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WorksheetsC1,2,3,4
Total questions: 119
Worksheet time: 3570secs
Name
Class
Date
1.
. A country’s gross national product (GNP) is
a)
the value of all final goods and services produced by its factors of production and sold on the market in a given time period.
b)
the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period
c)
the value of all final goods produced by its factors of production and sold on the market in a given time period
d)
the value of all final goods and services produced by its factors of production and sold on the market
e)
. the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period
2.
For most macroeconomists
a)
. national income accounts and national output accounts are equal to each other
b)
. national income accounts exceed national output accounts.
c)
national output accounts exceed national income accounts.
d)
it is impossible to tell whether national income accounts are equal to national
3.
For most macroeconomists,
a)
. gross national income and gross national product are the same.
b)
gross national income exceeds gross national product
c)
gross national product exceeds gross national product.
d)
. it is hard to tell whether gross national income equals gross national product
4.
The highest component of GNP is
a)
. the current account
b)
. Investment
c)
government purchases
d)
. consumption
5.
. In order to move from units expressed in trillion to units expressed in billions, you need to multiple the number in billions by<br />
a)
100
b)
10000
c)
100000
d)
1000
6.
The sale of
a)
a used textbook does enter GNP.
b)
. a used textbook does not enter GNP, but the sale of a used house does.
c)
. both a used textbook and a used house do not enter GNP
d)
a used house does not enter GNP, but the sale of a used book does.
7.
Which one of the following statements is the most accurate?
a)
The sale of a used textbook does generate income for factors of production
b)
The sale of a used textbook does not generate income for any factor of production
c)
The sale of a used textbook sometimes does and sometimes does not generate income for factors of production.
d)
It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production
8.
National income equals GNP
a)
. less depreciation, less net unilateral transfers, less indirect business taxes
b)
. less depreciation, plus net unilateral transfers, plus indirect business taxes.
c)
less depreciation, less net unilateral transfers, plus indirect business taxes
d)
less depreciation, plus net unilateral transfers, less indirect business taxes.
9.
GDP is supposed to measure
a)
. the volume of production within a country’s borders
b)
. the volume of services generated within a country’s borders
c)
. the volume of production of a country’s output
10.
. GNP equals GDP
a)
minus net receipts of factor income from the rest of the world.
b)
. plus receipts of factor income from the rest of the world
c)
minus receipts of factor income from the rest of the world.
d)
. plus net receipts of factor income from the rest of the world
11.
Movements in GDP
a)
and GNP usually do not differ greatly
b)
. and GNP usually do not differ greatly, as a practical matter.
c)
and GNP usually do differ greatly
d)
are usually smaller than those of GNP movements, in practice
12.
In open economies
a)
saving and investment are necessarily equal.
b)
. as in a closed economy, saving and investment are not necessarily equal.
c)
saving and investment are not necessarily equal as they are in a closed
d)
saving and investment are necessarily equal contrary to the case of a closed <br />
13.
Purchases of inventories by
a)
. firms are not counted in investment spending
b)
firms are also counted in investment spending
c)
households are also counted in investment spending
d)
households and firms are also counted in investment spending.
14.
. Investment is usually
a)
more variable than consumption
b)
less variable than consumption
c)
as variable as consumption
d)
It is hard to tell from the data whether investment is more or less variable than
15.
Any goods
a)
purchased by federal, state, or local governments are classified as government purchases
b)
. and services purchased only by federal government are classified as government purchases
c)
and services purchased only by federal or state governments are classified as government purchases.
d)
and services purchased by federal, state, or local governments are classified as government purchases
16.
Government transfer payments such as social security and unemployment benefits are
a)
. included in government purchases.
b)
. not included in government purchases
c)
not included in government purchases, but they are included in the consumption component of GNP
d)
not included in government purchases, but they are part of the investment component of GNP
17.
. Government purchases currently take up about
a)
18 percent of U.S. GNP, and this share has not changed much since the late 1950s
b)
. 38 percent of U.S. GNP, and this share has not changed much since the late 1950s.
c)
18 percent of U.S. GNP, and this share has been increasing since the late 1950s
d)
18 percent of U.S. GNP, and this share has been decreasing since the late 1950s
18.
Which one of the following expressions is the most accurate?
a)
CA = EX – IM
b)
CA = IM – EX.
c)
. CA=EX=IM.
d)
CA = EX + IM.
19.
A country’s current account
a)
balance equals the change in its net foreign wealth.
b)
balance equals the change in its foreign wealth
c)
. surplus equals the change in its foreign wealth
d)
deficit equals the change in its foreign wealth.
20.
. The CA is equal to
a)
Y – (C-I+G).
b)
. Y + (C+I+G).
c)
Y – (C+I+G)
d)
Y – (C+I-G).
21.
Which one of the following statements is the most accurate?
a)
It is not hard to measure accurately a country’s net foreign wealth.
b)
. It is surprisingly hard to measure accurately a country’s net foreign wealth
c)
. It is surprisingly hard to measure a country’s foreign wealth
d)
. It is surprisingly hard to measure accurately a country’s foreign transactions
22.
In a closed economy, national saving
a)
sometimes equals investment
b)
. always equals investment
c)
is always less than investment
d)
is always more than investment.
23.
For open economies
a)
. S = I.
b)
B. S = I +CA.
c)
C. S = I – CA.
d)
D. S > I + CA.
e)
E. S < I + CA.
24.
An open economy
a)
A. can save only by building up its capital stock.
b)
B. can save only by acquiring foreign wealth.
c)
C. cannot save either by building up its capital stock or by acquiring foreign wealth.
d)
D. can save either by building up its capital stock or by acquiring foreign wealth.
e)
E. None of the above.
25.
. A closed economy
a)
A. can save either by building up its capital stock or by acquiring foreign wealth.
b)
B. can save only by building up its capital stock.
c)
C. can save only by acquiring foreign wealth.
d)
D. cannot save either by building up its capital stock or by acquiring foreign wealth.
e)
E. None of the above
26.
When economists refer to the word government, they usually mean
a)
A. only the federal government.
b)
B. only the federal and state governments.
c)
C. the federal, state, and local governments.
d)
D. only the federal and local governments.
e)
E. None of the above
27.
Disposable income is National income
a)
A. less taxes collected from households and firms by the government.
b)
B. plus net taxes collected from households and firms by the government.
c)
C. less net taxes collected from households and firms by the government
d)
D. less net taxes collected from households by the government.
e)
E. less net taxes collected from households and firms by the government
28.
. Government savings, Sg , is equal to
a)
A. I - (G – T).
b)
B. I + (G – T).
c)
C. I + (G + T).
d)
D. I - (G + T).
e)
E. I + (G – T) + C.
29.
. In an open economy, private saving, Sp , is equal to
a)
A. I - CA + (G - T).
b)
B. I + CA - (G - T).
c)
C. I + CA + (G - T).
d)
D. I - CA - (G - T).
e)
E. I + CA + (G + T).
30.
Ricardian equivalence argues that when the government cuts taxes and raises its deficit,
a)
A. consumers anticipate that they will face lower taxes later to pay for the resulting government debt.
b)
B. consumers anticipate that they will receive better services from the government.
c)
C. consumers anticipate that they will face higher taxes later to pay for the resulting government debt.
d)
D. consumers anticipate it will affect their future taxes, in general in the direction of lowing future taxes.
e)
E. None of the above.
31.
Every international transaction automatically enters the balance of payments
a)
A. once either as a credit or as a debit.
b)
B. twice, once as a credit and once as a debit.
c)
C. once as a credit.
d)
D. twice, both times as debit.
e)
E. None of the above
32.
When a country’s currency depreciates,
a)
A. foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive.
b)
B. foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper.
c)
C. foreigners find that its exports are cheaper; however, domestic residents are not affected.
d)
D. foreigners are not affected, but domestic residents find that imports from abroad are more expensive.
e)
E. None of the above.
33.
An appreciation of a country’s currency
a)
A. decreases the relative price of its exports and lowers the relative price of its imports.
b)
B. raises the relative price of its exports and raises the relative price of its imports.
c)
C. lowers the relative price of its exports and raises the relative price of its imports.
d)
D. raises the relative price of its exports and lowers the relative price of its imports.
34.
Which one of the following statements is the most accurate?
a)
A. A depreciation of a country’s currency makes its goods cheaper for foreigners.
b)
B. A depreciation of a country’s currency makes its goods more expensive for foreigners.
c)
C. A depreciation of a country’s currency makes its goods cheaper for its own residents.
d)
D. A depreciation of a country’s currency makes its goods cheaper
35.
Which one of the following statements is the most accurate? The term spot exchange rate is
a)
A. misleading because even spot exchanges usually become effective only three days after a deal is struck.
b)
B. misleading because even spot exchanges usually become effective only four days after a deal is struck.
c)
C. misleading because even spot exchanges usually become effective only five days after a deal is struck.
d)
D. misleading because even spot exchanges usually become effective only six days after a deal is struck.
e)
E. misleading because even spot exchanges usually become effective only two days after a deal is struck
36.
Which one of the following statements is the most accurate? Trades of U.S. dollars for Canadian dollars in New York are<br /> executed with
a)
A. a one-day lag.
b)
B. a two-day lag.
c)
C. a three-day lag.
d)
D. a four-day lag.
e)
E. a zero-day lag.
37.
Forward and spot exchange rates
a)
A. are necessarily equal
b)
B. do not move closely together
c)
C. The forward exchange rate is always above the spot exchange rate.
d)
D. while not necessarily equal, do move closely together
38.
A foreign exchange swap
a)
A. is a spot sale of a currency.
b)
B. is a forward repurchase of the currency.
c)
C. is a spot sale of a currency combined with a forward repurchase of the currency.
d)
D. is a spot sale of a currency combined with a forward sale of the currency.
39.
An American put option on foreign exchange
a)
A. gives the buyer the right to sell the foreign currency at a known exchange rate at any time during the period of the option.
b)
B. gives the seller the right to sell the foreign currency at a known exchange rate at any time during the period of the option.
c)
C. gives the buyer the right to sell the foreign currency at a known exchange rate at a specific time in the future.
d)
D. obligates the buyer to sell the foreign currency at a known exchange rate at any time during the period of the option.
40.
An American call option on foreign exchange
a)
A. obligates you to buy foreign currency at a known price at any time during the period of the option.
b)
B. gives you the right to buy foreign currency at a known price at any time during the period of the option.
c)
C. gives you the right to buy foreign currency at a known price at a specific day in the future.
d)
D. gives you the right to sell foreign currency at a known price at any time during the period of the option
41.
. The exchange rate between currencies depends on
a)
A. the interest rate that can be earned on deposits of those currencies.
b)
B. the expected future exchange rate.
c)
C. the interest rate that can be earned on deposits of those currencies and the expected future exchange rate.
d)
D. national output.
42.
. Which one of the following statements<br /> is the most accurate? Countries in the euro
a)
A. Austria, Australia, and Belgium.
b)
B. Austria, Belgium, and Finland.
c)
C. Austria and Finland.
d)
D. Austria, Belgium, Finland, and France.
e)
E. Austria, Belgium, Finland, France, and Germany.
43.
Which one of the following statements is the most accurate?
a)
A. Because dollar and DM interest rates are measured in comparable terms, they can move quite differently over time.
b)
B. Because dollar and DM interest rates are not measured in comparable terms, they can move quite differently over time.
c)
C. Because dollar and DM interest rates are measured in comparable terms, they move quite the same over time.
d)
D. Because dollar and DM interest rates are measured in comparable terms, they still move quite differently over time.
44.
Which one of the following statements is the most accurate?
a)
A. The dollar rate of return on euro deposits is the euro interest rate plus the rate of depreciation of the dollar against the euro.
b)
B. The dollar rate of return on euro deposits is approximately the euro interest rate minus the rate of depreciation of the dollar against the euro.
c)
C. The dollar rate of return on euro deposits is the euro interest rate minus the rate of depreciation of the dollar against the euro.
d)
D. The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of appreciation of the dollar against the euro.
e)
E. The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of depreciation of the dollar against the euro.
45.
. If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then
a)
A. an investor should invest only in dollars.
b)
B. an investor should invest only in euros.
c)
C. an investor should be indifferent between dollars and euros.
d)
D. it is impossible to tell given the information.
46.
If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is zero percent, then<br />
a)
A. an investor should invest only in dollars.
b)
B. an investor should invest only in euros.
c)
C. an investor should be indifferent between dollars and euros.
d)
D. It is impossible to tell given the information.
47.
If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 4 percent, then<br />
a)
A. an investor should invest only in dollars.
b)
B. an investor should invest only in euros.
c)
C. an investor should be indifferent between dollars and euros.
d)
D. It is impossible to tell given the information
48.
If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 8 percent, then
a)
A. an investor should invest only in dollars.
b)
B. an investor should invest only in euros.
c)
C. an investor should be indifferent between dollars and euros.
d)
D. It is impossible to tell given the information
49.
If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, and the<br />expected return on dollar depreciation against the euro is negative 4 percent, then<br />
a)
A. an investor should invest only in dollars.
b)
B. an investor should invest only in euros.
c)
C. an investor should be indifferent between dollars and euros.
d)
D. It is impossible to tell given the information
50.
Which of the following statements is the most accurate?
a)
A. A rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
b)
B. A rise in the interest rate offered by dollar deposits causes the dollar to depreciate.
c)
C. A rise in the interest rate offered by dollar deposits does not affect the U.S. dollar.
d)
D. For a given euro interest rate and constant expected exchange rate, a rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
51.
. Which of the following statements is the most accurate?
a)
A. For a given U.S. interest rate and a given expectation with regard to the future exchange rate, a rise in the interest rate paid by euro deposits causes the dollar to depreciate.
b)
B. For a given U.S. interest rate and a given expectation with regard to the future exchange rate, a rise in the interest rate paid by euro deposits causes the dollar to appreciate.
c)
C. A rise in the interest rate paid by euro deposits does not affect the value of the dollar.
d)
D. A rise in the interest rate paid by euro deposits causes the dollar to depreciate.
52.
Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euros it is 4 percent. Under these assumptions,
a)
A. covered interest parity does hold.
b)
B. covered interest parity does not hold.
c)
C. It is hard to tell whether covered interest parity does or does not hold.
d)
D. Not enough information is given to answer the question.
53.
Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euros it is 4 percent. Under these assumptions,
a)
A. 0.10
b)
B. 0.101
c)
C. 0.102
d)
D. 0.103
e)
E. 0.104
54.
The exchange rate between currencies depends on
a)
A. the interest rate that can be earned on deposits of those currencies.
b)
B. the expected future exchange rate.
c)
C. the interest rate that can be earned on deposits of those currencies and the expected future exchange rate.
d)
D. national output.
55.
. Money serves as
a)
A. a medium of exchange.
b)
B. a unit of account.
c)
C. a store of value.
d)
D. All of the above
56.
Money includes
a)
A. currency.
b)
B. bank deposits on which check may be written.
c)
C. both A and B.
d)
D. travelers’ checks.
e)
E. A, B and D.
57.
In the United States at the end of 2000, the total money supply, M1, amounted to
a)
A. 10 percent of that year’s GNP.
b)
B. 20 percent of that year’s GNP.
c)
C. 30 percent of that year’s GNP.
d)
D. 40 percent of that year’s GNP.
e)
E. 50 percent of that year’s GNP.
58.
Individuals base their demand for an asset on
a)
A. the expected return the asset offers compared with the returns offered by other assets.
b)
B. the riskiness of the asset’s expected return.
c)
C. the asset’s liquidity.
d)
D. All of the above
59.
The family summer house on Cape Code pays a return in the form of
a)
A. interest rate.
b)
B. capital gains.
c)
C. the pleasure of vacations at the beach.
d)
D. A, B and C.
e)
E. B and C only.
60.
In a world with money and bonds only,
a)
A. it is risky to hold money.
b)
B. it is not risky to hold money.
c)
C. risk does affect the demand for money.
d)
D. there is no relationship between risk and holding money.
61.
. Which one of the following statements is the most accurate?
a)
A. A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall.
b)
B. A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
c)
C. A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
d)
D. A rise in the average value of transactions carried out by a household or a firm causes its demand for nominal money to rise.
e)
E. A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.
62.
The aggregate money demand depends on
a)
A. the interest rate.
b)
B. the price level.
c)
C. real national income.
d)
D. All of the above.
e)
E. Only A and C
63.
The aggregate real money demand schedule L(R,Y
a)
A. slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.
b)
B. slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy.
c)
C. has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy.
d)
D. slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.
64.
. For a given level of
a)
A. nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule.
b)
B. real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule.
c)
C. real GNP, changes in interest rates cause an increase of the L(R,Y) schedule.
d)
D. nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule.
e)
E. real GNP, changes in interest rates cause movements along the L(R,Y) schedule.
65.
A rise in
a)
A. real GNP decreases aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
b)
B. real GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the left.
c)
C. real GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
d)
D. nominal GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.
e)
E. real GNP raises aggregate nominal money demand for a given interest rate, moving the L(R,Y) schedule to the right
66.
The money supply schedule is
a)
A. horizontal because MS is set by the central bank while P is taken as given.
b)
B. vertical because MS is set by the central bank.
c)
C. vertical because MS is set by the households and firms while P is taken as given.
d)
D. vertical because MS and P are set by the central bank.
e)
E. vertical because MS is set by the central bank while P is taken as given.
67.
If there is initially
a)
A. excess demand for money, the interest rate falls, and if there is initially an excess supply, it rises.
b)
B. excess supply of money, the interest rate falls, and if there is initially an excess demand, it rises.
c)
C. excess supply of money, the interest rate increases, and if there is initially an excess demand, it falls.
d)
D. excess supply of money, the interest rate falls, and if there is initially an excess demand, it further falls.
68.
Which one of the following statements is the most accurate?
a)
A. A decrease in the money supply lowers the interest rate, while an increase in the money supply raises the interest rate, given the price level and output
b)
B. An increase in the money supply lowers <br />the interest rate, while a fall in the money supply raises the interest rate, given the price level.
c)
C. An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the output level
d)
D. An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the price level and output.
69.
. An increase in
a)
. nominal output raises the interest rate, while <br />a fall in real output lowers the interest rate, given the price level and the money supply
b)
real output decreases the interest rate, while <br />a fall in real output increases the interest rate, given the price level
c)
real output raises the interest rate, while<br /> a fall in real output lowers the interest rate, given the money supply.
d)
. nominal output raises the interest rate, while <br />a fall in real output lowers the interest rate, given the price level.
e)
. real output raises the interest rate, while a <br /> fall in real output lowers the interest rate, given the price level and the money supply
70.
Which one of the following statements is the most accurate?
a)
A. Given PUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.
b)
B. Given YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.
c)
C. Given PUS and YUS, when the money supply decreases, the dollar interest rate declines and the dollar depreciates against the euro.
d)
D. Given PUS and YUS, when the money supply rises, the dollar interest rate declines and the dollar appreciates against the euro.
e)
E. Given PUS and YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro
71.
Given PUS and YUS,
a)
A. an increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium.
b)
B. an increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market.
c)
C. an increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market.
d)
D. an increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium
72.
An economy’s long-run equilibrium is
a)
A. the equilibrium that would occur if prices were perfectly flexible.
b)
B. the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately.
c)
C. the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment.
d)
D. the equilibrium that would occur if prices were perfectly fixed to preserve full employment.
e)
E. the equilibrium that would occur if prices were perfectly fixed at the full
73.
Which one of the following statements is the most accurate?
a)
A. Only the long-run equilibrium price level is the value of P satisfying P=MS /L(R,Y).
b)
B. Only the short-run equilibrium price level is the value of P satisfying P=MS/L(R,Y).
c)
C. The short and long-run equilibrium price level is the value of P satisfyingP=MS /L(R,Y).
d)
D. The long-run equilibrium price level is the value of P satisfyingP=MD /L(R,Y).
74.
An increase in a country’s money supply
a)
A. causes a more than proportional increase in its price level.
b)
B. causes a less than proportional increase in its price level.
c)
C. causes a proportional increase in its price level.
d)
D. leaves its price level constant in long-run equilibrium.
75.
A change in the level of the supply of money
a)
A. increases the long-run values of the interest rate and real output.
b)
B. decreases the long-run values of the interest rate and real output.
c)
C. has no effect on the long-run value of only the interest rate.
d)
D. has no effect on the long-run value of only real output.
e)
E. has no effect on the long-run values of the interest rate and real output.
76.
Changes in the money supply growth rate
a)
A. are neutral in the short run.
b)
B. need not be neutral in the short run.
c)
C. are neutral both in the short and long run.
d)
D. are neutral in the long run.
77.
A sustained change in the monetary growth rate will
a)
A. immediately affect equilibrium real money balances by raising the money interest rate.
b)
B. eventually affect equilibrium nominal money balances by raising the money interest rate.
c)
C. eventually affect equilibrium real money balances by reducing the money interest rate.
d)
D. eventually affect equilibrium real money balances by raising the real interest rate.
e)
E. eventually affect equilibrium real money balances by raising the money interest rate.
78.
Money demand behavior may
a)
A. change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities.
b)
B. change only as a result of demographic trends.
c)
C. change only as a result of financial innovations such as electronic cash- transfer facilities.
d)
D. not change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities.
e)
E. change as a result of demographic trends but not as a result of financial innovations such as electronic cash-transfer facilities
79.
Which one of the following statements is the most accurate? In a
a)
A. cross-section of countries, long-term changes in money supplies and price levels show a clear negative correlation.
b)
B. time series of countries, long-term changes in money supplies and price levels show a clear positive correlation.
c)
C. cross-section of countries, short-term changes in money supplies and price levels show a clear negative correlation.
d)
D. cross-section of countries, short-term changes in money supplies and price levels show a clear positive correlation.
e)
E. cross-section of countries, long-term changes in money supplies and price levels show no clear correlation.
80.
. For Germany, long-term changes in money supplies and price levels
a)
A. do not show a clear positive correlation.
b)
B. do not show a clear negative correlation.
c)
C. do show a high and significant positive correlation
d)
D. it is difficult to find a strong positive relationship between average Latin American money-supply growth and inflation.
81.
Wages
a)
A. enter indices of the price level directly.
b)
B. do not enter indices of the price level directly, but they make up a small fraction of the cost of producing goods and services.
c)
C. do not enter indices of the price level directly, but they make up a negligible fraction of the cost of producing goods and services.
d)
D. do not enter indices of the price level directly, but they make up a large fraction of the cost of producing goods and services
82.
. For all the main industrial countries in recent years,
a)
A. the exchange rate is much more variable than relative price levels.
b)
B. the exchange rate is much less variable than relative price levels.
c)
C. the exchange rate is as variable as the relative price levels.
d)
D. It is hard to tell from the data whether the exchange rate is much more
83.
. For all the main industrial countries in recent years,
a)
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)
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)
C. there is almost the same month-to-month variability of the exchange rate and price levels.
d)
D. it is hard to tell whether month-to-month variability of the exchange rate is similar to changes in price levels.
84.
Which one of the following statements is the most accurate?
a)
A. There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite fixed.
b)
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)
C. There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite flexible.
d)
D. There is no debate over the possibility that wages and prices are sticky in the long run
85.
. During hyperinflation, exploding inflation causes real money demand to
a)
A. fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.
b)
B. increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.
c)
C. fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.
d)
D. fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.
86.
In a world where the price level could adjust<br /> immediately to its new long-run level after a money supply increase,
a)
A. the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising.
b)
B. the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising.
c)
C. the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.
d)
D. the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing
87.
After a permanent increase in the money supply,
a)
A. the exchange rate overshoots in the short run.
b)
B. the exchange rate overshoots in the long run.
c)
C. the exchange rate smoothly depreciates in the short run.
d)
D. the exchange rate smoothly appreciates in the short run.
88.
In order for the condition E$/HK$ = Pus/PHK to <br />hold, what assumptions does the principle of purchasing power parity make?
a)
A. No transportation costs and restrictions on trade; commodity baskets that are a reliable indication of price level.
b)
B. Markets are perfectly competitive, i.e., P = MC.
c)
C. The factors of production are identical between countries.
d)
D. No arbitrage exists.
e)
E. All of the above.
89.
Which of the following statements is the most accurate?
a)
A. Predictions about long-run movements in exchange rates are important even in the short run.
b)
B. Predictions about long-run movements in exchange rates are not important the short run.
c)
C. Predictions about long-run movements in exchange rates are important only in the long run.
d)
D. Predictions about long-run movements in exchange rates are often not important in the short run.
90.
Which of the following statements is the most accurate?
a)
A. In the long run, national price levels play a minor role in determining both interest rates and the relative prices at which countries’ products are traded.
b)
B. In the long run, national price levels play a key role only in determining interest rates.
c)
C. In the long run, national price levels play a key role only in determining the relative prices at which countries’ products are traded.
d)
D. In the long run, national price levels play a key role in determining both interest rates and the relative prices at which countries’ products are traded.
91.
Under Purchasing Power Parity,
a)
A. E$/E = PUS / PE.
b)
B. E$/E = PE / PES.
c)
C. E$/E = PUS + PE.
d)
D. E$/E = PUS - PE
92.
Under Purchasing Power Parity,
a)
A. E$/E = Pi US/ Pi E.
b)
B. E$/E = Pi E / Pi US.
c)
C. E$/E = PUS / PE.
d)
D. E$/E = PE / PES.
93.
Which of the following statements is the most accurate?
a)
A. The law of one price applies only to the general price level.
b)
B. The law of one price applies to the general price level while PPP applies to individual commodities.
c)
C. The law of one price applies to individual commodities while PPP applies to both the general price level and to individual commodities.
d)
D. PPP applies only to individual commodities.
e)
E. The law of one price applies to individual commodities while PPP applies to the general price level.
94.
Which of the following statements is the most accurate?
a)
A. If PPP holds true, then the law of one price holds true for every commodity as long as the reference baskets used to reckon different countries’ price levels are the same.
b)
B. If the law of one price holds true for every commodity, PPP must hold automatically.
c)
C. If the law of one price holds true for every commodity, PPP must automatically hold as long as the reference baskets used to reckon different countries’ price levels are the same.
d)
D. If the law of one price does not hold true for every commodity, PPP cannot be true as long as the reference baskets used to reckon different countries’ price levels are the same
95.
Which of the following statements is the most accurate?
a)
A. Absolute PPP does not imply relative PPP.
b)
B. Relative PPP implies absolute PPP.
c)
C. There is no causality relation between the two.
d)
D. Absolute PPP implies relative PPP.
96.
Which of the following statements is the most accurate?
a)
A. Relative PPP is valid even when absolute PPP is not, provided the factors causing deviations from absolute PPP are more or less stable over different commodities space.
b)
B. Absolute PPP is valid even when relative PPP is not, provided the factors causing deviations from relative PPP are more or less stable over time.
c)
C. Relative PPP is valid even when absolute PPP is not, provided the factors causing deviations from absolute PPP are more or less stable over time.
d)
D. Relative PPP is not valid when absolute PPP is not.
97.
Which of the following statements is the most accurate? In general,
a)
A. The monetary approach to the exchange rate is a long-run theory.
b)
B. The monetary approach to the exchange rate is a short-run theory.
c)
C. The monetary approach to the exchange rate is both a short- and long-run theory.
d)
D. The monetary approach to the exchange rate neither long-run nor short-run theory
98.
The monetary approach makes the general prediction that
a)
A. The exchange rate, which is the relative price of American and European money, is fully determined in the long run by the relative supplies of those monies.
b)
B. The exchange rate, which is the relative price of American and European money, is fully determined in the short run by the relative supplies of those monies and the relative demands for them
c)
C. The exchange rate, which is the relative price of American and European money, is fully determined in the short- and long run by the relative supplies of those monies and the relative demands for them
d)
D. The exchange rate, which is the relative price of American and European money, is fully determined in the long run by the relative supplies of those monies and the relative demands for them
99.
. Under the monetary approach to the exchange rate theory, money supply growth
a)
A. eventually results in ongoing price level deflation at the same rate, but changes in this long-run deflation rate do not affect the full-employment output level or the long-run relative prices of goods and services.
b)
B. eventually results in ongoing price level inflation at the same rate, but changes in this long-run inflation rate do affect the full-employment output level and the long-run relative prices of goods and services.
c)
C. eventually results in ongoing price level inflation at the same rate, but changes in this long-run inflation rate do not affect the full-employment output level or the long-run relative prices of goods and services.
d)
D. eventually results in ongoing price level inflation at the same rate, but changes in this long-run inflation rate do not affect the full-employment output level, only the long-run relative prices of goods and services.
100.
Which of the following statements is the most <br />accurate? In general, under the monetary approach to the exchange rate,
a)
A. the interest rate is not independent of the money supply growth rate in the short run.
b)
B. the interest rate is independent of the money supply growth rate in the long run.
c)
C. the interest rate is not independent of the money supply growth rate in the long run, but independent in the short run.
d)
D. the interest rate is not independent of the money supply growth rate in the long run.
101.
Which of the following statements is the most<br /> accurate? In general, under the monetary approach to the exchange rate
a)
A. while the short -run interest rate does not depend ion the absolute level of the money supply, continuing growth in the money supply eventually will affect the interest rate.
b)
B. while the long-run interest rate does depend on the absolute level of the money supply, continuing growth in the money supply does not affect the interest rate.
c)
C. while the long-run interest rate does not depend on the absolute level of the money supply, continuing growth in the money supply eventually will affect the interest rate.
d)
D. the long-run interest rate does not depend on the absolute level of the money supply, and thus continuing growth in the money supply will not affect the interest rate.
102.
If people expect relative PPP to hold,
a)
A. the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected, in the United States and Europe, over the relevant horizon.
b)
B. the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected in Europe and the United States.
c)
C. the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected, over the relevant horizon, in the United States and Europe, in the short run.
d)
D. the difference between the interest rates offered by dollar and euro deposits will be above the difference between the inflation rates expected, over the relevant horizon, in the United States and Europe
103.
Under PPP
a)
A. a rise in a country’s expected inflation rate will eventually cause a more-than proportional rise in the interest rate that depositors of its currency offer in order to accommodate for the higher inflation.
b)
B. a fall in a country’s expected inflation rate will eventually cause an equal rise in the interest rate that depositors of its currency offer.
c)
C. a rise in a country’s expected inflation rate will eventually cause an equal rise in the interest rate that depositors of its currency offer.
d)
D. a rise in a country’s expected inflation rate will eventually cause a less than proportional rise in the interest rate that depositors of its currency offer to accommodate the rise in expected inflation
104.
In the short run,
a)
A. the interest rate can rise when the domestic money supply falls.
b)
B. the interest rate can decrease when the domestic money supply falls.
c)
C. the interest rate stays constant when the domestic money supply falls.
d)
D. the interest rate rises in the same proportion as the domestic money supply falls.
105.
. Under a flexible-price monetary approach to the exchange rate,
a)
A. when the domestic money supply falls, the price level would eventually fall, increasing the interest rate.
b)
B. when the domestic money supply falls, the price level would fall right away, causing a reduction in the interest rate.
c)
C. when the domestic money supply falls, the price level would fall right away, causing an increase in the interest rate.
d)
D. when the domestic money supply falls, the price level would eventually fall, keeping the interest rate constant
e)
E. when the domestic money supply falls, the price level would fall right away, keeping the interest rate constant
106.
Under sticky prices,
a)
A. a fall in the money supply raises the interest rate to preserve money market equilibrium.
b)
B. a fall in the money supply reduces the interest rate to preserve money market equilibrium.
c)
C. a fall in the money supply keeps the interest rate intact to preserve money market equilibrium.
d)
D. a fall in the money supply does not affect the interest rate in the short run, only in the long run.
107.
Under sticky prices,
a)
A. an interest rate rise is associated with lower expected deflation and a long-run currency appreciation, so the currency appreciates immediately.
b)
B. an interest rate rise is associated with higher expected inflation and a long-run currency appreciation, so the currency appreciates immediately.
c)
C. an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency appreciates immediately.
d)
D. an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency depreciates immediately.
e)
E. an interest rate rise is associated with lower expected inflation and a long-run currency appreciation, so the currency appreciates immediately
108.
Under the monetary approach to the exchange rate
a)
A. an interest rate decrease is associated with higher expected inflation and a currency that will be weaker on all future dates.
b)
B. an interest rate increase is associated with higher expected deflation and a currency that will be weaker on all future dates.
c)
C. an interest rate increase is associated with higher expected inflation and a currency that will be strengthened on all future dates.
d)
D. an interest rate increase is associated with higher expected deflation and a currency that will be strengthened on all future dates.
e)
E. an interest rate increase is associated with higher expected inflation and a currency that will be weaker on all future dates
109.
Under the monetary approach to the exchange rate,
a)
A. a reduction in the money supply will cause immediate currency depreciation.
b)
B. a rise in the money supply will cause currency depreciation.
c)
C. a rise in the money supply will cause immediate currency appreciation.
d)
D. a rise in the money supply will cause depreciation.
e)
E. a rise in the money supply will cause immediate currency depreciation.
110.
. In practice,
a)
A. changes in national price levels often tell us little or nothing about exchange rate movements.
b)
B. changes in national price levels raise the exchange rate.
c)
C. changes in national price levels lower the exchange rate.
d)
D. changes in national price levels often tell us about exchange rate movements.
111.
Which of the following statements is the most accurate?
a)
A. The prices of identical commodity baskets, when converted to a single currency, are the same across countries.
b)
B. The prices of identical commodity baskets, when converted to a single currency, differ substantially across countries.
c)
C. The prices of identical commodity baskets, when converted to a single currency, do not differ substantially across countries.
d)
D. The prices of identical commodity baskets, when converted to a single currency, are often the same across countries
112.
Which of the following statements is the most accurate?
a)
A. The law of one price does fare well in all recent studies.
b)
B. The law of one price does fare well in many recent studies.
c)
C. The law of one price sometimes fares well in recent studies.
d)
D. The law of one price does not fare well in recent studies
113.
Which of the following statements is the most accurate?
a)
A. Relative PPP is not a reasonable approximation to the data.
b)
B. Relative PPP is sometimes a reasonable approximation to the data but usually performs poorly.
c)
C. Relative PPP is sometimes a reasonable approximation to the data.
d)
D. PPP is sometimes a reasonable approximation to the data.
114.
Which of the following statements is the most accurate?
a)
A. PPP appears to be of limited use as a short-run explanation of exchange rate movements.
b)
B. PPP appears to be of limited use even as a short-run explanation of exchange rate movements.
c)
C. PPP appears to be of limited use even as a long-run explanation of exchange rate movements.
d)
D. Relative PPP appears to be of limited use even as a short-run explanation of exchange rate movements.
115.
Which of the following statements is the most accurate?
a)
A. Relative PPP has not held up well since the 1960s.
b)
B. Relative PPP has not held up well since the early 1970s, but in the 1960s it was a more reliable guide to the relationship among exchange rates and national price levels.
c)
C. Relative PPP has held up well since the early 1960s, but in the 1970s it was a more reliable guide to the relationship among exchange rates and national price levels.
d)
D. Relative PPP has held up well since the early 1970s.
116.
Which one of the following statements is the most accurate?
a)
A. The purchasing power of any given country will increase in countries where the prices of non-tradable goods rise.
b)
B. The purchasing power of any given country will fall in countries where the prices of non-tradable goods increase.
c)
C. The purchasing power of any given country will fall in countries where the prices of non-tradable goods rise.
d)
D. The purchasing power of any given country will remain constant in countries where the prices of non-tradable goods rise.
e)
E. The purchasing power of any given country will fall in countries where the prices of non-tradable goods remain constant.
117.
Which one of the following statements is the most accurate?
a)
A. Relative price changes could not lead to PPP violations even if trade were free and costless.
b)
B. Relative price changes could lead to PPP violations only if trade were free and costless.
c)
C. Relative price changes could lead to PPP violations even if trade were free and costless.
d)
D. Price changes could lead to PPP violations even if trade were free and costless
118.
Which one of the following statements is the most accurate?
a)
A. Departures from PPP are similar in both the short run and long run.
b)
B. Departures from PPP are even greater in the long run than in the short run.
c)
C. Departures from PPP are smaller in the long run than in the long run.
d)
D. It is hard to tell whether departures from PPP are greater in the short run than in the long run.
e)
E. Departures from PPP are even greater in the short run than in the long run.
119.
Floating exchange rates
a)
A. systematically lead to larger and more frequent short-run deviations from the relative PPP.
b)
B. systematically lead to much larger but less frequent short-run deviations from the relative PPP.
c)
C. systematically lead to much larger and more frequent short-run deviations from the relative PPP.
d)
D. systematically lead to much smaller and less frequent short-run deviations from the relative PPP.
e)
E. systematically lead to much smaller but more frequent short-run deviations from the relative PPP.
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