Chapter 3: Practice Problems
1. Suppose there is a reduction in aggregate real money demand, that
is, a negative shift in the aggregate real money demand function.
Trace the short-run and long-run efects on the exchange rate,
interest rate, and price leve
Chapter 16/4: Price Levels and the Exchange Rate In the Long Run
What economic factors lie behind long-term movements in the exchange rates?
The theory of purchasing power parity (PPP) explains movements in the exchange
rate between two countries currenc
Chapter 17/5: Output and The Exchange Rate in the Short Run
Previous analysis: Y is treated as an exogenous variable in exchange rate determination.
In reality both Y and E are determined simultaneously.
Purpose: To develop a short-run model where E and Y
Chapter 20: Optimum currency Areas and the European Experience
THE EVOLUTION OF THE EUROPEAN SINGLE CURRENCY
During the oating exchange rate period EU countries tried to reduce the uctuations of their
currencies against each other. These eforts resulted i
Chapter 1: National Income Accounting and the Balance of Payments
Microeconomics: studies this problem from the perspective of individual rms and customers
Works from the bottom up to show how individual economic actors collectively
determine how resourc
Chapter 3/15: MONEY, INTEREST RATES, AND EXCHANGE RATES
We know how the exchange rate between currencies depends on two factors, the interest that
can be earned on deposits of those currencies and the expected future exchange rate.
Exchange rates are the
Chapter 19: International Monetary Systems
Goals of macroeconomic policiesinternal and external balance
Gold standard era 18701914
International monetary system during interwar period 19181939
Bretton Woods system of fixed exchange rates 1944
Chapter 18: Fixed Exchange Rates and Foreign Exchange Intervention
CENTRAL BANK INTERVENTION AND THE MONEY SUPPLY
How does Central Bank intervention affect the foreign exchange market?
To understand the effects of central bank intervention in the foreign
Chapter 2/14: Exchange Rates and The Foreign Exchange Market: An Asset Approach
Foreign exchange rates determination in the Short Run
Exchange rate: the price of one currency in terms of another
o Exchange rates are among the most important prices in an
Chapter 18 Practice Problems
3. Describe the efects of an unexpected devaluation on the central banks
balance sheet and on the balance of payments account.
4. Explain why devaluation improves the current account in this chapters
6. Can you think of