Question 1

Which one of the following statements is most correct?

Accepted Answer

A) Any central bank purchase of assets automatically results in an increase in the domestic money supply,while any central bank sale of assets automatically causes the money supply to decline. 
B) Any central bank purchase of assets results in an increase in the domestic money supply,while any central bank sale of assets causes the money supply to decline. 
C) Any central bank purchase of assets automatically results in a decrease in the domestic money supply,while any central bank sale of assets automatically causes the money supply to decline. 
D) Any central bank purchase of assets automatically results in a decrease in the domestic money supply,while any central bank sale of assets automatically causes the money supply to increase. 
E) Any central bank purchase of assets automatically results in an increase in the domestic money supply,while any central bank sale of assets does not necessarily affect the money supply. 
A) Any central bank purchase of assets automatically results in an increase in the domestic money supply,while any central bank sale of assets automatically causes the money supply to decline. 
B) Any central bank purchase of assets results in an increase in the domestic money supply,while any central bank sale of assets causes the money supply to decline. 
C) Any central bank purchase of assets automatically results in a decrease in the domestic money supply,while any central bank sale of assets automatically causes the money supply to decline. 
D) Any central bank purchase of assets automatically results in a decrease in the domestic money supply,while any central bank sale of assets automatically causes the money supply to increase. 
E) Any central bank purchase of assets automatically results in an increase in the domestic money supply,while any central bank sale of assets does not necessarily affect the money supply.

Question 2

Imperfect asset substitutability assumes

Accepted Answer

A) the returns on foreign and domestic currency bonds are identical. 
B) the returns on foreign and domestic currency are unrelated. 
C) the risks of holding foreign and domestic currency are identical. 
D) the risks of holding foreign and domestic currency are unrelated to returns. 
E) the returns on foreign and domestic currency differ and are influenced by risk. 
A) the returns on foreign and domestic currency bonds are identical. 
B) the returns on foreign and domestic currency are unrelated. 
C) the risks of holding foreign and domestic currency are identical. 
D) the risks of holding foreign and domestic currency are unrelated to returns. 
E) the returns on foreign and domestic currency differ and are influenced by risk.

Question 3

Under fixed exchange rates,which one of the following statements is the MOST accurate?

Accepted Answer

A) Devaluation causes a rise in output. 
B) Devaluation causes a decrease in output. 
C) Devaluation has no effect on output. 
D) Devaluation causes a rise in output and a decrease in official reserves. 
E) Devaluation causes a decrease in output and in official reserves. 
A) Devaluation causes a rise in output. 
B) Devaluation causes a decrease in output. 
C) Devaluation has no effect on output. 
D) Devaluation causes a rise in output and a decrease in official reserves. 
E) Devaluation causes a decrease in output and in official reserves.

Question 4

Assuming perfect asset substitutability,can sterilized intervention by the central bank be effective? Please discuss.

Accepted Answer

No,a sterilized foreign exchange interve

Question 5

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

Accepted Answer

The advantage of bimetallism was that it

Question 6

The expectation of future devaluation causes a balance of payments crisis marked by

Accepted Answer

A) a sharp rise in reserves and a fall in the home interest rate below the world interest rate. 
B) a sharp fall in reserves and an even bigger fall in the home interest rate below the world interest rate. 
C) a sharp fall in reserves and a rise in the home interest rate above the world interest rate. 
D) a sharp rise in reserves and an even greater rise in the home interest rate above the world interest. 
E) a sharp rise in reserves and a rise in the home interest rate to the level of the world interest. 
A) a sharp rise in reserves and a fall in the home interest rate below the world interest rate. 
B) a sharp fall in reserves and an even bigger fall in the home interest rate below the world interest rate. 
C) a sharp fall in reserves and a rise in the home interest rate above the world interest rate. 
D) a sharp rise in reserves and an even greater rise in the home interest rate above the world interest. 
E) a sharp rise in reserves and a rise in the home interest rate to the level of the world interest.

Question 7

Briefly describe two systems for fixing the exchange rates of all currencies against each other and the time periods in which they were used.

Accepted Answer

The first is to single cut one country's

Question 8

Which one of the following statements is the most correct?

Accepted Answer

A) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies an increased home money supply. 
B) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies a decreased home money supply. 
C) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies an increased home money demand. 
D) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated decrease in the home central bank's foreign asset implies an increased home money supply. 
E) If central banks are not sterilizing and the home country has a balance of payments shortage,any associated decrease in the home central bank's foreign asset implies an increased home money supply. 
A) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies an increased home money supply. 
B) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies a decreased home money supply. 
C) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated increase in the home central bank's foreign asset implies an increased home money demand. 
D) If central banks are not sterilizing and the home country has a balance of payments surplus,any associated decrease in the home central bank's foreign asset implies an increased home money supply. 
E) If central banks are not sterilizing and the home country has a balance of payments shortage,any associated decrease in the home central bank's foreign asset implies an increased home money supply.

Question 9

Please describe in detail a self-fulfilling currency crisis.

Accepted Answer

Consider an economy in which domestic co

Question 10

This question concerns the mechanism of a reserve currency standard.
Two countries,X and Y,have two currencies,x and y,fixed to the reserve currency,the U.S.dollar.Suppose the exchange rate between x and the U.S.dollar is 3x per dollar.Suppose the exchange rate between y and the U.S.dollar is 5y per dollar.Explain (using numbers)the mechanism if the x-y exchange rate was 0.5 x per y.

Accepted Answer

At this exchange rate,an investor can ma

Question 11

A balance sheet for the central bank of Pecunia is shown below:
Central Bank Balance Sheet
Assets Liabilities
Foreign assets $1,000 Deposits held by private banks $500
Domestic assets $1,500 Currency in circulation $2,000
Please write the new balance sheet if the bank makes a sterilized transaction by selling $100 of foreign assets for domestic currency and then purchasing $100 of domestic assets by writing a check on itself.

Accepted Answer

Central Bank Balance Sheet
Ass

Question 12

Under the gold standard,if the dollar price of gold is pegged at $35 per ounce and the dollar/euro exchange rate is set at $2.40 per euro,what must the euro price of gold be pegged at?

Accepted Answer

The euro price of gold is cons

Question 13

A balance of payments crises under fixed exchange rates occurs when

Accepted Answer

A) a country runs out of foreign reserves. 
B) a country is in a liquidity trap. 
C) exports and imports expand beyond some point. 
D) marginal returns on foreign exchange investments approach zero. 
E) forward currency markets undergo high volatility. 
A) a country runs out of foreign reserves. 
B) a country is in a liquidity trap. 
C) exports and imports expand beyond some point. 
D) marginal returns on foreign exchange investments approach zero. 
E) forward currency markets undergo high volatility.

Question 14

Please use a figure to discuss whether or not a devaluation under a fixed exchange rate has the same long-run effect as a proportional increase in the money supply under a floating rate.

Accepted Answer

@#IMG-DLM& 
A currency devaluation shifts the AA s

Question 15

Assume that initially,the risk premium,ρ = 0 and that the domestic and foreign interest rates are given by R = .06,R* = .05.Suppose that the risk premium depends linearly on the difference between domestic government debt,B,and domestic assets of the central bank,A,i.e. ,
ρ =   How much will the central bank have to reduce domestic assets A s.t.the domestic interest rate will increase by (a)1% (b)4%?

Accepted Answer

(a)ρ = .01 = @#IMG-DLM& 
ΔA =

Question 16

Which of the following best describes a deliberate government decision to lower the exchange rate,E?

Accepted Answer

A) appreciation 
B) depreciation 
C) revaluation 
D) devaluation 
E) accumulation 
A) appreciation 
B) depreciation 
C) revaluation 
D) devaluation 
E) accumulation

Question 17

The global financial crisis of 2007-2008 resulted in a(n)________ of the Swiss franc.In 2011,the Swiss central bank intervened in order to cause a(n)________ of the franc.

Accepted Answer

A) appreciation;appreciation 
B) depreciation;depreciation 
C) appreciation;revaluation 
D) depreciation;appreciation 
E) appreciation;depreciation 
A) appreciation;appreciation 
B) depreciation;depreciation 
C) appreciation;revaluation 
D) depreciation;appreciation 
E) appreciation;depreciation

Question 18

Please discuss the difference between the terms devaluation and depreciation.

Accepted Answer

Depreciation is a rise in the exchange r

Question 19

The main reason(s)why governments sometimes chose to devalue their currencies is (are)

Accepted Answer

A) devaluation makes domestic goods more expensive in relation to foreign goods. 
B) devaluation makes domestic services more expensive in relation to foreign services. 
C) devaluation increases foreign reserves held by the central bank. 
D) devaluation improves the current account and increases foreign reserves held by the central bank. 
E) devaluation hurts foreign currencies. 
A) devaluation makes domestic goods more expensive in relation to foreign goods. 
B) devaluation makes domestic services more expensive in relation to foreign services. 
C) devaluation increases foreign reserves held by the central bank. 
D) devaluation improves the current account and increases foreign reserves held by the central bank. 
E) devaluation hurts foreign currencies.

Question 20

Under fixed rates,which one of the following statements is the MOST accurate?

Accepted Answer

A) Fiscal policy can affect output,employment and international reserves at the same time. 
B) Fiscal policy can affect only employment. 
C) Fiscal policy can affect only international reserves. 
D) Fiscal policy can affect only output and employment. 
E) Fiscal employment can affect only output and international reserves. 
A) Fiscal policy can affect output,employment and international reserves at the same time. 
B) Fiscal policy can affect only employment. 
C) Fiscal policy can affect only international reserves. 
D) Fiscal policy can affect only output and employment. 
E) Fiscal employment can affect only output and international reserves.

Which one of the following statements is most correct?

Imperfect asset substitutability assumes

Under fixed exchange rates,which one of the following statements is the MOST accurate?

Assuming perfect asset substitutability,can sterilized intervention by the central bank be effective? Please discuss.

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

The expectation of future devaluation causes a balance of payments crisis marked by

Briefly describe two systems for fixing the exchange rates of all currencies against each other and the time periods in which they were used.

Which one of the following statements is the most correct?

Please describe in detail a self-fulfilling currency crisis.

Under the gold standard,if the dollar price of gold is pegged at $35 per ounce and the dollar/euro exchange rate is set at $2.40 per euro,what must the euro price of gold be pegged at?

A balance of payments crises under fixed exchange rates occurs when

Please use a figure to discuss whether or not a devaluation under a fixed exchange rate has the same long-run effect as a proportional increase in the money supply under a floating rate.

Which of the following best describes a deliberate government decision to lower the exchange rate,E?

The global financial crisis of 2007-2008 resulted in a(n) of the Swiss franc.In 2011,the Swiss central bank intervened in order to cause a(n) of the franc.

Please discuss the difference between the terms devaluation and depreciation.

The main reason(s)why governments sometimes chose to devalue their currencies is (are)

Under fixed rates,which one of the following statements is the MOST accurate?

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

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

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 18: Fixed Exchange Rates and Foreign Exchange Intervention

Which one of the following statements is most correct?

Imperfect asset substitutability assumes

Under fixed exchange rates,which one of the following statements is the MOST accurate?

Assuming perfect asset substitutability,can sterilized intervention by the central bank be effective? Please discuss.

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

The expectation of future devaluation causes a balance of payments crisis marked by

Briefly describe two systems for fixing the exchange rates of all currencies against each other and the time periods in which they were used.

Which one of the following statements is the most correct?

Please describe in detail a self-fulfilling currency crisis.

Under the gold standard,if the dollar price of gold is pegged at $35 per ounce and the dollar/euro exchange rate is set at $2.40 per euro,what must the euro price of gold be pegged at?

A balance of payments crises under fixed exchange rates occurs when

Please use a figure to discuss whether or not a devaluation under a fixed exchange rate has the same long-run effect as a proportional increase in the money supply under a floating rate.

Which of the following best describes a deliberate government decision to lower the exchange rate,E?

The global financial crisis of 2007-2008 resulted in a(n)________ of the Swiss franc.In 2011,the Swiss central bank intervened in order to cause a(n)________ of the franc.

Please discuss the difference between the terms devaluation and depreciation.

The main reason(s)why governments sometimes chose to devalue their currencies is (are)

Under fixed rates,which one of the following statements is the MOST accurate?

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

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

The global financial crisis of 2007-2008 resulted in a(n) of the Swiss franc.In 2011,the Swiss central bank intervened in order to cause a(n) of the franc.