Under a flexible-price monetary approach to the exchange rate A) when the domestic money supply falls, the price level would eventually fall, increasing the interest rate. B) when the domestic money supply falls, the price level would fall right away, causing a reduction in the interest rate. C) when the domestic money supply falls, the […]
Which of the following statements is TRUE about a vehicle currency? A) It is widely used to denominate contracts made by parties who reside in the country that issues the vehicle currency. B) The dollar is sometimes called a vehicle currency because of its pivotal role in many foreign exchange deals. C) There is much […]
The first phase of a typical cycle of economic populism is usually A) hyperinflation. B) rising growth and rising wages. C) falling growth and falling wages. D) rising unemployment. E) severe disinflation. ANSWER B
The goal of international economic policy cooperation is to allow for greater flexibility in exchange rates. Indicate whether the statement is true or false ANSWER FALSE
Low wages and poor working conditions in many U.S. trade partners A) prove that the gains-from-trade arguments of the Ricardian model are false. B) may be a fact of life, but economists don’t care. C) are facts emphasized by U.S. labor in its contract negotiations. D) prove that the gains-from-trade arguments of the Ricardian model […]
The development of countries like South Korea has been supported by all of the following EXCEPT A) high domestic interest rates. B) high domestic saving rates. C) large endowments of human capital. D) high levels of labor productivity. E) reduced government regulation. ANSWER A
Which of the following is NOT a major actor in the foreign exchange market? A) corporations B) central banks C) commercial banks D) non-bank financial institutions E) tourists ANSWER E
Under PPP (and by the Fisher Effect), all else equal A) a rise in a country’s expected inflation rate will eventually cause a more-than proportional rise in the interest rate that deposits of its currency offer in order to accommodate for the higher inflation. B) a fall in a country’s expected inflation rate will eventually […]
The BP curve presents combinations of y and i that yield balance of trade equilibrium. Indicate whether the statement is true or false ANSWER FALSE
In 2003, the per-capita income in China was roughly ________ of that in the U.S. A) one hundredth B) one eighth C) one half D) the same as E) one twentieth ANSWER B
