# Problem Set _6 ANSWERS - Name(Last name first name SID GSI...

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Problem Set #6 (Spring 2011) 1/5 Name: _________________________ (Last name, first name) SID: _________________________ GSI: _________________________ Econ 100B Macroeconomic Analysis Professor Steven Wood Spring 2011 Problem Set #6 ANSWERS Due: April 28, 2011 (in class before 3:50:01 p.m.) Turn your completed problem set in to your GSI Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. You MUST complete your problem set on this template. 2. Graphs and equations MAY be drawn by hand. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 3. Explanations MUST be word-processed. Your explanations should be succinct and to the point.

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Problem Set #6 (Spring 2011) 2/5 A. Multiple Choice Questions (15 points) . Circle the letter corresponding to the best answer (3 points each). 1. Suppose that U.S. inflation is expected to increase in the future. This will tend to cause: a. A depreciation of the U.S. dollar. b. An appreciation of the U.S. dollar. c. No change in the value of the U.S. dollar d. No change in the value of the U.S. dollar in the short-run. 2. Suppose a small country has perfect capital mobility and a fixed exchange rate. If the unemployment rate is below the natural rate of unemployment, then to stabilize the economy at potential output would require: a. A fiscal policy expansion. b. A fiscal policy contraction. c. A moentary policy expansion. d. A monetary policy contraction. 3. Suppose a country has a flexible exchange rate. It then experiences a large permanent decline in the foreign demand for its domestically produced goods. This will tend to cause: a. Domestic economic output to increase. b. Domestic economic output to decrease. c. No change in domestic economic output. d. An indeterminate change in economic output. 4. During the Asian economic crisis in 1997, capital flight from Asia led to a surge in capital inflows to the U.S. If the U.S. economy was at potential output with a flexible exchange rate before the crisis, then as a result of these capital inflows, all of the following would be true except : a. The U.S. dollar would appreciate.
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Problem Set _6 ANSWERS - Name(Last name first name SID GSI...

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