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In an open economy with global capital markets and mobile capital:

a. a country has control over both its domestic money supply and exchange rate.
b. a country has control of either its domestic money supply or exchange, but not both.
c. a country only has control over its domestic money supply.
d. a country only has control over its exchange rate.

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If rising inflation in an economy with fixed exchange rates puts downward pressure on the value of the currency, what action must the government take to maintain fixed exchange rates?

 
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d) buy up more foreign currency, using money that it prints

If Costa Rica can produce 50,000 pounds of bananas a day, while Nicaragua can produce 30,000 pounds of bananas a day, which statement must be true?

 
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c) Costa Rica has a comparative advantage over Nicaragua in banana production.
 
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46. Other things being equal, an increase in the supply of money

 

a. increases the price level.
 

b. reduces aggregate demand.
 

c. generate significant changes in relative prices.
 

d. reduces the amount of money balances.

 

47. As global financial markets become more intertwined, the Fed has

 

a. more control over fiscal policy.
 

b. less control over monetary policy.
 

c. more control over monetary policy.
 

d. less control over fiscal policy.

 

48. According to the quantity theory of money,

 

 

a. the velocity of money is the least stable factor in the monetary analysis.
 

b. a change in the money supply can lead only to a proportionate change in the price level.
 

c. price level changes can best be explained by Keynesian analysis.
 

d. the rate of inflation is not related to changes in the money supply.

6) Which of the following would be the most pessimistic with regard to the ability of the government to reduce unemployment by monetary of fiscal policy? a. Monetarists b. Keynesians c. rational expectations school d. Klingons e. supply-siders

7) Which of the following would tend to increase a country's imports?

a. an increase in the domestic rate of interest

b. an increase in the exchange rate ( i.e an increase in the price of foreign exchange)

c. an increase in domestic income

d. an increase in foreign prices

e. none of the above

8) Which of the following would decrease a country's exports ?

a. a decrease in the exchange rate( i.e a an decrease in the price of foreign exchange)

b. an increase in the domestic rate of interest

c. an increase in domestic price

d. an increase in domestic income

e. none of the above

9) Which of the following would indicate a conflict between the goals of full employment and balance of payments equilibrium ?

a. inflation and a balance of payments deficit

b. unemployment and a balance of payments surplus

c. unemployment and a balance of payments deficit

d. full employment and a balance of payments surplus

e. none of the above would indicate a conflict

10) Which of the following would result if the county's currency depreciated ? a. an increase in both imports and exports

b. a decrease in both imports and exports

c. an increase in imports and a decrease in exports

d. a decrease in imports and an increase in exports

e. a decrease in net capital inflows

11) Under the gold standard, if a nation had a balance of payments surplus, the difference would have been resolved by:

a. gold shipments from the surplus to the deficit country

b.gold shipments from the deficit to the surplus country

c. appreciation of the country's currency in the foreign exchange markets

d. depreciation of the country's currency in the foreign exchange markets

e. human sacrifices in the deficit country

12.Under a system of flexible exchange rates, if a nation had a balance of payments deficit, which of the following would occur ?

a. gold shipment from the surplus to the deficit country

b. gold shipments from the deficit to the surplus country

c. appreciation of the current in the foreign exchange markets

d. depreciation of the currency in the foreign exchange markets

e. the money supply increase

13. Depreciation of a country's currency would generally result in:

a. the aggregate demand curve shifting to the left

b. the aggregate demand curve shifting to the right

c. the aggregate supply curve shifting to the left

d. the aggregate supply curve shifting to the right.

e) both A and B

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