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12 Feb 2019

1. If the exchange rate for $1 goes from 1.33 euros to 1.34 euros, the dollar has appreciated.

True False

2. The interest parity condition is relevant in the

A.
short run.

B.
long run.

C.
both of the above.

D.
neither of the above.

3. A change in the discount rate shifts the supply of reserves.

True

False

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Elin HesselLv2

13 Feb 2019

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Related questions

22. The quantity equation of money supply is not true if velocity is not constant.

True

False

24. A decrease in which of the following factors (from the perspective of the domestic country) would cause a depreciation of the domestic currency in the short run?

	A.	foreign interest rate
	B.	relative productivity
	C.	relative expected export demand
	D.	all of the above

27. According to both Keynes and Friedman, the demand for money decreases with a decrease in

	A.	the interest rate.
	B.	the return on bonds minus the return on money.
	C.	permanent income.
	D.	the spread between the interest rates on bonds and money.

28. According to the interest parity condition, the domestic interest rate falls if the _____ rises, ceteris paribus.

	A.	foreign interest rate
	B.	exchange rate
	C.	expected future exchange rate
	D.	none of the above

29. A difference between m₁ and m₂ is that m₂ takes ____ into account.

	A.	excess reserves
	B.	the currency ratio
	C.	time deposits
	D.	coins and notes

Assume the following initial situation:

R = 3% (annual domestic interest rate), R* = 5% (annual foreign interest rate) E = 2 (current spot rate; expressed as the price of pound in terms of us dollar)

If the domestic money supply increases by 10% and drive the interest rate down by 1% in the short run. What would be the responses of the nominal exchange rate in the short run and long run (show the values of exchange rate in the short and long run)?

(Instructions: 1. domestic interest rate will return to the initial level in the long run, 3% â 2% â 3% 2. Expectation on exchange rate has a one for one relationship with the money supply change)]

Question 13 (1 point)

A firm that has not shut down in the short run will not shut down in response to a decrease in the marginal costs.

Question 13 options:

	1) True
	2) False

Question 14 (1 point)

Saved

A firm earns a positive economic profit when the market price exceeds its marginal cost.

Question 14 options:

	1) True
	2) False

Question 15 (1 point)

For prices greater than the minimum value of average variable cost, the firm's short-run supply curve coincides with its short-run marginal cost curve.

Question 15 options:

	1) True
	2) False

Question 16 (1 point)

Saved

The number of firms in an industry is fixed in the short run.

Question 16 options:

	1) True
	2) False

Question 17 (1 point)

When a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs.

Question 17 options:

	1) True
	2) False

Question 18 (1 point)

Saved

If the market price is currently above the shut-down price, the firm will be making positive profits.

Question 18 options:

	1) True
	2) False

Question 19 (1 point)

A competitive firm's supply curve is identical to its marginal cost curve.

Question 19 options:

	1) True
	2) False

Question 20 (1 point)

Saved

There is no reason for a competitive firm to stay in business if it is making zero profits.

Question 20 options:

	1) True
	2) False

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	A.	short run.
	B.	long run.
	C.	both of the above.
	D.	neither of the above.