Fiscal expansion under fixed exchange rates will have what temporary effect? A) the money supply will decrease. B) output will decrease. C) the exchange rate will increase. D) the exchange rate will decrease. E) there will be no effect. ANSWER D
Date: September 10th, 2020
Illustrate the effectiveness of monetary policy with fixed exchange rates. What will be an ideal response? ANSWER The required intervention to maintain the fixed exchange rate will undo any effect on income of an increase or decrease in the money supply. Illustrate by shifting LM curve and then explaining how intervention will return LM […]
Date: September 10th, 2020
It is still the conventional wisdom in the U.S. that compliance with NAFTA requirements is having a deleterious effect on U.S. highway safety standards, on U.S. pollution and other environmental standards, and on U.S. jobs. What facts would proponents of an expansion of NAFTA (e.g., to include all of Central and South American countries) need […]
Date: September 10th, 2020
Reform of a country’s trading system, including the reduction or elimination of trade barriers, is an example of A) an orthodox stabilization plan. B) a heterodox stabilization plan. C) economic populism. D) import substitution industrialization. E) structural reform. ANSWER E
Date: September 10th, 2020
If some industries exhibit increasing returns to scale in each country, we should not expect to see A) intraindustry trade between countries. B) perfect competition in these industries. C) interindustry trade between countries. D) Either B or C. ANSWER B
Date: September 10th, 2020
Discuss the effects of ongoing inflation based on the PPP theory. What will be an ideal response? ANSWER Other things equal, money supply growth at a constant rate eventually results in ongoing price level inflation at the same rate as the money supply growth, but changes in this long-run inflation rate do not affect […]
Date: September 10th, 2020
Explain the purpose of the following figure 14-2 from the text in the context of the interest rates on the dollar and the Japanese Yen between 1980 and 2010. What will be an ideal response? ANSWER Since the dollar and the Yen interest rates are not measured in comparable terms, they can move quite […]
Date: September 10th, 2020
All else equal, if Canada raises its interest rates, A) the dollar depreciates. B) the U.S. demand for Canadian dollars increases. C) the Canadian supply of Canadian dollars increases. D) Both A and B. E) Both A and C. ANSWER D
Date: September 10th, 2020
Free trade and globalization is generally believed A) to cause a degradation in the world’s environment. B) to improve the environment by correcting for distortions caused by import competing policies. C) to help spread the best of each country’s culture, so as to uplift global cultural standards. D) to help each country safeguard the best […]
Date: September 10th, 2020
If an industry is imperfectly competitive, and markets are segmented then A) a firm may find that it is profitable to engage in dumping. B) a firm may find that international trade is unprofitable. C) a firm may find that it should promote scale economies. D) a firm may find that it has lost its […]
Date: September 10th, 2020
