Question : 18.4   Stabilization Policies with a Fixed Exchange Rate 1) By fixing : 1303645

 

18.4   Stabilization Policies with a Fixed Exchange Rate

 

1) By fixing the exchange rate, the central bank gives up its ability to

A) adjust taxes.

B) increase government spending.

C) influence the economy through fiscal policy.

D) depreciate the domestic currency.

E) influence the economy through monetary policy.

 

 

2) 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.

 

 

3) When a country’s currency is devalued

A) output decreases.

B) output increases and the money supply decreases.

C) the money supply decreases.

D) output decreases and the money supply increases.

E) both the output and the money supply increases.

 

 

4) Under fixed rates, which one of the following statements is the MOST accurate?

A) Monetary policy can affect only output.

B) Monetary policy can affect only employment.

C) Monetary policy can affect only international reserves.

D) Monetary policy can not affect international reserves.

E) Monetary policy can only affect money supply.

 

 

5) Under fixed rates, which one of the following statements is the MOST accurate?

A) Fiscal policy can affect output, employment and international reserves at the same time.

B) Fiscal policy can affect only employment.

C) Fiscal policy can affect only international reserves.

D) Fiscal policy can affect only output and employment.

E) Fiscal employment can affect only output and international reserves.

 

6) Which one of the following statements is the MOST accurate?

A) Fiscal policy has the same effect on employment under fixed and flexible exchange rate regimes.

B) Fiscal policy affects employment less under fixed than under flexible exchange rate regimes.

C) Fiscal policy affects employment more under fixed than under flexible exchange rate regimes.

D) Fiscal policy cannot affect employment under fixed exchange rate but does affect output under flexible exchange rate regimes.

E) Fiscal policy can affect employment under fixed exchange rate regimes, but does not affect output under flexible exchange rate regimes.

 

 

7) Which one of the following statements is the MOST accurate?

A) Fiscal policy has the same effect on output under fixed and flexible exchange rate regimes.

B) Fiscal policy affects output more under fixed than under flexible exchange rate regimes.

C) Fiscal policy affects output less under fixed than under flexible exchange rate regimes.

D) Fiscal policy cannot affect output under fixed exchange rate but does affect output under flexible exchange rate regimes.

E) Fiscal policy can affect output under fixed exchange rate but does not affect output under flexible exchange rate regimes.

 

 

8) Which one of the following statements is the MOST accurate?

A) A devaluation occurs when the central bank lowers the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank raises E.

B) A devaluation occurs when the central bank raises the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank lowers E.

C) Devaluation occurs when the domestic currency price of foreign currency, E, raises and a revaluation occurs when E is lowered.

D) A devaluation occurs when the central bank of the foreign country raises the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank of the foreign country lowers E.

E) A devaluation occurs when the central bank raises the foreign currency price of domestic currency, E, and a revaluation occurs when the central bank lowers E.

 

9) Which one of the following statements is the MOST accurate?

A) Depreciation is a rise in E when the exchange rate is fixed while devaluation is a rise in E when the exchange rate floats.

B) Depreciation is a decrease in E when the exchange rate floats while devaluation is a rise in E when the exchange rate is fixed.

C) Depreciation is a rise in E when the exchange rate floats while devaluation is a rise in E when the exchange rate is fixed.

D) Depreciation is a rise in E when the exchange rate floats while devaluation is a decrease in E when the exchange rate is fixed.

E) Depreciation is a fall in E when the exchange rate is fixed while devaluation is a fall in E when the exchange rate floats.

 

 

10) Which one of the following statements is the MOST accurate?

A) Appreciation is a rise in E when the exchange rate floats while revaluation is a fall in E when the exchange rate is fixed.

B) Appreciation is a fall in E when the exchange rate floats while revaluation is a fall in E when the exchange rate is fixed.

C) Appreciation is a fall in E when the exchange rate is fixed while revaluation is a fall in E when the exchange rate is flexible.

D) Appreciation is a fall in E when the exchange rate floats while revaluation is a rise in E when the exchange rate is fixed.

E) Appreciation is a rise in E when the exchange rate floats while revaluation is a rise in E when the exchange rate is fixed.