Question 1

Explain and give some governmental policy problems?

Accepted Answer

The answer of Explain and give some governmental policy problems?...

Question 2

In the short run, with prices fixed, how would an increase in government spending affect the DD-AA schedule?

Accepted Answer

A)  It will increase output and appreciate the currency. 
B)  It will increase output and depreciate the currency. 
C)  It will decrease output and appreciate the currency. 
D)  It will decrease output and depreciate the currency. 
E)  It will increase output and have no effect on the currency.

Question 3

The domestic currency price of a representative foreign expenditure basket is

Accepted Answer

A)  P, the domestic price level. 
B)  E, the nominal exchange rate. 
C)  P times E, the domestic price level times the domestic price level. 
D)  P, the foreign price level. 
E)  P times E, the foreign price level times the nominal exchange rate.

Question 4

Which one of the following statements is the most accurate?

Accepted Answer

A)  A permanent increase in the money supply cannot have any short-run effects. 
B)  A permanent increase in taxes cannot have any short-run effects. 
C)  A permanent decrease in the money supply cannot have short-run effects. 
D)  A permanent decrease in taxes cannot have short-run effects. 
E)  A permanent increase in money demand can be offset with a permanent increase in the money supply of equal magnitude.

Question 5

The Marshall-Lerner Condition states that, all else equal,

Accepted Answer

A)  nominal appreciation improves the current account if export and import volumes are sufficiently elastic with respect to the real exchange rate. 
B)  real depreciation improves the current account if export and import volumes are sufficiently inelastic with respect to the real exchange rate. 
C)  real appreciation improves the current account if export and import volumes are sufficiently elastic with respect to the real exchange rate. 
D)  real depreciation improves the current account if export and import volumes are sufficiently elastic with respect to the real exchange rate. 
E)  the sum of import and export elasticities must be equal to one in order for depreciation to occur.

Question 6

Discuss the main factors affecting the position of the AA schedule.

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Question 7

Explain the difference between the following two expressions:

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Question 8

Explain how does an increase in the real exchange rate affect exports and imports?

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Question 9

What would be the best description of what we assume about money prices in the short run?

Accepted Answer

A)  Money prices of goods and services vary. 
B)  Money prices of goods and services not related to each other. 
C)  Money prices of goods are fixed. 
D)  Money prices of services are fixed. 
E)  Money prices of goods and services are only temporarily fixed.

Question 10

Which of the following are true in terms of the current account balance?

Accepted Answer

A)  Monetary expansion has no effect on the current account balance. 
B)  Monetary expansion decreases the current account balance. 
C)  Fiscal expansion increases the current account balance. 
D)  Fiscal expansion has no effect on the current account balance. 
E)  Monetary expansion increases the current account balance.

Question 11

The domestic currency price of a representative domestic expenditure basket is

Accepted Answer