Ch.19,20 practice problems_wi2017 - Econ171 International...

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1 Econ171 International Finance – Ch.19 & 21 Practice Problems Winter 2015 I. True, False, Uncertain Explain briefly your answer in a couple of sentences no matter which choice you make (true, false, or uncertain). 1. When the U.S. permanently increases its money supply, its trade partner Japan would experience an increase in aggregate demand and output in the short run. 2. A country is less vulnerable to a financial crisis if its debt is in the form of foreign direct investment (FDI) rather than bank loans. 3. Under a fixed exchange rate regime, a country can generally attain internal and external balance using only fiscal policy. 4. Existence of risk premiums is one of the reasons that interest rate differentials and other macro- fundamentals do not predict nominal exchange rate changes in the short-run very well.
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2 II. Short Answer Questions Explain your answer in a short paragraph and show your calculation or graph when applicable.
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