Assignment13-1 - Assignment 12 (Chapter 13) 1. The...

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Assignment 12 (Chapter 13) 1. The balance-of-payments adjustment mechanism developed during the 1700s by the English economist David Hume is the: a) Income-adjustment mechanism b) Flexible-exchange-rate-adjustment mechanism c) Price-adjustment mechanism d) Rank-reserve-adjustment mechanism 2. Which chain of events would promote payments equilibrium for a deficit nation, according to the price- adjustment mechanism? a) Increasing money supply-increasing domestic prices-rising imports-falling exports b) Increasing money supply-falling domestic prices-rising imports-falling exports c) Decreasing money supply-increasing domestic prices-falling imports-rising exports d) Decreasing money supply-decreasing domestic prices-falling imports-rising exports 3. During the gold standard era, the "rules of the game" suggested that: a) Surplus countries should increase their money supplies b) Deficit countries should increase their money supplies c) Surplus and deficit countries should increase their money supplies d) Surplus and deficit countries should decrease their money supplies 4. Which of the following balance-of-payments adjustment mechanisms is most closely related to the quantity theory of money? a) Income-adjustment mechanism b) Price-adjustment mechanism c) Interest-rate-adjustment mechanism d) Output-adjustment mechanism 5. Under the gold standard, a surplus nation facing a gold inflow and an increase in its money supply would also experience a: a) Rise in its interest rate and a short-term financial inflow b) Rise in its interest rate and a short-term financial outflow c) Fall in its interest rate and a short-term financial inflow d) Fall in its interest rate and a short-term financial outflow 6. Under the gold standard, a deficit nation facing a gold outflow and a decrease in its money supply would also experience a: a) Rise in its interest rate and a short-term financial inflow b) Rise in its interest rate and a short-term financial outflow c) Fall in its interest rate and a short-term financial inflow d) Fall in its interest rate and a short-term financial outflow
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7. Assume that Canada initially faces payments equilibrium in its merchandise trade account as well as in its capital
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This note was uploaded on 07/07/2011 for the course ECON 306 taught by Professor Nelson during the Spring '11 term at Southern New Hampshire University.

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Assignment13-1 - Assignment 12 (Chapter 13) 1. The...

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