Quiz_10-solutions econ 410

Quiz_10-solutions econ 410 - D US dollar appreciates...

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Q u i z 1 0 4/19/2011 1 In a floating exchange rate regime, if United States increase tariff of its imports, what would likely happen: A) US would import less and export more. B) Both import and export would decrease. C) Both import and export would increase. D) Both import and export would remain the same. Solution: B) 2 In 2009, US government increased its spending by 18.0% over 2008. Using the Mundell-Fleming model (assuming US is a small country) and under floating exchange rate, what would you expect? A) Interest is higher. B) US dollar depreciates against other currencies. C) Interest rate is lower.
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Unformatted text preview: D) US dollar appreciates against other currencies. Solutions: D) – IS curve shifts right but LM remains the same. A consequence of that is an appreciation of US dollar but no change in output. Fiscal policy under floating regime is not effective (for a small country). 3. Currently, the exchange rate between the US dollar and the Chinese RMB is: A) fixed by the Chinese government. B) floating according the buy and sell of Chinese RMB and US dollar in the market. C) determined by a basket of international currencies. D) neither above. Solution: C)...
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This note was uploaded on 02/13/2012 for the course ECON 410 taught by Professor Hernandez-verme during the Spring '08 term at Texas A&M.

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