Deck 4: Monetary Policy , and How Exchange Rates Are Determined

Question 1

Which of the following is not a tool of monetary policy controlled by the Fed?

A) open market operations
B) setting the required reserve ratio
C) the power to tax
D) setting the discount rate

Answer 1

the power to tax

Question 2

A price index that measure the average change in the prices of all domestic personal consumption expenditures where the weights of items in the index changes is?

A) The core consumer price index
B) The personal consumption expenditures price index (PCEPI)
C) The consumer price index
D) The whole sale price index

Answer 2

The personal consumption expenditures price index (PCEPI)

Question 3

-Refer to Figures A, B, C, and and D. Which of the figures best illustrates a situation where U.S. income rises, ceteris paribus?

A) Figure A
B) Figure B
C) Figure C
D) Figure D

Answer 3

Figure C

Question 4

-Refer to Figures A, B, C, and D. Which of the figures best illustrates a situation where foreign income rises ceteris paribus?

A) Figure A
B) Figure B
C) Figure C
D) Figure D

Question 5

-Refer to Figures A, B, C, and D. Which of the figures best illustrates a situation where foreign interest rates rise relative to U.S. rates ceteris paribus?

A) Figure A and D
B) Figure B and C
C) Figure C
D) Figure D

Question 6

-Refer to Figures A, B, C, and D. Which of the figures best illustrates a situation where the dollar price of U.S. goods increases relative to the dollar price of foreign goods ceteris paribus?

A) Figures A and D
B) Figures B and C
C) Figure C
D) Figure D

Question 7

-Refer to Figures A, B, C, and D. During the first half of the 1980s, the U.S. Government engaged in expansionary fiscal policy and tight monetary policy. One result was a significant increase in U.S. interest rates relative to the rest of the world. Which of the figures best illustrates this historical experience?

A) Figures A and D
B) Figures B and C
C) Figure C
D) Figure D

Question 8

If the price of a new Rolex watch is 18,000 francs in Switzerland, ignoring all other costs, what will the U.S. dollar price be if one Swiss franc buys $0.78 dollars?

A) $23,076.92
B) $21,867.51
C) $13,978.53
D) $14,040.00

Question 9

Which of the following would best explain the decrease in demand for dollars illustrated in Figure 20-1?

A) A decrease in U.S. prices, ceteris paribus
B) A decrease in U.S. interest rates, ceteris paribus
C) An increase in foreign incomes, ceteris paribus
D) A decrease in foreign interest rates, ceteris paribus

Question 10

Which of the following would best explain the increase in demand for dollars illustrated in Figure 20-2?

A) An increase in U.S. prices, ceteris paribus
B) A decrease in U.S. interest rates, ceteris paribus
C) An increase in foreign incomes, ceteris paribus
D) An increase in foreign interest rates, ceteris paribus

Question 11

Which of the following would best explain the increase in the supply of dollars illustrated in Figure 20-3?

A) A decrease in U.S. prices, ceteris paribus
B) An increase in U.S. interest rates, ceteris paribus
C) An increase in U.S. incomes, ceteris paribus
D) An increase in foreign incomes, ceteris paribus