1. Draw a diagram, similar to Figure 43.1, representing the foreign exchange
situation of China when it kept the exchange rate fixed at a target rate of $0.121
per yuan and the market equilibrium rate was higher than the target rate. Then
show with a diag
1. The current account includes which of the following?
I. payments for goods and services
II. transfer payments
III. factor income
a. I only
b. II only
c. III only
d. I and II only
e. I, II and III
2. The balance of payments on the current account plus t
1. Which of the following is a benefit of a fixed exchange rate regime?
a. certainty about the value of domestic currency
b. commitment to inflationary policies
c. no need for foreign exchange reserves
d. allows unrestricted use of monetary policy
1. According to the MIT study discussed in the module, a cap and trade system to reduce
greenhouse gas emissions in the United States would lead to
a. no significant costs.
b. significant but not overwhelming costs.
c. a loss of roughly three years real G
1. Which of the following is listed among the key sources of growth in potential output?
a. expansionary fiscal policy
b. expansionary monetary policy
c. a rightward shift of the short-run aggregate supply curve
d. investment in human capital
e. both a an
1. Which of the following is cited as an important factor preventing long-run economic growth
a. political instability
b. lack of property rights
c. unfavorable geographic conditions
d. poor health
e. all of the above
2. The convergence hypothe
1. Which of the following would cause the real exchange rate between pesos and U.S. dollars
(in terms of pesos per dollar) to decrease?
a. an increase in net capital flows from Mexico to the United States
b. an increase in the real interest rate in Mexico
1. Devaluation of a currency occurs when which of the following happens?
I. The supply of a currency with a floating exchange rate increases.
II. The demand for a currency with a floating exchange rate decreases.
III. The government decreases the fixed ex
1. Suppose Mexico discovers huge reserves of oil and starts exporting oil to the
United States. Describe how this would affect the following:
a. the nominal pesoU.S. dollar exchange rate
b. Mexican exports of other goods and services
c. Mexican imports of
1. Explain the link between a countrys growth rate, its investment spending as a
percent of GDP, and its domestic savings.
2. Which of the following is the better predictor of a future high long-run growth
rate: a high standard of living today or high lev