# ECO2004S (2010 Test 2).pdf - University of Cape Town School...

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Chapter 18 / Exercise 3
Exploring Microeconomics
Sexton
Expert Verified
1 ´ University of Cape Town School of Economics ECO2004S Test 2 19 October 2010 Time: 90 Minutes INSTRUCTIONS Fill in the answers on the MCQ sheet provided Write your name, student number and test number on the MCQ sheet provided Use PENCIL only on the MCQ answer sheet Time: 1.5 hours Total Questions: 40 Marks: Correct Answer + 2 Incorrect Answer 1/2 No answer 0 CHOOSE THE ANSWER YOU THINK IS MOST CORRECT
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Chapter 18 / Exercise 3
Exploring Microeconomics
Sexton
Expert Verified
2 1.Which of the following countries would you expect to have the highest ratio of trade to GDP?
2.Suppose that over the past decade SA inflation is less than that in Bangladesh. Further assume that during this same period the rand depreciates relative to the Bangladeshi taka. Given this information the real exchange rate
3.Assume that the interest rate in a foreign country is 7% and that the foreign currency is expected to depreciate by 3% during the year. For each dollar that a U.S. resident invests in foreign bonds, he/she can expect to get back an approximate total of
4.Assume that the nominal exchange rate increases by 2%. If prices (both domestic and foreign do not change) we know that a.domestic and foreign goods cost the same in real terms b.domestic goods are now relatively cheaper c.domestic goods are now relatively more expensive d.foreign goods are now relatively cheaper e.both c and d*
5.Suppose you have one rand with which you wish to purchase U.K. (one-year) bonds in period t. Which of the following expressions represents the amount of U.K. pounds you will receive in one year (i.e. period t+1) from purchasing U.K. bonds in period t?
6.Which of the following represents the domestic demand for goods?
3 7.Suppose the rest of the world experiences an expansion that causes an increase in foreign income (Y*). From the domestic economy's perspective this increase in foreign income will cause which of the following as the domestic economy adjusts to the rise in Y*?