Question :
91) Consider the monetary transmission mechanism in an open economy. : 1384461
91) Consider the monetary transmission mechanism in an open economy. Other things being equal, a decrease in the domestic money supply leads to
A) an appreciation of the domestic currency, thereby inhibiting net exports and reducing aggregate demand.
B) a depreciation of the domestic currency, thereby inhibiting net exports and raising aggregate demand.
C) a depreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.
D) an appreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.
E) an appreciation of the domestic currency, thereby stimulating net exports and reducing aggregate demand.
92) Which of the following correctly describes the way in which a change in the money supply affects aggregate demand?
A) a shift of the ID curve and a movement along the aggregate demand curve
B) a movement along the ID curve and a shift of the aggregate demand curve
C) a shift of both the ID curve and the aggregate demand curve
D) movements along the ID curve and the aggregate demand curve
E) a movement along the aggregate demand curve
93) Changes in the money supply in an open economy, as compared to a closed economy,
A) are likely to have a greater effect on AD because of the secondary effect that exchange rates have on exports.
B) are likely to have a smaller effect on AD because the secondary effect of exchange rates will offset the changes created by monetary disturbances.
C) are the same in either situation.
D) affect investment to a greater degree because foreign investors can create new investment in an open economy.
E) cannot be determined with the available information.
94) Which of the following phenomena add a second channel to the monetary transmission mechanism?
A) inflation
B) diminishing marginal returns
C) rising productivity
D) open-market operations
E) international capital mobility
95) Consider the monetary transmission mechanism. In an open economy, such as Canada’s, an increase in the money supply leads to a fall in the interest rate. This is followed by
A) an outflow of financial capital and an appreciation of the Canadian dollar.
B) an inflow of financial capital and a depreciation of the Canadian dollar.
C) an outflow of financial capital and a depreciation of the Canadian dollar.
D) an inflow of financial capital and an appreciation of the Canadian dollar.
96) Consider the monetary transmission mechanism. In an open economy, such as Canada’s, a decrease in the money supply leads to a rise in the interest rate. This is followed by
A) an outflow of financial capital and an appreciation of the Canadian dollar.
B) an inflow of financial capital and a depreciation of the Canadian dollar.
C) an outflow of financial capital and a depreciation of the Canadian dollar.
D) an inflow of financial capital and an appreciation of the Canadian dollar.
97) Other things being equal, a decrease in the money supply will lead to ________ in real interest rates and, in the short run, ________ in real GDP because ________.
A) an increase; an increase; more money is available for investing in bonds from abroad
B) an increase; a decrease; of the decline in domestic investment
C) a decrease; an increase; of the increase in domestic investment
D) a decrease; a decrease; of the decrease in domestic investment
E) a decrease; a decrease, of the decrease in net exports
98) If the economy is experiencing an undesired inflationary gap, the Bank of Canada could
A) increase the supply of money, lowering interest rates, which would shift the AD curve inward.
B) decrease the demand for money, lowering interest rates, which would shift the AD curve outward.
C) decrease the supply of money, raising interest rates, which would shift the AD curve inward.
D) increase the supply of money, lowering interest rates, which would shift the AD curve outward.
E) shift the investment demand curve to the right by lowering interest rates, which would shift the AD curve outward.
99) The monetary transmission mechanism provides a partial explanation for the downward slope of the AD curve. For a given vertical MS curve, the explanation for the negative relationship between the price level and aggregate demand is as follows: A rise in the price level shifts the curve
A) to the right, the interest rate rises and desired investment expenditure rises.
B) to the left, the interest rate falls, and desired investment expenditure rises.
C) to the right, the interest rate rises and desired investment expenditure falls.
D) to the left, the interest rate rises and desired investment expenditure falls.
E) to the right, the interest rate falls and desired investment expenditure falls.
100) Which of the following is partly responsible for the negative slope of the aggregate demand (AD) curve?
A) open-market operations of the Bank of Canada
B) the monetary transmission mechanism
C) the multiplier effect
D) the speculative demand for money
E) the precautionary demand for money
