Hw6O - ECN 162 International Economic Relations Ina...

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1 ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2009 Assignment 6 (Maximum Points: 100) Due Thursday, December 3, at the beginning of class. This is an optional homework. If your score on this homework is above the lowest score on the five required homeworks, this homework will replace it. Short Answer 1) (29 points) Low-income nations have a dilemma as to whether to fix or float. There are many factors that affect their decisions and how effectively they can manage a financial system. Discuss a few of these issues and the factors that play into the success of a policy. Multiple Choice Questions (Each question is worth 1 point) There are two sets of multiple choice questions. Set 1 has 27 questions referring to Chapter 19. Set 2 has 44 questions referring to Chapter 20. Please use a separate SCANTRON for each set of questions and attach both sheets to your short answer.
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Date: ______________ 1. Suppose that the United Kingdom pegs the pound to the euro and the European Central Bank decides to use monetary policy to offset the possible inflationary effects of European expansionary fiscal policy. Would it expand, contract, or not change the European money supply? A) expand B) contract C) not change D) cannot be determined using the information provided 2. Suppose that the United Kingdom pegs the pound to the euro and the European Central Bank decides to use monetary policy to offset the possible inflationary effects of European expansionary fiscal policy. How would the European Central Bank's monetary policy affect European interest rates? A) They would rise farther. B) They would fall farther. C) The combination of the expansionary fiscal policy and the monetary policy would cause interest rates to return to their level prior to the expansionary fiscal policy. D) The combination of the expansionary fiscal policy and the monetary policy would not affect interest rates. 3. When a nation chooses to fix or float, it should consider: A) only its domestic banks, importers, and exporters. B) only whether it has a great deal of economic integration. C) only whether it has similar circumstances in terms of demand or supply shocks with its trading partners. D) both the level of economic integration and the similarity of demand or supply shocks. 4. When a nation is economically integrated with trading partners, fixed exchange rates: A) would be very harmful to the dynamic nature of trade. B) could promote integration and economic efficiency by keeping transaction costs low. C) would be the best choice if that nation became the dominant nation in the transactions. D) would be adequate but have the disadvantage of discouraging trade because of uncertainty. Page 1
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This note was uploaded on 02/24/2010 for the course ECN ECN 162 taught by Professor Inna during the Winter '09 term at UC Davis.

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Hw6O - ECN 162 International Economic Relations Ina...

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