exam 4-key - NAME_ Exam 4 - ECO 215 SPRING 2008 CUTLER...

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Exam 4 - ECO 215 – SPRING 2008 – CUTLER MULTIPLE-CHOICE questions – Please, select the letter which best answers each question, and enter it into the answer key table provided at the end of the exam. Each multiple-choice question is worth 1 point. 1. A system of managed floating exchange rates is (a) A system in which governments may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. (b) A system in which governments use flexible exchange rates. (c) A system in which governments are forbidden from attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. (d) A system in which governments need to reach a prior agreement among them before they may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. (e) None of the above statement is true. Answer: A 2. Which one of the following statements is the most true? (a) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies an increased home money supply. (b) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies a decreased home money supply. (c) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies an increased home money demand. (d) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decreased in the home central bank’s foreign asset implies an increased home money supply. (e) None of the above statement is true. Answer: A 3. Which one of the following statements is the most accurate? (a) Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy’s money supply. (b) Under a flexible exchange rate, central bank monetary tools are powerless to affect the economy’s money supply or its output. (c) Under a fixed exchange rate, fiscal policy tools are powerless to affect the economy’s money supply or its output. (d) Under a flexible exchange rate, central bank monetary tools are powerful and do affect the economy’s output. (e) Under a dirty float exchange rate, central bank monetary tools are powerless to affect the economy’s money supply or its output. Answer: D 4. The main reason(s) why governments sometimes chose to devalue their currencies is (are): (a) Devaluation allows the government to fight domestic unemployment despite the lack of effective monetary policy. (b)
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exam 4-key - NAME_ Exam 4 - ECO 215 SPRING 2008 CUTLER...

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