Question :
11) In the short run
A) the interest rate can rise : 1303610
11) In the short run
A) the interest rate can rise when the domestic money supply falls.
B) the interest rate can decrease when the domestic money supply falls.
C) the interest rate stays constant when the domestic money supply falls.
D) the interest rate rises in the same proportion as the domestic money supply falls.
E) the interest rate never rises when the domestic money supply falls.
12) 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 price level would fall right away, causing an increase in the interest rate.
D) when the domestic money supply falls, the price level would eventually fall, keeping the interest rate constant.
E) when the domestic money supply falls, the price level would fall right away, keeping the interest rate constant.
13) Under sticky prices
A) a fall in the money supply raises the interest rate to preserve money market equilibrium.
B) a fall in the money supply reduces the interest rate to preserve money market equilibrium.
C) a fall in the money supply keeps the interest rate intact to preserve money market equilibrium.
D) a fall in the money supply does not affect the interest rate in the short run, only in the long run.
E) a fall in the money supply raises the interest rate to preserve money market equilibrium in the long run.
14) Under sticky prices
A) an interest rate rise is associated with lower expected deflation and a long-run currency appreciation, so the currency appreciates immediately.
B) an interest rate rise is associated with higher expected inflation and a long-run currency appreciation, so the currency appreciates immediately.
C) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency appreciates immediately.
D) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency depreciates immediately.
E) an interest rate rise is associated with lower expected inflation and a long-run currency appreciation, so the currency appreciates immediately.
15) Under the monetary approach to the exchange rate
A) an interest rate decrease is associated with higher expected inflation and a currency that will be weaker on all future dates.
B) an interest rate increase is associated with higher expected deflation and a currency that will be weaker on all future dates.
C) an interest rate increase is associated with higher expected inflation and a currency that will be strengthened on all future dates.
D) an interest rate increase is associated with higher expected deflation and a currency that will be strengthened on all future dates.
E) an interest rate increase is associated with higher expected inflation and a currency that will be weaker on all future dates.
16) Under the monetary approach to the exchange rate
A) a reduction in the money supply will cause immediate currency depreciation.
B) a rise in the money supply will cause currency depreciation.
C) a rise in the money supply will cause immediate currency appreciation.
D) a rise in the money supply will cause depreciation.
E) a rise in the money supply will cause immediate currency depreciation.
17) Explain why exchange rate model based on PPP is a long run theory.
