Question 1

Which of the following statements is true with respect to the monetary approach to the balance of payments:

Accepted Answer

A) the interest differential in favor of the dollar equals the expected rate of appreciation of the euro 
B) the interest differential in favor of the dollar equals the expected rate of depreciation of the dollar 
C) the interest differential in favor of the pound equals the expected rate of depreciation of the pound 
D) all of the above 
A) the interest differential in favor of the dollar equals the expected rate of appreciation of the euro 
B) the interest differential in favor of the dollar equals the expected rate of depreciation of the dollar 
C) the interest differential in favor of the pound equals the expected rate of depreciation of the pound 
D) all of the above

Question 2

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

Accepted Answer

A) price stability 
B) fixed exchange rate 
C) price stability or fixed exchange rate 
D) price stability and fixed exchange rate 
A) price stability 
B) fixed exchange rate 
C) price stability or fixed exchange rate 
D) price stability and fixed exchange rate

Question 3

The portfolio balance approach:

Accepted Answer

A) can be regarded as an extension of the monetary approach 
B) deals with money and other domestic and foreign financial assets 
C) can more readily be extended than the monetary approach to deals with the real sector 
D) all of the above 
A) can be regarded as an extension of the monetary approach 
B) deals with money and other domestic and foreign financial assets 
C) can more readily be extended than the monetary approach to deals with the real sector 
D) all of the above

Question 4

Which is correct with respect to the absolute PPP theory?

Accepted Answer

A) It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations 
B) it does not take into consideration transportation costs or other obstructions to the flow of international trade 
C) can be very misleading 
D) all of the above 
A) It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations 
B) it does not take into consideration transportation costs or other obstructions to the flow of international trade 
C) can be very misleading 
D) all of the above

Question 5

If the United States rate of inflation is 2% and the German rate of inflation is 5%,what would relative purchasing power parity predict about the value of the euro relative to the dollar,all other things equal?

Accepted Answer

The euro would depre

Question 6

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

Accepted Answer

A) an excess in the nation's stock of money supply that is not eliminated or corrected by the nation's monetary authorities 
B) an excess in the stock of money demanded in the nation that is not satisfied by domestic monetary authorities 
C) an excess in the stock of money demanded in the other nation that is not satisfied by the other nation's monetary authorities 
D) an excess of imports over exports in the nation 
A) an excess in the nation's stock of money supply that is not eliminated or corrected by the nation's monetary authorities 
B) an excess in the stock of money demanded in the nation that is not satisfied by domestic monetary authorities 
C) an excess in the stock of money demanded in the other nation that is not satisfied by the other nation's monetary authorities 
D) an excess of imports over exports in the nation

Question 7

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

Accepted Answer

A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above 
A) domestic money 
B) domestic bond 
C) foreign bond 
D) all of the above

Question 8

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

Accepted Answer

A) the demand for domestic money 
B) the demand for the domestic bond 
C) the demand for the foreign bond 
D) the risk premium 
A) the demand for domestic money 
B) the demand for the domestic bond 
C) the demand for the foreign bond 
D) the risk premium

Question 9

If the rate of inflation in the United States is 4% and the rate of inflation in the United Kingdom is 3%,relative purchasing power would predict that

Accepted Answer

A) the pound will appreciate relative to the dollar. 
B) the pound will depreciate relative to the dollar. 
C) both the dollar and the pound will depreciate due to inflation. 
D) both the dollar and the pound will appreciate due to inflation. 
A) the pound will appreciate relative to the dollar. 
B) the pound will depreciate relative to the dollar. 
C) both the dollar and the pound will depreciate due to inflation. 
D) both the dollar and the pound will appreciate due to inflation.

Which of the following statements is true with respect to the monetary approach to the balance of payments:

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

The portfolio balance approach:

Which is correct with respect to the absolute PPP theory?

If the United States rate of inflation is 2% and the German rate of inflation is 5%,what would relative purchasing power parity predict about the value of the euro relative to the dollar,all other things equal?

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

If the rate of inflation in the United States is 4% and the rate of inflation in the United Kingdom is 3%,relative purchasing power would predict that

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters

Exam 15: Exchange Rate Determination

Which of the following statements is true with respect to the monetary approach to the balance of payments:

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

The portfolio balance approach:

Which is correct with respect to the absolute PPP theory?

If the United States rate of inflation is 2% and the German rate of inflation is 5%,what would relative purchasing power parity predict about the value of the euro relative to the dollar,all other things equal?

According to the monetary approach to the balance of payments,a deficit in the nation's balance of payments results from:

According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:

If the rate of inflation in the United States is 4% and the rate of inflation in the United Kingdom is 3%,relative purchasing power would predict that

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters