final209 - Fall 2009 Temple University Econ 1101 Final Exam...

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1 Fall 2009 Temple University Econ 1101 Final Exam Time Allowed: 2 hrs Name:___________________________________ TU ID: _____________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If the prices in the United States rise faster than those in other countries, 1) _______ A) the exchange rate falls. B) the interest rate in the United States falls. C) then interest rate parity must not hold. D) the exchange rate rises. 2) According to purchasing power parity, if the exchange rate between the dollar and the Brazilian real is 2 reals per dollar, and a Big Mac costs $3.10 in the U.S., then the Brazilian price will be 2) _______ A) 6.20 reals. B) 2.00 reals. C) 3.10 reals. D) 1.55 reals. 3) The U.S. dollar will depreciate in value if 3) _______ A) the demand curve for U.S. dollars shifts rightward. B) the demand curve for U.S. dollars shifts leftward. C) the supply curve of U.S. dollars shifts rightward. D) Both answers B and C are correct. 4) An increase in the U.S. demand for imports will ________ the supply of dollars and lead the dollar to ________. 4) _______ A) decrease; depreciate B) increase; appreciate C) decrease; appreciate D) increase; depreciate
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2 5) Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? 5) _______ A) crawling peg B) moving target C) flexible exchange rate D) fixed exchange rate 6) Suppose the target exchange rate set by the Fed is 100 guilders per dollar. If the demand for dollars temporarily decreases, to maintain the target exchange rate, the Fed can 6) _______ A) increase U.S. exports. B) increase U.S. imports. C) buy dollars. D) sell dollars. 7) In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D 1 . To maintain the target exchange rate, the Fed 7) _______ A) cannot maintain the target exchange rate. B) can sell dollars. C) must violate interest rate parity but not purchasing power parity. D) can buy dollars. 8) ________ economists believe that the economy is self - regulating and will be at full employment as long as monetary policy is not erratic. 8) _______ A) Monetarist B) Keynesian C) All D) Classical 9) If the Fed follows the Taylor rule and the economy goes into a recession, the Fed would 9) _______ A) reduce tax rates. B) lower the federal funds rate.
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3 C) increase government expenditures. D) None of the above answers are correct. 10) The federal funds rate is the interest rate 10) ______ A) on the 30 - year treasury bond. B) on the 3 - month Treasury bill. C) also known as the prime rate.
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final209 - Fall 2009 Temple University Econ 1101 Final Exam...

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