midterm_answers - Econ 181 Midterm (110 points total)...

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Econ 181 Midterm (110 points total) Multiple choice (3 points each, 15 points total) 1. In an open economy, private saving, S p , is equal to A. I - CA + (G - T). B. I + CA - (G - T). C. I + CA + (G - T). D. I - CA - (G - T). E. I + CA + (G + T). Answer: C 2. When a country’s currency depreciates, A. foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive. B. foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper. C. foreigners find that its exports are cheaper; however, domestic residents are not affected. D. foreigners are not affected, but domestic residents find that imports from abroad are more expensive. E. None of the above. Answer: E 3. Which one of the following statements is the most accurate? A. The dollar rate of return on euro deposits is the euro interest rate plus the rate of depreciation of the dollar against the euro. B. The dollar rate of return on euro deposits is approximately the euro interest rate minus the rate of depreciation of the dollar against the euro. C. The dollar rate of return on euro deposits is the euro interest rate minus the rate of depreciation of the dollar against the euro. D. The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of appreciation of the dollar against the euro. E. The dollar rate of return on euro deposits is approximately the euro interest rate plus the rate of depreciation of the dollar against the euro. Answer: E 4. Given P US and Y US, A. an increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. B. an increase in the European money supply causes the euro to appreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. C. an increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. D. an increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium. E. None of the above statements is true. Answer: D
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5. Under PPP, A. a rise in a country’s expected inflation rate will eventually cause a more-than proportional rise in the interest rate that depositors of its currency offer in order to accommodate for the higher inflation. B.
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This note was uploaded on 04/06/2010 for the course ECONOMICS ECON 181 taught by Professor Jack during the Spring '10 term at UCSB.

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midterm_answers - Econ 181 Midterm (110 points total)...

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