tb15[1] - CHAPTER 15 EXCHANGE-RATE ADJUSTMENTS AND THE...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 15 EXCHANGE-RATE ADJUSTMENTS AND THE BALANCE OF PAYMENTS MULTIPLE-CHOICE QUESTIONS 1. According to the absorption approach, the economic circumstances that best warrant a currency devaluation is where the domestic economy faces: a. Unemployment coupled with a payments deficit b. Unemployment coupled with a payments surplus c. Full employment coupled with a payments deficit d. Full employment coupled with a payments surplus 2. According to the J-curve effect, when the exchange value of a country’s currency appreciates , the country’s trade balance: a. First moves toward deficit, then later toward surplus b. First moves toward surplus, then later toward deficit c. Moves into deficit and stays there d. Moves into surplus and stays there 3. Assume that Brazil has a constant money supply and that it devalues its currency. The monetary approach to devaluation reasons that one of the following tends to occur for Brazil: a. Domestic prices rise—purchasing power of money falls—consumption falls b. Domestic prices rise—purchasing power of money rises—consumption rises c. Domestic prices fall—purchasing power of money rises—consumption falls d. Domestic prices fall—purchasing power of money rises—consumption rises 4. According to the Marshall-Lerner approach, a currency depreciation will best lead to an improvement on the home country’s trade balance when the: a. Home demand for imports is inelastic—foreign export demand is inelastic b. Home demand for imports is inelastic—foreign export demand is elastic c. Home demand for imports is elastic—foreign export demand is inelastic d. Home demand for imports is elastic—foreign export demand is elastic 242
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
243 Test Bank for International Economics, 9e 5. Assume an economy operates at full employment and faces a trade deficit . According to the absorption approach, currency devaluation will improve the trade balance if domestic: a. Interest rates rise, thus encouraging investment spending b. Income rises, thus stimulating consumption c. Output falls to a lower level d. Spending is cut, thus freeing resources to produce exports 6. An appreciation of the U.S. dollar tends to: a. Discourage foreigners from making investments in the United States b. Discourage Americans from purchasing foreign goods and services c. Increase the number of dollars that could be bought with foreign currencies d. Discourage Americans from traveling overseas 7. The Marshall-Lerner condition deals with the impact of currency depreciation on: a. Domestic income b. Domestic absorption c. Purchasing power of money balances d. Relative prices 8. According to the J-curve concept, which of the following is false ? That the effects of a currency depreciation on the balance of payments are: a. Transmitted primarily via the income adjusted mechanism b. Likely to be adverse or negative in the short run c. In the long run positive, given favorable elasticity conditions d. Influenced by offsetting devaluations made by other countries
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 12

tb15[1] - CHAPTER 15 EXCHANGE-RATE ADJUSTMENTS AND THE...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online