International Monetary Economics (ECO3IME) Sample Quiz Questions
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)The monetary approach makes the general prediction that1)
A)the exchange rate, which is the relative price of American and European money, is fully
determined in the short run and long run by the relative supplies of those monies and the
relative demands for them.
B)the exchange rate, which is the relative price of American and European money, is fully
determined in the short run by the relative supplies of those monies and the relative demands
for them.
C)the exchange rate, which is the relative price of American and European money, is fully
determined in the long run by the relative supplies of those monies and the relative demands
for them.
D)the money supply in the U.S. will adjust to European monetary equilibrium.
E)the exchange rate, which is the relative price of American and European money, is fully
determined in the long run by the relative supplies of those monies.
2)The PPP theory fails in reality because2)
A)transport costs and restrictions on trade.
B)inflation rates are unrelated to money supply growth.
C)A, B, and C.
D)monopolistic or oligopolistic practices in goods markets.
E)the inflation data reported in different countries are based on different commodity baskets.
3)An increase in the world relative demand for U.S. output causes3)
A)a short-run real depreciation of the dollar against the euro.
B)a long-run real appreciation of the dollar against the euro.
C)a short-run real appreciation of the euro against the dollar.
D)a long-run real appreciation of the euro against the dollar.
E)a long-run real depreciation of the dollar against the euro.
4)Which one of the following statements is the most accurate?4)
A)For asset markets to remain in equilibrium, a fall in domestic output must be accompanied by
a depreciation of foreign currency, all else equal.
B)For asset markets to remain in equilibrium, a rise in domestic output must be accompanied by
an appreciation of domestic currency, all else equal.
C)For asset markets to remain in equilibrium, a fall in domestic output must be accompanied by
an appreciation of domestic currency, all else equal.
D)For asset markets to remain in equilibrium, a fall in domestic output must be accompanied by
an appreciation of foreign currency, all else equal.
E)For asset markets to remain in equilibrium, a rise in domestic output must be accompanied by
a depreciation of domestic currency, all else equal.
5)Which of the following compete to determine whether the current account improves or worsens following a rise in the real exchange rate?5)
A)appreciation and depreciation
B)producers effect and value effect
C)volume effect and inflation
D)crowding Out effect and producers effect
E)volume effect and value effect
6)How would you define a DD schedule?6)
A)the currency depreciation in relation to the exchange rate
B)the combinations of output and the exchange rate that must hold when the output market is
in short-run equilibrium
C)the aggregate demand in relation to the foreign market value
D)the combinations of output and the exchange rate that must hold when the home money
market and the foreign exchange market are in equilibrium
E)factors of production in the long run
7)In the short-run, a temporary increase in the money supply7)
A)shifts the AA curve to the left, increases output and appreciates the currency.
B)shifts the AA curve to the right, increases output and depreciates the currency.
C)shifts the AA curve to the right, increases output and appreciates the currency.
D)shifts the AA curve to the left, increases output and depreciates the currency.
E)shifts the AA curve to the left, decreases output and depreciates the currency.
8)How is the AA schedule derived?8)
A)It is derived by the schedule of exchange rate and output combinations that are consistent
with equilibrium in the domestic money market and the foreign exchange market.
B)It is derived by the schedule of interest rate and output combinations that are consistent with
equilibrium in the domestic money market and the foreign exchange market.
C)It is derived by the schedule of exchange rate and output combinations that are greater than
equilibrium in the foreign money market and the domestic exchange market.
D)It is derived by the schedule of exchange rate and output combinations that are consistent
with equilibrium in the foreign money market and the domestic exchange market.
E)It is derived by the schedule of exchange rate and output combinations that are consistent
with equilibrium in the domestic bond market and the foreign asset market.
9)In the short-run, an increase in government purchases causes9)
A)a shift of the DD curve to the right, output increases
B)a shift of the DD curve to the left, output increases
C)a shift of the DD curve upwards, supply increases
D)a shift of the DD curve to the right, output decreases
E)a shift of the DD curve to the left, output decreases
10)Using the DD-AA framework, which one of the following statements is the most accurate?10)
A)Both policies are capable of bringing the economy to full employment and low inflation.
B)Only fiscal policy can bring the economy to full employment.
C)Monetary policy by itself or fiscal policy by itself can bring the economy to full employment.
D)Only monetary policy can bring the economy to full employment.
E)Only both monetary and fiscal policies can bring the economy to full employment.
11)The liabilities side of a central bank include11)
A)deposits held by the private banks and currency in circulation.
B)foreign assets and domestic assets.
C)currency in circulation.
D)deposits held by the private banks.
E)deposits held by the private banks, foreign assets, and currency in circulation.
12)Which one of the following statements is most true?12)
A)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.
B)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.
C)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.
D)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.
E)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.
13)Under fixed exchange rate, in general,13)
A)the foreign and domestic interest rates are unequal.
B)the expected rate of currency depreciation is one.
C)R= R + (E e- E)/E.
D)the expected rate of domestic currency depreciation is high.
E)the domestic and foreign interest rates are equal, R= R .
14)By fixing the exchange rate, the central bank gives up its ability to14)
A)increase government spending.
B)adjust taxes.
C)influence the economy through fiscal policy.
D)depreciate the domestic currency.
E)influence the economy through monetary policy.
15)A balance of payments crisis is best described as15)
A)a sharp change in interest rates sparked by a change in expectations about the level of
imports.
B)a sharp change in interest rates sparked by a change in expectations about the level of exports.
appreciatesC)a sharp change in foreign reserves sparked by a change in expectations about the future
exchange rate.
D)a sharp change in foreign reserves sparked by a change in expectations about domestic
production.
E)a sharp change in foreign reserves sparked by a change in expectations about the level of
imports.
Answer Key
Testname: IME_SAMPLE QUIZ QUESTIONS
1)C
2)C
3)B
4)B
5)E
6)B
7)B
8)A
9)A
10)C
11)A
12)D
13)E
14)E
15)C
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