Question 1

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 2

The relative purchasing power parity theory postulates that:

Accepted Answer

A)  The equilibrium exchange rate is equal to the ratio of the price level in the two nations 
B)  the change in the exchange rate over a period of time should be proportional to the relative change in the price level in the two nations over the same time period 
C)  the change in the exchange rate over a period of time should be proportional to the absolute change in the price level in the two nations over the same time period 
D)  the exchange rate at a period of time should be proportional to the relative prices in the two nations 
A)  The equilibrium exchange rate is equal to the ratio of the price level in the two nations 
B)  the change in the exchange rate over a period of time should be proportional to the relative change in the price level in the two nations over the same time period 
C)  the change in the exchange rate over a period of time should be proportional to the absolute change in the price level in the two nations over the same time period 
D)  the exchange rate at a period of time should be proportional to the relative prices in the two nations

Question 3

Explain absolute and relative purchasing power parity (PPP).

Accepted Answer

Absolute PPP postulates that the exchang

Question 4

Discuss (a)the exchange dynamics of the dollar resulting from an unanticipated reduction of the U.S.money supply and (b)indicate the final long-run equilibrium interest rate,price index,and exchange rate as compared with the original equilibrium position.

Accepted Answer

(a)The unanticipated reduction in the U.

Question 5

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.

Question 6

Which of the following is false with regard to exchange rate dynamics:

Accepted Answer

A)  seeks to explain exchange rate fluctuations over time 
B)  results because the real sector adjusts instantaneously to disturbances 
C)  in the short run, the exchange rate overshoots its long-run equilibrium 
D)  results from the stock adjustment in financial assets 
A)  seeks to explain exchange rate fluctuations over time 
B)  results because the real sector adjusts instantaneously to disturbances 
C)  in the short run, the exchange rate overshoots its long-run equilibrium 
D)  results from the stock adjustment in financial assets

Question 7

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

Accepted Answer

A)  20 
B)  25 
C)  50 
D)  100 
A)  20 
B)  25 
C)  50 
D)  100

Question 8

According to the portfolio balance approach,an increase in domestic wealth 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 9

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

Accepted Answer

A)  once-and-for-all balance of payments deficit 
B)  once-and-for-all balance of payments surplus 
C)  continuous balance of payments deficit 
D)  continuous balance of payments surplus 
A)  once-and-for-all balance of payments deficit 
B)  once-and-for-all balance of payments surplus 
C)  continuous balance of payments deficit 
D)  continuous balance of payments surplus

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:

The relative purchasing power parity theory postulates that:

Explain absolute and relative purchasing power parity (PPP).

Discuss (a)the exchange dynamics of the dollar resulting from an unanticipated reduction of the U.S.money supply and (b)indicate the final long-run equilibrium interest rate,price index,and exchange rate as compared with the original equilibrium position.

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

Which of the following is false with regard to exchange rate dynamics:

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

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 Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

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 Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

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 Answers to Selected Problems on Web

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Exam 15: Exchange Rate Determination

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:

The relative purchasing power parity theory postulates that:

Explain absolute and relative purchasing power parity (PPP).

Discuss (a)the exchange dynamics of the dollar resulting from an unanticipated reduction of the U.S.money supply and (b)indicate the final long-run equilibrium interest rate,price index,and exchange rate as compared with the original equilibrium position.

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

Which of the following is false with regard to exchange rate dynamics:

If a nation's money GDP is 100 and the velocity of circulation of money is 4,the quantity demanded of money in the nation is:

According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:

If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:

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 Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

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 Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

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 Answers to Selected Problems on Web

Filters