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Question 1
1
points
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When the interest parity condition
holds, we know that the domestic interest rate
must be approximately
equal to:
the foreign interest rate.
the expected rate of depreciation of
the domestic currency.
the expected
rate of appreciation of the domestic currency.
the foreign interest rate minus the
expected rate of appreciation of the
domestic currency.
the
foreign interest rate plus the expected rate of
appreciation of the
domestic currency.
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Question 2
For
an open economy, which of the following
expressions represents private
saving
(S)?
investment plus tax
revenues less government expenditure plus net
exports, I + T - G + NX
I + T - G - NX
I + G + NX
G - T + NX - I
none of
the above
Question 3
*
*
1
points
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Suppose there is a reduction in foreign
output, Y
. This reduction in
Y
will cause
which of the following in the domestic
country?
a
reduction in output
a reduction in
consumption
a reduction in net
exports
all of the above
none of the above
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Question 4
Suppose the domestic and foreign
interest rates are i = 12%,
i
*
= 10%, and that
the domestic currency is expected to
appreciate by 3% during the coming year.
Given this information,
we know that:
individuals will only hold domestic
bonds.
individuals will only hold
foreign bonds.
individuals will be
indifferent about holding domestic or foreign
bonds.
the interest parity
condition holds.
Question 5
1
points
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Assume the Marshall-Lerner condition
holds. Which of the following would
occur as a result of a real
depreciation?
an improvement
of the trade balance
a reduction in
the quantity of imports
an increase
in domestic output
all of the above
none of the above
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Question
6
Suppose there is a real
depreciation of the domestic currency. This real
depreciation will cause:
an increase
in net exports.
an increase in
imports.
a reduction in output.
a decrease in government spending.
all of the above.
Question 7
1 points
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When the
Australian dollar appreciates, we know that, other
things equal:
the dollar is less
expensive to foreigners.
foreign
goods are less expensive to Australians.
foreign currency is more expensive to
Australians.
Australian goods are
less expensive to foreigners.
none of
the above
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Question 8
Suppose a country switches from a
flexible to a fixed exchange rate. Which of
the following will occur as a result of
this change?
Monetary
policy will become a more effective tool for
changing
output.
Fiscal policy will become a less
effective tool for changing output.
Both fiscal
and monetary policy will become more effective in
changing GDP.
Both fiscal
and monetary policy will become completely
ineffective in
changing GDP.
none of the above
1
points
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Question 9
Assume that the interest parity
condition holds and that both the expected
exchange rate and foreign interest rate
are constant. Given this information, an
increase in the domestic
interest rate will cause: