chapter 17 - problems

chapter 17 - problems - 17 Short-Run Macroeconomic Policy...

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17 Short-Run Macroeconomic Policy under Flexible Exchange Rates QUICK QUIZ 2. Short-run macroeconomic models that ignore the role of expectations tend to imply that a reduction in a U.S. government budget deficit would lead to (a) an appreciation of the dollar. (b) a depreciation of the dollar. (c) no effect on the value of the dollar relative to other currencies. (d) offsetting growth in the U.S. current-account deficit. (e) no change in the U.S. current-account deficit. (f) an increase in the rate of growth of the money stock. 3. With a flexible exchange rate and perfectly immobile capital, contractionary fiscal policy in the short run leads to (a) a rise in Q and a fall in i. (b) a fall in Q and a fall in i. (c) no change in Q and a fall in i. (d) no change in Q and a rise in i. (e) a rise in Q and no change in i. (f) a fall in Q and no change in i. 4. With a flexible exchange rate and perfectly immobile capital, contractionary monetary policy in the short run leads to (a) a rise in Q and a fall in i. (b) a fall in Q and an indeterminate effect on i. (c) no change in Q and a fall in i. (d) no change in Q and a rise in i. (e) a rise in Q and no change in i. (f) no change in Q or i. 5. With a flexible exchange rate and perfectly mobile capital, contractionary fiscal policy that is expected to be temporary leads to (a) a rise in Q and a fall in i. (b) a fall in Q and a fall in i. (c) no change in Q and a fall in i. (d) no change in Q and a rise in i. (e) a rise in Q and no change in i. (f) a fall in Q and no change in i.
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6. With a flexible exchange rate and perfectly mobile capital, contractionary fiscal policy that is expected to be permanent leads to (a) a rise in Q and a fall in i. (b) a fall in Q and a rise .in i. (c) no change in Q and a fall in i. (d) no change in Q or i. (e) a rise in Q and no change in i. (f) a fall in Q and no change in i. 7. With a flexible exchange rate and perfectly mobile capital, contractionary monetary policy that is expected to be temporary leads to (a) a rise in Q and a fall in i. (b) a fall in Q and a fall in i. (c) no change in Q and a fall in i. (d) no change in Q and a rise in i. (e) a rise in Q and no change in i. (f) a fall in Q and a rise in i. 8. With a flexible exchange rate and perfectly mobile capital, contractionary monetary policy that is expected to be permanent leads to (a) a rise in Q and a fall in i. (b) a fall in Q and a rise in L (c) no change in Q and a fall in i. (d) no change in Q or i. (e) a rise in Q and no change in i. (f) a fall in Q and no change in i. 9. Under a flexible exchange rate and perfectly mobile capital, whether a policy is expected to be temporary or permanent matters because (a) it affects the new equilibrium interest rate. (b) it affects the location of the BOP line.
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chapter 17 - problems - 17 Short-Run Macroeconomic Policy...

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