ECON5319Quiz6S2011key

ECON5319Quiz6S2011key - ECON 5319 Quiz #6 1. The...

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Quiz #6 1. The assumptions of the flexible-price monetary model imply: a) the exchange rate is fixed. b) the real exchange rate overshoots. c) real interest rates are equal internationally. d) the trade balance is zero. 2. The assumption that is relaxed in the overshooting model is: a) PPP. b) UIP. c) CIP. d) AWOL. 3. The assumption that is relaxed in the Portfolio Balance model is: a) PPP. b) UIP. c) CIP. d) MVP. 4. In the Portfolio Balance model it is the relative stocks of outside assets (bonds) that are important for determining the exchange rate. The total outstanding stock of outside bonds is equal to those issued by the government. The simple Macro expenditure identity implies that Y = C + I + G + (X-M). The simple Macro income identity is Y = C + S + T. If savings equals investment, then what must be true? a) X = M. b) G = T. c) G-T = X-M. d) C = T. 5. Based upon your answer to #4, why would the government issue outside assets (bonds)? a)
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ECON5319Quiz6S2011key - ECON 5319 Quiz #6 1. The...

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