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D theinflationrate 39

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Unformatted text preview: ce in Nominal Year England Germany Exchange Rate 2005 6 pounds 6 euros 1.2 euros per pound 2007 8 pounds 12 euros 1.5 euros per pound 2010 10 pounds 13 euros 1.0 euros per pound 2012 12 pounds 15 euros 0.75 euros per pound 33. In which year, if any, does purchasing power parity hold? A. 2010 B. 2005 C. 2007 *** D. 2012 E. [None of the above] 34. In which year is the euro strongest against the pound? A. 2010 B. 2005 C. 2007 D. 2012 *** 35. John operates a restaurant in a country that is experiencing hyperinflation. Every day, after the restaurant closes, he immediately goes and buys the ingredients he needs for the next day with the cash he made the same day to prevent the money from losing value. This is an example of _______ . A. unit‐of‐account cost B. shoe leather cost *** C. menu cost D. relative price distortion 36. You can buy 1 kilogram potatoes for 4 euros in Paris and for 500 yen in Tokyo. If the nominal exchange rate is 90 yen per euro, which of the following is NOT true? A. The real exchange rate is 0.72 kilogram Japanese potatoes per one kilogram French potatoes. B. The real exchange rate is 1.39 kilogram French potatoes per one kilogram Japanese potatoes. C. In May 2013 you can trade each yen for about .011 euro. D. Purchasing power parity holds in this case. *** 37. (Consider the open market macro model.) If NCO increases, then the _______ loanable funds will _______ . A. supply of; increase B. supply of; decrease C. demand for; increase *** D. demand for; decrease E. [There is no relationship between NCO and the loanable funds market] 38. The Federal Reserve’s primary tool for changing the money supply is A. the reserve requirement. B. open market operations. *** C. the discount rate. D. the inflation rate. 39. (Consider the open market macro model.) If US government imposes a severe quota on all tomatoes produced outside the US, which of the following happens in the foreign currency exchange market? A. The supply curve shifts to the right. B. The demand curve shifts to the right. *** C. The supply curv...
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