Exam 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

For this question,use the Keynesian IS-LM model with flexible exchange rates. Eastland's main trading partner is Westland.Suppose Westland undertakes an expansionary monetary policy. (a)What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the short run,assuming no change in Eastland's policies? (b)What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the long run,assuming no change in Eastland's policies? (c)What is the effect of Westland's expansionary monetary policy on Eastland's nominal exchange rate in the short run and in the long run?

(Essay)

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Question 41

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

(Multiple Choice)

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Question 42

An increase in the U.S.money supply would cause the value of the dollar to and U.S.net exports to in the short run using a Keynesian model.

(Multiple Choice)

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Question 43

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

(Multiple Choice)

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Question 44

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.

(Multiple Choice)

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Question 45

The nominal exchange rate is 15 crowns per florin,the domestic price level is 6 florins/bottle,and the foreign price level is 2 crowns/bushel. (a)What is the real exchange rate? (b)What is the real exchange rate in the foreign country? (c)If the domestic price level rises to 8 florins/bottle,what must the nominal exchange rate become if the real exchange rate remains unchanged?

(Essay)

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Question 46

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to and should cause desired saving minus desired investment to .

(Multiple Choice)

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Question 47

Currency unions are rare because

(Multiple Choice)

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Question 48

Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily government purchases and the domestic money supply.

(Multiple Choice)

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Question 49

In an open economy,a shift down and to the left of the IS curve could have been caused by

(Multiple Choice)

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Question 50

If all countries produce the same good (or the same set of goods)and goods are freely traded among countries,so that the real exchange rate equals one,then the relationship between domestic and foreign prices and the nominal exchange rate is

(Multiple Choice)

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Question 51

When the domestic currency strengthens under a fixed-exchange-rate system,this is called

(Multiple Choice)

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Question 52

According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to and the real exchange rate to .

(Multiple Choice)

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Question 53

From 1980 to 2000,the yen/dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar,while the dollar/pound exchange rate fell from 2.22 dollars/pound to 1.62 dollars/pound.As a result,

(Multiple Choice)

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Question 54

Suppose the real exchange rate is 10,the domestic price level is 8,and the foreign price level is 4. (a)What is the nominal exchange rate? (b)Suppose the real exchange rate rises by 10%,the inflation rate in the domestic country is 6%,and the inflation rate in the foreign country is 4%.By what percentage does the nominal exchange rate change? (c)Suppose the nominal exchange rate rises by 5%,the real exchange rate rises by 8%,and domestic inflation is 3%.What is the foreign inflation rate?

(Essay)

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Question 55

Monetary policy in the European Monetary Union is determined by

(Multiple Choice)

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Question 56

A shift in demand toward the home country's goods would the domestic real interest rate and net desired saving (desired saving less desired investment)in the economy.

(Multiple Choice)

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Question 57

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

(Multiple Choice)

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Question 58

Suppose the Swiss franc rises against the British pound but falls against the Japanese yen.What happens to the prices of goods imported into Switzerland?

(Multiple Choice)

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Question 59

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

(Multiple Choice)

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Question 60

Showing 41 - 60 of 96

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

An increase in the U.S.money supply would cause the value of the dollar to and U.S.net exports to in the short run using a Keynesian model.

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to and should cause desired saving minus desired investment to .

Currency unions are rare because

Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily government purchases and the domestic money supply.

In an open economy,a shift down and to the left of the IS curve could have been caused by

If all countries produce the same good (or the same set of goods)and goods are freely traded among countries,so that the real exchange rate equals one,then the relationship between domestic and foreign prices and the nominal exchange rate is

When the domestic currency strengthens under a fixed-exchange-rate system,this is called

According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to and the real exchange rate to .

From 1980 to 2000,the yen/dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar,while the dollar/pound exchange rate fell from 2.22 dollars/pound to 1.62 dollars/pound.As a result,

Monetary policy in the European Monetary Union is determined by

A shift in demand toward the home country's goods would the domestic real interest rate and net desired saving (desired saving less desired investment)in the economy.

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

Suppose the Swiss franc rises against the British pound but falls against the Japanese yen.What happens to the prices of goods imported into Switzerland?

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

An increase in the U.S.money supply would cause the value of the dollar to ________ and U.S.net exports to ________ in the short run using a Keynesian model.

Suppose purchasing power parity holds.If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good,then the nominal exchange rate is ________ yen per dollar.

A rise in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to ________ and should cause desired saving minus desired investment to ________.

Currency unions are rare because

Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily ________ government purchases and ________ the domestic money supply.

In an open economy,a shift down and to the left of the IS curve could have been caused by

If all countries produce the same good (or the same set of goods)and goods are freely traded among countries,so that the real exchange rate equals one,then the relationship between domestic and foreign prices and the nominal exchange rate is

When the domestic currency strengthens under a fixed-exchange-rate system,this is called

According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to ________ and the real exchange rate to ________.

From 1980 to 2000,the yen/dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar,while the dollar/pound exchange rate fell from 2.22 dollars/pound to 1.62 dollars/pound.As a result,

Monetary policy in the European Monetary Union is determined by

A shift in demand toward the home country's goods would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

You have just noticed that the dollar appreciated and you suspect that the American government was behind this change.Which would you choose as the most likely cause of this appreciation in the real exchange rate?

Suppose the Swiss franc rises against the British pound but falls against the Japanese yen.What happens to the prices of goods imported into Switzerland?

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

An increase in the U.S.money supply would cause the value of the dollar to and U.S.net exports to in the short run using a Keynesian model.

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to and should cause desired saving minus desired investment to .

Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily government purchases and the domestic money supply.

According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to and the real exchange rate to .

A shift in demand toward the home country's goods would the domestic real interest rate and net desired saving (desired saving less desired investment)in the economy.