
E)  real interest rates are the same in every country, while nominal interest rates are different for every country.

What are the predictions for the long-run equilibrium of the Monetary Approach?

Which of the following are theories meant to explain "Why price levels are lower in poorer countries"?

To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation.

When the domestic money prices of goods are held constant

Which of the following statements is the MOST accurate?

Interest rate differences between countries depend on

Which of the following statements is the MOST accurate?

Which of the following statements is MOST accurate?

Which of the following statements is the MOST accurate?

What are the predictions of the PPP theory with regards to the real exchange rates?

Discuss the differences between Absolute PPP and Relative PPP.

Which of the following statements is the MOST accurate? In general, under the monetary approach to the exchange rate

In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make?

The difference between nominal and real interest rates is that

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

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 16: Price Levels and the Exchange Rate in the Long Run

What are the predictions for the long-run equilibrium of the Monetary Approach?

Which of the following are theories meant to explain "Why price levels are lower in poorer countries"?

To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation.

When the domestic money prices of goods are held constant

Which of the following statements is the MOST accurate?

Interest rate differences between countries depend on

Which of the following statements is the MOST accurate?

Which of the following statements is MOST accurate?

Which of the following statements is the MOST accurate?

What are the predictions of the PPP theory with regards to the real exchange rates?

Discuss the differences between Absolute PPP and Relative PPP.

Which of the following statements is the MOST accurate? In general, under the monetary approach to the exchange rate

In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make?

The difference between nominal and real interest rates is that

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

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters