Question : 21) Under purchasing power parity (PPP), if U.S. monetary growth : 1303677

 

21) Under purchasing power parity (PPP), if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany’s price level remains constant, PPP predicts that the

A) long-run DM price of the dollar will be doubled.

B) long-run DM price of the dollar will be halved.

C) long-run DM price of the dollar will remain the same.

D) short-run DM price of the dollar will be halved.

E) short-run DM price of the dollar will be doubled.

 

 

22) Under flexible exchange rate regime, a money-induced

A) decrease in U.S. prices causes an immediate appreciation of the foreign currencies against the dollar.

B) increase in U.S. prices causes an immediate appreciation of the foreign currencies against the dollar.

C) increase in U.S. prices causes an eventual appreciation of the foreign currencies against the dollar.

D) increase in U.S. prices causes an eventual depreciation of the foreign currencies against the dollar.

E) decrease in U.S. prices causes no change in foreign exchange rate.

 

 

23) Under Bretton Woods,

A) any foreign country cannot devalue its currency against the dollar in conditions of “fundamental disequilibrium.”

B) any foreign country could devalue its currency against the dollar in conditions of “fundamental disequilibrium,” but the system’s rules did not give the United States the option of devaluing against foreign currencies.

C) any foreign country could devalue its currency against the dollar in conditions of “fundamental disequilibrium,” and the system’s rules did give the United States the same option of devaluing against foreign currencies.

D) the U.S. could devalue its currency against the foreign currencies in conditions of “fundamental disequilibrium.”

E) any foreign country can revalue its currency against the dollar in conditions of “fundamental disequilibrium.”

 

 

24) The DD schedule shows

A) interest rate and output pairs for which aggregate demand equals aggregate output.

B) exchange rate and output pairs for which aggregate demand equals aggregate output.

C) exchange rate and output pairs for which aggregate supply equals aggregate output.

D) interest rate and output pairs for which aggregate supply equals aggregate output.

E) exchange rate and output pairs for which aggregate demand is greater than aggregate output.

 

25) The AA schedule shows

A) Interest rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium.

B) Exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium.

C) Interest rate and output pairs at which only the foreign exchange market is in equilibrium.

D) Exchange rate and output pairs at which only the foreign exchange market is in equilibrium.

E) Exchange rate and output pairs at which only the domestic money market are in equilibrium.

 

 

26) Under flexible exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

A) the currency appreciates, and output falls.

B) the currency depreciates, and output falls.

C) the currency depreciates, and output increases.

D) the currency depreciates, and output remains constant.

E) the currency appreciates, and output increases.

 

 

27) Under fixed exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

A) the currency appreciates, and output falls.

B) the currency depreciates, and output falls.

C) the currency remains the same, and output decreases.

D) the currency depreciates, and output remains constant.

E) the currency appreciates, and output remains the same.

 

 

28) Comparing fixed to flexible exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

A) output actually falls less under fixed rate than under floating rate.

B) output actually falls more under fixed rate than under floating rate.

C) output actually remains the same under fixed rate than under floating rate.

D) the currency value grows in a fixed rate system and falls in a flexible system.

E) output grows in a fixed rate system and falls in a flexible system.

 

29) The effects of a decrease in export demand

A) is a powerful argument in favor of fixed rates.

B) is a powerful argument in favor of flexible rates.

C) shows the difficulties in determining which exchange rate is better.

D) is a powerful argument in favor of fixed rates only in the short run.

E) is a powerful argument in favor of fixed rates only in the long run.

 

 

30) Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by

A) using tight monetary policy.

B) using expansionary fiscal policy.

C) negotiating with the central bank of the United States.

D) setting their domestic interest rate equal to the U.S. interest rate.

E) holding their exchange rates constantly pegged to the euro and yen.