Question 1

For this question,use the Keynesian IS-LM model with flexible exchange rates.
Eastland's main trading partner is Westland.Suppose Westland undertakes an expansionary monetary policy.
(a)What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the short run,assuming no change in Eastland's policies?
(b)What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the long run,assuming no change in Eastland's policies?
(c)What is the effect of Westland's expansionary monetary policy on Eastland's nominal exchange rate in the short run and in the long run?

Accepted Answer

(a)Since LM(West)shifts right,West's out...

Question 2

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A)  rise; rise
B)  rise; fall
C)  fall; rise
D)  fall; fall

Question 3

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

Accepted Answer

A)  relative purchasing power parity.
B)  purchasing power parity.
C)  a Phillips curve.
D)  an aggregate supply shock.

Question 4

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

Accepted Answer

A)  rise in the short run and fall in the long run.
B)  rise in the short run and rise further in the long run.
C)  fall in the short run and rise in the long run.
D)  fall in the short run and fall further in the long run.

Question 5

Goods market equilibrium in the open economy occurs when

Accepted Answer

A)  desired saving equals desired investment.
B)  output equals desired consumption plus desired investment plus government spending.
C)  desired consumption equals desired investment.
D)  desired saving minus desired investment equals net exports.

Exam 13: Exchange Rates,business Cycles,and Macroeconomic Policy in the Open Economy

Correct Answer
verified
(a)Since LM(West)shifts right,West's out...
View Answer

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

Correct Answer
verified

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

Correct Answer
verified

An increase in domestic output would cause a in net exports and a in the exchange rate.

Correct Answer
verified

Goods market equilibrium in the open economy occurs when

Correct Answer
verified

Exam 13: Exchange Rates,business Cycles,and Macroeconomic Policy in the Open Economy

Correct Answerverified(a)Since LM(West)shifts right,West's out...View AnswerShow Answer

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

Correct AnswerverifiedShow Answer

According to the J curve,the rapid depreciation in the dollar from 1985 to 1987 caused net exports to

Correct AnswerverifiedShow Answer

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

Correct AnswerverifiedShow Answer

Goods market equilibrium in the open economy occurs when

Correct AnswerverifiedShow Answer

Correct Answer
verified
(a)Since LM(West)shifts right,West's out...
View Answer

Correct Answer
verified

Correct Answer
verified

An increase in domestic output would cause a in net exports and a in the exchange rate.

Correct Answer
verified

Correct Answer
verified