Econ Final Practice

Econ Final Practice

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Unformatted text preview: that central bankers use for price stability is a. low and stable inflation. b. an inflation rate of zero percent. c. low and stable deflation. d. high and stable inflation. 17. Since the early 1990’s, the Fed has conducted monetary policy by setting a target for the a. monetary base. b. money supply. c. Federal funds interest rate. d. exchange rate. e. discount rate. 18. The Fed can engage in preemptive strikes against a rise in inflation by ________ the Federal funds rate; it can act preemptively against negative demand shocks by ________ the Federal funds rate. a. raising; raising b. raising; lowering c. lowering; lowering d. lowering; raising 19. Inflation targeting is employed in a. Canada b. United Kingdom c. New Zealand d. United States e. (A), (B), and (C) above f. All of the above, (A), (B), (C), and (D) 20. ________ in the domestic interest rate causes the demand for domestic assets to shift to the left and the domestic currency to ________, everything else held constant. a. A decrease; appreciate b. An increase; depreciate c. A decrease; depreciate d. An increase; appreciate 21. Which of the following is a disadvantage of the implicit nominal anchor? a. It does not rely on stable money‐inflation relationship. b. Its success heavily depends on individuals in charge. c. It does not send an immediate signal about achievement of target. d. It could impose a rigid rule. 22. A decrease in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. a. left; depreciate b. left; appreciate c. right; depreciate d. right; appreciate 23. The Economist regularly publishes an interesting application of the PPP. The ________ index calculates the exchange rate based on the theory of PPP. a. Coca‐cola b. Tall Late c. Big Mac d. Whopper 24. The theory of PPP suggests that if one country's price level falls relative to another's, its currency should a. appreciate in the short run. b. depreciate in the long run. c. appreciate in the long run. d. depreciate in the short run. 25. In a world with few impediments to capital mobility, the domestic interest rate equals the sum of the foreign interest rate and the expected depreciation of the domestic currency, a si...
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This note was uploaded on 04/25/2013 for the course ECON 2035 taught by Professor Stahl during the Spring '08 term at LSU.

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