xm3-w05 - Econ 102/Lecture 100 Final Exam Form 1 April 27,...

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Econ 102/Lecture 100 Final Exam Form 1 April 27, 2005
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1. The Wall Street Journal reports that 2004 saw an increase in the real interest rate and a simultaneous depreciation of the real exchange rate. Which of the following events can explain this phenomenon according to the (long-run) open-economy model? a) An increase in the government budget deficit b) An increase in the government budget surplus c) A quota is imposed, restricting imports of a foreign good d) Capital flight out of the country e) None of the above 2. Suppose a US resident buys a car from a German auto company and the auto company uses the US- dollar revenues to buy stock in GM (a large US auto company) from a British shareholder, who then deposits the money into a dollar-denominated bank account in Great Britain. Which of the following is true from the perspective of the US? a) NX decreases, Foreign Direct Investment decreases b) Imports decrease, Net Foreign Investment decreases c) NX decreases, Net Foreign Portfolio Investment decreases d) NX increases, Net Foreign Investment decreases e) NX decreases, Net Foreign Investment is unchanged 3. Suppose that fear of war outside the US causes people everywhere to view assets outside the US as more risky before. According to the open economy model, which of the following cannot be true? a) The real interest rate in the US decreases b) Domestic investment in the US increases c) The US real exchange rate appreciates d) Net Exports in the US increases e) The value of the US dollar, measured in foreign currency, rises
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4. According to the information in the table below, what nominal interest rate will an asset purchased in 2002 yield from 2002 to 2003? 2002 2003 Real GDP Real interest rate Money Supply Velocity of Money 5000 2% 100,000 5 5125 2% 102,500 5 a) 4% b) 1% c) 0% d) 2% e) 3% 5. Which of the following is TRUE according to the data below? Country Price of a Hamburger Exchange rate South Korea 3000 won 1218 won/$ Spain 375 pesetas 155 pesetas/$ Mexico 19.9 peso 9.53 peso/$ The Netherlands 2.16 euros .916 euros/$ US 2.43 US dollars a) A hamburger in Spain is cheaper than one in Mexico b) A hamburger in Spain is cheaper than one in The Netherlands c) A hamburger in Spain is more expensive than in South Korea d) Hamburgers are most expensive in the US e) Hamburgers are most expensive in South Korea
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6. Which of the following is NOT necessarily true if a country has a trade surplus? a) Income is greater than domestic spending b) National saving is greater than domestic investment c) NFI is positive d) The government has a budget surplus e) None of the above; that is, all of the above are necessarily true 7. The Fed announced that they will conduct open market operations to increase the money supply, once and for all, by 10%. Which one is always true in the short run ? a)
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xm3-w05 - Econ 102/Lecture 100 Final Exam Form 1 April 27,...

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