Question 1

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

Accepted Answer

Mundell argued these countries need to s

Question 2

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

Accepted Answer

A) devalue the currency. 
B) increase government spending. 
C) decrease government spending. 
D) decrease government spending and devalue the currency. 
E) increase government spending and revalue the currency. 
A) devalue the currency. 
B) increase government spending. 
C) decrease government spending. 
D) decrease government spending and devalue the currency. 
E) increase government spending and revalue the currency.

Question 3

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Accepted Answer

A) devalue the currency 
B) increase government spending 
C) decrease government spending 
D) decrease government spending and devalue the currency 
E) increase government spending and revalue the currency 
A) devalue the currency 
B) increase government spending 
C) decrease government spending 
D) decrease government spending and devalue the currency 
E) increase government spending and revalue the currency

Question 4

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

Accepted Answer

The standard of list of determinants tha

Question 5

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

Accepted Answer

A) an increase in the price level 
B) a devaluation of the currency 
C) a reduction in the domestic interest rate 
D) an increase in the foreign price level 
E) none of the above 
A) an increase in the price level 
B) a devaluation of the currency 
C) a reduction in the domestic interest rate 
D) an increase in the foreign price level 
E) none of the above

Question 6

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Accepted Answer

A) the real exchange rate will decrease with no change in the nominal exchange rate. 
B) the nominal exchange rate will decrease with no change in the real exchange rate. 
C) both the real and nominal exchange rate will decrease. 
D) no change in either the nominal or real exchange rate. 
E) both the real and nominal exchange rate will increase. 
A) the real exchange rate will decrease with no change in the nominal exchange rate. 
B) the nominal exchange rate will decrease with no change in the real exchange rate. 
C) both the real and nominal exchange rate will decrease. 
D) no change in either the nominal or real exchange rate. 
E) both the real and nominal exchange rate will increase.

Question 7

Explain the cases for and against flexible and fixed exchange rate regimes.

Accepted Answer

Case for fixed: cannot trust the central

Question 8

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

Accepted Answer

A) the real exchange rate will be permanently higher in the medium run. 
B) the real exchange rate will be permanently lower in the medium run. 
C) the effects of this revaluation on the real exchange rate will be ambiguous in the medium run. 
D) the real exchange rate will be unchanged in medium run. 
E) the nominal exchange will initially fall in the short run and then increase in the medium run. 
A) the real exchange rate will be permanently higher in the medium run. 
B) the real exchange rate will be permanently lower in the medium run. 
C) the effects of this revaluation on the real exchange rate will be ambiguous in the medium run. 
D) the real exchange rate will be unchanged in medium run. 
E) the nominal exchange will initially fall in the short run and then increase in the medium run.

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Explain the cases for and against flexible and fixed exchange rate regimes.

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

The Labor Market

Putting All Markets Togetherthe As-Ad Model

The Phillips Curve,the Natural Rate of Unemployment,and Inflation

The Crisis

The Facts of Growth

Saving,capital Accumulation,and Output

Technological Progress and Growth

Technological Progress: the Short,the Medium,and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations,consumption,and Investment

Expectations,output,and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output,the Interest Rate,and the Exchange Rate

Should Policy Makers Be Restrained

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

an Introduction to National Income and Product Accounts

an Introduction to Econometrics

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Exam 21: Exchange Rate Regimes

According to Mundell,countries to constitute an optimal currency area need to satisfy one of the two conditions.Explain these conditions.

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

In a fixed exchange rate regime,which of the following policies could be implemented to reduce a trade deficit and leave aggregate demand constant?

Explain what factors cause shifts of the aggregate demand curve in the open economy model.

For this question,assume that policy makers are pursuing a fixed exchange rate regime and that output is initially greater than the natural level of output.The economy will tend to move toward the natural level of output when which of the following occur?

An increase in the foreign one-year interest rate expected to occur in,say,two years will,all else fixed,have which of the following effects in a flexible exchange rate regime?

Explain the cases for and against flexible and fixed exchange rate regimes.

Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output.Which of the following will occur as a result of a revaluation?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

The Labor Market

Putting All Markets Togetherthe As-Ad Model

The Phillips Curve,the Natural Rate of Unemployment,and Inflation

The Crisis

The Facts of Growth

Saving,capital Accumulation,and Output

Technological Progress and Growth

Technological Progress: the Short,the Medium,and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations,consumption,and Investment

Expectations,output,and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output,the Interest Rate,and the Exchange Rate

Should Policy Makers Be Restrained

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

an Introduction to National Income and Product Accounts

an Introduction to Econometrics

Filters