239110KS_finalreview - 239110KS_ FINAL EXAM: Zahlungsbilanz...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
239110KS_ FINAL EXAM: Zahlungsbilanz und Devisenmarkt REVIEW QUESTIONS (1) Under perfect capital mobility and 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 (2) A fixed exchange rate regime may be forced to collapse by (a) excessive purchases of government bonds by central banks (b) speculative attacks on the currency (c) an increase in foreign reserves (d) (a) and (b) (e) (a) and (c) Answer: D (3) In theory, under flexible exchange rates, (a) No country would be forced to import only inflation from abroad. (b) No country would be forced to import only deflation from abroad. (c) No country would be forced to import inflation and deflation from abroad. (d) Flexible exchange rates are not able to halt importing inflation from abroad. (e) Flexible exchange rates are not able to halt importing deflation from abroad. Answer: C (4) In an optimum currency area, candidates for a single currency should (a) share a common language (b) share a common history (c) have well integrated factor and goods markets (d) have limits on capital flows to prevent contagion Answer: c (5) When countries have a single currency (a) they are unable to run fiscal deficits (b) speculative attacks on the currency may cause the exchange rate to be abandoned (c) unemployment will be the same in both countries (d) they must also share a common government (e) they will be unable to run independent monetary policies Answer: E
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
(6) Under strict purchasing power parity, (a) Exchange rates immediately move to offset exactly national differences in inflation. (b) Exchange rates eventually move to offset exactly national differences in inflation. (c) Exchange rates eventually move to offset to some extent national differences in inflation. (d) Exchange rates eventually move to offset exactly national differences in unemploymen t. (e) None of the above. Answer: A (7) The expectation of future devaluation causes a balance of payments crisis marked by (a) a sharp rise in reserves and a fall in the home interest rate below the world interest rate (b) a sharp fall in reserves and an even bigger fall in the home interest rate below the world interest rate (c) a sharp fall in reserves and a rise in the home interest rate above the world interest rate (d) a sharp rise in reserves and an even greater rise in the home interest rate above the world interest
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

239110KS_finalreview - 239110KS_ FINAL EXAM: Zahlungsbilanz...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online