Homework 13 67-72 -...

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Submitted by deweerdt@msu.edu on 12/2/2008 4:57:39 PM  Points Awarded  10 Points Missed  0 Percentage  100% 1. Suppose that the dollar floats on FX markets.  Further suppose that the U.S. economy is starting to  show signs of deflationary pressure.  As such, FRB (the Federal Reserve System) determines that  the proper medicine is an expansion in the money supply. The FRB's policy is likely to A. increase U.S. income and therefore put upward pressure on the incomes of other countries  since Americans would be more interested in importing goods from foreign. B. cause the value of the other currencies to appreciate relative to the dollar, thereby making the  goods from other countries less attractive to Americans and putting downward pressure on the  incomes of other countries C. do both of the above, suggesting that net effect of American policy on the incomes of other  countries depends on the strength of the two effects D. do none of the above. While they seem contradictory, both (A) and (B) are true.  The idea is that there are multiple forces that  are created by expansionary monetary policy.  It is an empirical question as to which effect dominates.   See Lesson 67. Points Earned: 1/1 Correct Answer: C Your Response: C 2. Suppose that for a particular economy, the current account balance is -50, the non-official financial  account balance is +20, and the official financial account balance is +30.  In this case, the Official  Settlements Balance has a value of A. 30. B. -30. C. 50. D. -50. E. 20. F. -20. G. 70. H. -70. This is a definition.  The official reserve balance = current account + non-official financial account.  See  Lesson 68. Points Earned:
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This note was uploaded on 02/25/2011 for the course ECON 340 taught by Professor Leidholm during the Spring '08 term at Michigan State University.

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Homework 13 67-72 -...

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