midterm2 - Economics/Finance 431/531 Ruxandra Prodan Test 2...

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Economics/Finance 431/531 International Finance Ruxandra Prodan Fall 2004 Test 2 1. True/False and explain. The explanations is what counts. Only one or two well chosen sentences are necessary. a. (5 points) The emergence of expectations that a country in the near future will impose exchange controls will probably result in upward pressure on the exchange rate value of the country’s currency. b. (5 points) The Pugelovian central bank intervenes in the foreign exchange market by selling US $10 billion to prevent the Pugelovian currency (the pnut) from depreciating. This action will decrease Pugelovian money supply if the central bank does not sterilize. c. (5 points) Countries whose currencies are linked to each other through fixed exchange rates usually pursue different monetary and fiscal policies. 2. Define the following terms: a) (5 points) IMF conditionality b) (5 points) Price-Specie-Flow mechanism
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3. Consider the following comment: “The current account depends upon income and the real exchange rate. If income rises, consumption of imports is high, and the current account worsens. Thus, if
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This note was uploaded on 04/14/2010 for the course ECON 351-451 taught by Professor Prodan during the Spring '10 term at University of Alabama - Huntsville.

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midterm2 - Economics/Finance 431/531 Ruxandra Prodan Test 2...

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