exam 4 KEY - EXAM 4 - International Finance Spring 2009 -...

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EXAM 4 - International Finance – Spring 2009 - Cutler MULTIPLE-CHOICE – Please, select the letter which best answers each question, and enter it into the space provided in front of each question number. Each multiple-choice question is worth 1 point. 1. Under the price-specie-flow mechanism, what happens when say Britain’s current account surplus is greater than its non-reserve capital account deficits? (a) British loans will finance all foreign net imports. (b) Automatic drop in British domestic prices and rise in foreign prices. (c) Gold reserves will flow into Britain. (d) Gold reserves will flow out of Britain. (e) None of the above. Answer: C 2. By internal balance, most economists mean (a) Full employment (b) Price stability (c) Full employment and price stability (d) Full employment and moderate decrease in prices (e) None of the above. Answer: C 3. By external balance, most economists means, (a) Avoiding excessive imbalances in international payments (b) Flexible exchange rates (c) Balance between trade account and service account (d) Fixed exchange rate (e) None of the above.
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Answer: A 4. Which one of the following statements is true? (a) Inflation can occur under conditions of full employment if the central bank continues to inject money to the economy. (b) Inflation can occur under conditions of full employment if the central bank continues to withdraw money from the economy. (c) Deflation can occur under conditions of full employment if the central bank continues to inject money to the economy. (d) Inflation cannot occur under conditions of full employment even if the central bank continues to inject money to the economy. (e) None of the above statement is true. Answer: A 5. Countries where investment is (a) relatively unproductive should have current account deficits. (b) relatively productive should have current account surpluses. (c) relatively productive should have current account deficits. (d) relatively productive should have balanced current accounts. (e) None of the above statements is true. Answer: C 6. Under fixed exchange rates, (a) Monetary policy is not an effective policy. (b) Fiscal policy is not an effective policy. (c) Monetary policy and fiscal policy are not effective. (d) Both monetary and fiscal policies are effective. (e) None of the above. Answer: A
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7. Temporary fiscal expansion (a) stimulates aggregate demand and causes output to decline (b) decreases aggregate demand and causes output to decline (c) stimulates aggregate demand and causes output to rise (d) decreases aggregate demand and causes output to rise (e) decreases government expenditures Answer: C 8. A devaluation of the home currency (a) makes foreign goods and services cheaper relative to those sold at home (b) makes domestic goods and services more expensive relative to those sold abroad (c) increases demand and output (d) makes domestic goods and services cheaper relative to those sold abroad (e) (c) and (d) Answer: E 9. The XX schedule shows how much
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This note was uploaded on 05/26/2010 for the course ECON 1160 taught by Professor Byrke during the Spring '10 term at Macomb Community College.

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exam 4 KEY - EXAM 4 - International Finance Spring 2009 -...

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