INTB 3353 Exam 3

INTB 3353 Exam 3 - University of Houston Spring 2008 INTB...

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Unformatted text preview: University of Houston Spring 2008 INTB 3353: Economics of Globalization Professor Ruxandra Prodan Exam #3 Name:_________________________________________________________________ 1. As a result of the __________, the dollar became the worlds chief reserve currency. a) gold standard b) Plaza Agreement c) Louvre Accord d) Bretton-Woods Conference e) Smithsonian Agreement d 2. With a flexible exchange rate and free movement of capital, the role of monetary policy is directed towards: a. inflation b. unemployment c. keeping the domestic interest rate at the world interest rate d. a and b e. a and c d 3. The desirable policy choices according to the Macroeconomic Policy Trilemma, are: a. Fixed exchange rate, restricted movement of capital, and independent monetary policy b. Fixed exchange rate, free movement of capital, and independent monetary policy. c. Free movement of capital, flexible exchange rate, and independent monetary policy. b 4. Covered Interest rate Parity says that interest rate differential equal: a. expected appreciation of the currency b. forward rate premium c. changes in fiscal policy d. investment performance b Scenario: Assume that there are only two countries in the world and flexible exchange rates: UK and US. Suppose that C, I, and G all stay the same in the UK and the United States. Answer the following three questions. 5. Assume that that net exports from the UK decrease As a result, what will happen to GDP in each country? a. GDP will increase in the UK and decrease in the United States. b. GDP will decrease in the UK and increase in the United States. c. GDP will increase in both the UK and the United States. d. GDP will decrease in both the UK and the United States. b 6. What happens with the exports from the UK when the exchange rate (measured in dollars per pound) increases? a. The quantity of exports is lower b. The quantity of exports is higher c. The quantity of exports is the same a 7. What happens with the exports from the US when the exchange rate (measured in dollars per pound) decreases? a. The quantity of exports is lower b. The quantity of exports is higher c. The quantity of exports is the same a 8. An exchange rate system such as Nicaraguas where the currency value is maintained against another currency, but the parity value is allowed to change at regular intervals is called a a) conventional peg. b) peg with bands. c) managed float. d) crawling peg. e) parity band. d 9. In a flexible exchange rate regime, suppose that UK's economy goes into a recession....
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INTB 3353 Exam 3 - University of Houston Spring 2008 INTB...

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