Question 1

In a fixed exchange rate regime,assuming perfect capital mobility,if China increases government spending to stimulate the economy,which of the following would happen in China?

Accepted Answer

A)   Capital account deficit
B)   A decrease in money supply
C)   Official settlement surplus
D)   A decrease in domestic output

Question 2

If,other things being equal,a country with a flexible exchange rate increases its money supply,this will lead to _____ in the value of the country's currency,which will tend to _____ national income.

Accepted Answer

A)   a depreciation; increase
B)   a depreciation; decrease
C)   an appreciation; increase
D)   an appreciation; decrease A

Question 3

Figure 13.1 
-Refer to Figure 13.1.In a flexible exchange rate regime,if an economy is experiencing external disequilibrium at point B,then the domestic currency will:

Accepted Answer

A)   depreciate, shifting the IS curve to the right.
B)   depreciate, shifting the IS curve to the left.
C)   appreciate, shifting the IS curve to the left.
D)   depreciate, shifting the LM curve to the right.

Question 4

"The BP curve could be vertical,if capital is perfectly mobile."

Accepted Answer

A) True 
 B)False  False

Question 5

Using the IS-LM-BP model with the perfect capital mobility assumption to answer this question.Which of the following statements is TRUE?
I.In a floating exchange rate regime,fiscal policy is effective in stimulating income.
II.In a floating exchange rate regime,monetary policy is effective in stimulating income.

Accepted Answer

A)   Only I is true.
B)   Only II is true.
C)   Both I and II are true
D)   Neither I nor II is true.

Question 6

Due to the potential for dueling fiscal policies and sharp movements in exchange rates,some countries have pursued:

Accepted Answer

A)   International policy coordination.
B)   Protectionist tariffs
C)   Isolationism policies
D)   World bank trade agreements

Question 7

The factor that shifts the BP curve is a change in perception of asset substitutability.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that North Korea has closed off its capital market from the rest of the world.No resident is allowed to invest outside North Korea and no foreigner is allowed to invest in North Korea's capital market.In this case,the BP curve will be:

Accepted Answer

A)   upward-sloping curve
B)   downward-sloping curve
C)   horizontal curve
D)   vertical curve

Question 9

"The assumptions of perfect substitutability of assets and perfect capital mobility mean that interest rates on domestic assets and comparable foreign assets will be equalized."

Accepted Answer

A) True 
 B)False  True

Question 10

Figure 13.2 
-Refer to Figure 13.2.In a fixed exchange rate regime,if an economy is experiencing external disequilibrium at point B,then to peg the exchange rate the central bank has to:

Accepted Answer

A)   buy domestic currency, sell foreign currency, and shift the IS to the left.
B)   buy foreign currency, sell domestic currency, and shift the LM to the right.
C)   buy domestic currency, sell foreign currency, and shift the LM to the left.
D)   buy foreign currency, sell domestic currency, and shift the IS to the right.

Question 11

Suppose the central bank increases the money supply.Then:

Accepted Answer

A)   The IS curve shifts right
B)   The IS curve shifts left
C)   The LM curve shifts right
D)   The LM curve shifts left

Question 12

When the leakages are ________ the injections,then the value of income received from producing goods and services will equal to total spending.

Accepted Answer

A)   Greater than
B)   Less than
C)   Equal to
D)   The sum of

Question 13

Which of the following is not one of the three equilibrium conditions in an IS-LM-BP model?

Accepted Answer

A)   Goods market equilibrium
B)   Balance of payments equilibrium
C)   Currency equilibrium
D)   Money market equilibrium

Question 14

If the Fed decreases money supply,

Accepted Answer

A)   the IS curve will shift to the right.
B)   the IS curve will shift to the left.
C)   the LM curve will shift to the right.
D)   the LM curve will shift to the left.

Question 15

Figure 13.2 2, A)  there will be official settlement deficit which pressures the domestic currency to depreciate. B)  there will be official settlement deficit which pressures the domestic currency to appreciate. C)  there will be official settlement surplus which pressures the domestic currency to depreciate. D)  there will be official settlement surplus which pressures the domestic currency to appreciate." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13.2.Starting from an equilibrium point A,if the IS curve shifts to the left to IS2,

Accepted Answer

A)   there will be official settlement deficit which pressures the domestic currency to depreciate.
B)   there will be official settlement deficit which pressures the domestic currency to appreciate.
C)   there will be official settlement surplus which pressures the domestic currency to depreciate.
D)   there will be official settlement surplus which pressures the domestic currency to appreciate.

Question 16

Suppose that the government uses an expansionary fiscal policy.Then:

Accepted Answer

A)   The IS curve shifts right
B)   The IS curve shifts left
C)   The LM curve shifts right
D)   The LM curve shifts left

Question 17

Considering the internal balance in an economy,which of the following could lead to lower interest rate and higher income?

Accepted Answer

A)   An increase in government spending
B)   A depreciation of domestic currency
C)   An increase in money supply
D)   A decrease in money supply

Question 18

With fixed exchange rates,a country cannot conduct ________ to alter domestic income.

Accepted Answer

A)   Fiscal policy
B)   Monetary policy
C)   Currency devaluations
D)   Currency appreciation

Question 19

Suppose the central bank pursues restrictive monetary policy.Then:

Accepted Answer

A)   The IS curve shifts right
B)   The IS curve shifts left
C)   The LM curve shifts right
D)   The LM curve shifts left

Question 20

Which of the following factors shifts the LM curve to the left?

Accepted Answer

A)   An increase in money supply
B)   An decrease in money supply
C)   An increase in government spending
D)   A depreciation of domestic currency

Exam 13: The Is-Lm-Bp Approach

In a fixed exchange rate regime,assuming perfect capital mobility,if China increases government spending to stimulate the economy,which of the following would happen in China?

Correct Answer
verified

If,other things being equal,a country with a flexible exchange rate increases its money supply,this will lead to _ in the value of the country's currency,which will tend to _ national income.

Correct Answer
verified
A

Figure 13.1 -Refer to Figure 13.1.In a flexible exchange rate regime,if an economy is experiencing external disequilibrium at point B,then the domestic currency will:

Correct Answer
verified

"The BP curve could be vertical,if capital is perfectly mobile."

Correct Answer
verified
False

Correct Answer
verified

Due to the potential for dueling fiscal policies and sharp movements in exchange rates,some countries have pursued:

Correct Answer
verified

The factor that shifts the BP curve is a change in perception of asset substitutability.

Correct Answer
verified

Suppose that North Korea has closed off its capital market from the rest of the world.No resident is allowed to invest outside North Korea and no foreigner is allowed to invest in North Korea's capital market.In this case,the BP curve will be:

Correct Answer
verified

"The assumptions of perfect substitutability of assets and perfect capital mobility mean that interest rates on domestic assets and comparable foreign assets will be equalized."

Correct Answer
verified
True

Figure 13.2 -Refer to Figure 13.2.In a fixed exchange rate regime,if an economy is experiencing external disequilibrium at point B,then to peg the exchange rate the central bank has to:

Correct Answer
verified

Suppose the central bank increases the money supply.Then:

Correct Answer
verified

When the leakages are ________ the injections,then the value of income received from producing goods and services will equal to total spending.

Correct Answer
verified

Which of the following is not one of the three equilibrium conditions in an IS-LM-BP model?

Correct Answer
verified

If the Fed decreases money supply,

Correct Answer
verified

Figure 13.2 -Refer to Figure 13.2.Starting from an equilibrium point A,if the IS curve shifts to the left to IS₂,

Correct Answer
verified

Suppose that the government uses an expansionary fiscal policy.Then:

Correct Answer
verified

Considering the internal balance in an economy,which of the following could lead to lower interest rate and higher income?

Correct Answer
verified

With fixed exchange rates,a country cannot conduct ________ to alter domestic income.

Correct Answer
verified

Suppose the central bank pursues restrictive monetary policy.Then:

Correct Answer
verified

Which of the following factors shifts the LM curve to the left?

Correct Answer
verified

Exam 13: The Is-Lm-Bp Approach

In a fixed exchange rate regime,assuming perfect capital mobility,if China increases government spending to stimulate the economy,which of the following would happen in China?

Correct AnswerverifiedShow Answer

If,other things being equal,a country with a flexible exchange rate increases its money supply,this will lead to _____ in the value of the country's currency,which will tend to _____ national income.

Correct AnswerverifiedA

Figure 13.1 -Refer to Figure 13.1.In a flexible exchange rate regime,if an economy is experiencing external disequilibrium at point B,then the domestic currency will:

Correct AnswerverifiedShow Answer

"The BP curve could be vertical,if capital is perfectly mobile."

Correct AnswerverifiedFalse

Correct AnswerverifiedShow Answer

Due to the potential for dueling fiscal policies and sharp movements in exchange rates,some countries have pursued:

Correct AnswerverifiedShow Answer

The factor that shifts the BP curve is a change in perception of asset substitutability.

Correct AnswerverifiedShow Answer

Suppose that North Korea has closed off its capital market from the rest of the world.No resident is allowed to invest outside North Korea and no foreigner is allowed to invest in North Korea's capital market.In this case,the BP curve will be:

Correct AnswerverifiedShow Answer

"The assumptions of perfect substitutability of assets and perfect capital mobility mean that interest rates on domestic assets and comparable foreign assets will be equalized."

Correct AnswerverifiedTrue

Figure 13.2 -Refer to Figure 13.2.In a fixed exchange rate regime,if an economy is experiencing external disequilibrium at point B,then to peg the exchange rate the central bank has to:

Correct AnswerverifiedShow Answer

Suppose the central bank increases the money supply.Then:

Correct AnswerverifiedShow Answer

When the leakages are ________ the injections,then the value of income received from producing goods and services will equal to total spending.

Correct AnswerverifiedShow Answer

Which of the following is not one of the three equilibrium conditions in an IS-LM-BP model?

Correct AnswerverifiedShow Answer

If the Fed decreases money supply,

Correct AnswerverifiedShow Answer

Figure 13.2 -Refer to Figure 13.2.Starting from an equilibrium point A,if the IS curve shifts to the left to IS2,

Correct AnswerverifiedShow Answer

Suppose that the government uses an expansionary fiscal policy.Then:

Correct AnswerverifiedShow Answer

Considering the internal balance in an economy,which of the following could lead to lower interest rate and higher income?

Correct AnswerverifiedShow Answer

With fixed exchange rates,a country cannot conduct ________ to alter domestic income.

Correct AnswerverifiedShow Answer

Suppose the central bank pursues restrictive monetary policy.Then:

Correct AnswerverifiedShow Answer

Which of the following factors shifts the LM curve to the left?

Correct AnswerverifiedShow Answer

Correct Answer
verified

If,other things being equal,a country with a flexible exchange rate increases its money supply,this will lead to _ in the value of the country's currency,which will tend to _ national income.

Correct Answer
verified
A

Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Figure 13.2 -Refer to Figure 13.2.Starting from an equilibrium point A,if the IS curve shifts to the left to IS₂,

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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