Question : 15.7   Inflation and Exchange Rate Dynamics 1) What term means an : 1303600

 

 

15.7   Inflation and Exchange Rate Dynamics

 

1) What term means an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use?

A) superinflation

B) stagflation

C) hyperinflation

D) maginflation

E) deflation

 

 

2) The most extreme inflationary conditions occurred

A) in Zimbabwe in 2008.

B) in Chile in 2012.

C) in Eastern Europe in the 1990s.

D) in Western Europe in the 1980s.

E) in Germany in 20013.

 

 

3) For main industrial countries such as Japan and the U.S.

A) there is much less month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the short run.

B) there is much more month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the short run.

C) there is almost the same month-to-month variability of the exchange rate and price levels.

D) it is hard to tell whether month-to-month variability of the exchange rate is similar to changes in price levels.

E) there is much more month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the long run.

 

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

A) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite fixed.

B) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes.

C) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite flexible.

D) There is no debate over the possibility that wages and prices are sticky in the long run.

E) There is no debate over the possibility that wages and prices are sticky in the short run.

 

 

5) During hyperinflation, exploding inflation causes real money demand to

A) fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.

B) increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.

C) fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.

D) increase over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.

E) fall over time, and this additional monetary change makes money prices decrease even less quickly than the money supply itself rises.

 

 

6) In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

A) 50 percent per month.

B) 10 percent per month.

C) 20 percent per month.

D) 5 percent per month.

E) 25 percent per month.

 

 

7) In a classic paper, Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

A) more than 120 percent per year.

B) more than 100 percent per year.

C) more than 200 percent per year.

D) more than 12,000 percent per year.

E) more than 1,000 percent per year.

 

8) In a world where the price level could adjust immediately to its new long-run level after a money supply increase

A) The dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising.

B) The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising.

C) The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.

D) The dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing.

E) The dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

 

 

9) After a permanent increase in the money supply

A) the exchange rate overshoots in the short run.

B) the exchange rate overshoots in the long run.

C) the exchange rate smoothly depreciates in the short run.

D) the exchange rate smoothly appreciates in the short run.

E) the exchange rate remains the same.

 

 

10) A change in the money supply creates demand and cost pressures that lead to future increases in the price level from which main sources?

I.Excess demand for output and labor

II.Inflationary expectations

III.Raw materials prices

A) I

B) II

C) II and III

D) I and II

E) I, II, and III