Summer 06 Exam 3 Ans

# Summer 06 Exam 3 Ans - Name: _ANSWERS_ (Last name, first...

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Summer 2006 (IS-LM-BP and DAD-SAS Models) 1 Name: ____ ANSWERS ______ (Last name, first name) SID: ____________________ UGBA 101B Macroeconomic Analysis for Business Decisions Professor Steven Wood Summer 2006 Exam #3 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 5:00 p.m. on June 29, 2006. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: a. Completely , clearly and accurately label all axis, lines, curves, and equilibrium points. b. The original diagram and equilibrium points MUST be drawn in black. c. The first shift of any line(s) and the new equilibrium points MUST be drawn in red. d. Any subsequent shifts in curves and new equilibrium points MUST be drawn in another color, first blue and then green. Do NOT open this test until instructed to do so.

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Summer 2006 (IS-LM-BP and DAD-SAS Models) 2 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (3 points each; total of 30 points.) 1. Suppose we have a small open economy has fixed exchange rates. If unemployment is below the NAIRU, then to stabilize the economy a good policy would be to: a. A fiscal contraction. b. A monetary contraction. c. A fiscal expansion. d. A monetary expansion. e. Indeterminate. 2. Suppose an economy with fixed exchange rates accumulated reserves of 100 last year. Then, if the current account was 30, we know that: a. There was no sterilization. b. The balance of payments was 70. c. The balance of payments was 30. d. The capital account was 70. e. The country devalued its exchange rate. 3. Suppose a country that starts in joint equilibrium with flexible exchange rates experiences a permanent and large fall in foreign demand for their goods. This will ultimately lead to: a. Higher interest rates. b. A weaker exchange rate. c. Lower interest rates. d. A stronger exchange rate. e. Unemployment below the NAIRU. 4. A prime objective of sterilization policy would be to: a. Reduce unemployment. b. Increase potential output. c. Prevent inflation from rising. d. Keep the exchange rate fixed. e. Raise the monetary base.
Summer 2006 (IS-LM-BP and DAD-SAS Models) 3 5. The US has most of its foreign assets denominated in foreign currency terms; hence a weaker dollar can effectively make the US richer. So, given this observation, if the dollar fell in value: a. The BP curve would shift outwards. b. The shift in the BP curve is indeterminate.

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## This note was uploaded on 02/15/2010 for the course UGBA 08481 taught by Professor Levine during the Spring '09 term at University of California, Berkeley.

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Summer 06 Exam 3 Ans - Name: _ANSWERS_ (Last name, first...

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