What are the predictions for the long run equilibrium of the Monetary Approach? What will be an ideal response? ANSWER Money supplies: Given the equations, = PUS/PE PUS = MUSS/L(R$, YUS) PE = MES/L( , YE) one can show that an increase in the U.S. money supply MUSS causes a proportional increase in the […]
Date: September 10th, 2020
What was the Plaza Agreement about? What will be an ideal response? ANSWER A coordinated intervention aimed at dollar depreciation.
Date: September 10th, 2020
Intraindustry trade can be explained in part by A) transportation costs within and between countries. B) problems of data aggregation and categorization. C) increasing returns to scale. D) All of the above. ANSWER D
Date: September 10th, 2020
All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth, A) the pressure on the dollar is to revalue. B) the pressure on the dollar is to devalue. C) the pressure on the dollar is to depreciate. D) the pressure on the dollar […]
Date: September 10th, 2020
National saving minus investment equals the current account. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
Present and explain the Fundamental Equation of the Monetary Approach. What will be an ideal response? ANSWER Assume = PUS/PE and that domestic price levels depend on domestic money demands and supplies: PUS = MUSS/L(R$, YUS) PE = MES/L( , YE) Therefore, the exchange rate is fully determined in the long run by the […]
Date: September 10th, 2020
Illustrate with a graph the effects of fiscal policy when exchange rates are fixed. What will be an ideal response? ANSWER Draw horizontal BP curve. Fiscal policy shifts IS. Monetary policy must accommodate by shifting LM to match IS in order to maintain fixed exchange rate.
Date: September 10th, 2020
The most common form of price discrimination in international trade is A) dumping. B) non-tariff barriers. C) Voluntary Export Restraints. D) preferential trade arrangements. E) product boycotts. ANSWER A
Date: September 10th, 2020
Explain what is a “vehicle currency.” Why is the U.S. dollar considered a vehicle currency? What will be an ideal response? ANSWER A vehicle currency is one that is widely used to denominate international contracts made by parties who do not reside in the country that issues the vehicle currency. Since in 2004, nearly […]
Date: September 10th, 2020
Which type of industry is likely to see more intraindustry trade? What will be an ideal response? ANSWER High technology
Date: September 10th, 2020
