1. The exchange rate between currencies depends on
2.
the interest rate that can be earned on deposits of those currencies.
the interest rate that can be earned on deposits of those currencies and the expected
future exchange rate.
the expected future exchange rate.
national output.
the interest rate that can be earned on deposits of those countries and the national output.
6 points
QUESTION 2
1. Which one of the following statements is the MOST accurate?
2.
A rise in the average value of transactions carried out by a household or a firm causes its
demand for money to fall.
A reduction in the average value of transactions carried out by a household or a firm
causes its demand for money to rise.
A rise in the average value of transactions carried out by a household or a firm causes its
demand for money to rise.
A rise in the average value of transactions carried out by a household or a firm causes its
demand for real money to rise.
a decrease in the average value of transactions carried out by a household or a firm causes
its demand for real money to rise.
6 points
QUESTION 3
1. An increase in
2.
nominal output raises the interest rate while a fall in real output lowers the interest rate,
given the price level and the money supply.
real output decreases the interest rate while a fall in real output increases the interest
rate, given the price level.
real output raises the interest rate while a fall in real output lowers the interest rate, given
the money supply.
nominal output raises the interest rate while a fall in real output lowers the interest rate,
given the price level.
real output raises the interest rate while a fall in real output lowers the interest rate, given
the price level and the money supply.
6 points
QUESTION 4
1. A reduction in a country’s money supply causes
2.
its currency to depreciate in the foreign exchange market.
its currency to appreciate in the foreign exchange market.
does not affect its currency in the foreign market.
does affect its currency in the foreign market in an ambiguous manor.
affects other countries currency in the foreign market.
6 points
QUESTION 5
1. The long run effects of money supply change
2.
ambiguous effect on the long-run values of the interest rate or real output, a proportional
change in the price level’s long-run value in the opposite direction.
proportional effect on the long-run values of the interest rate or real output, a
proportional change in the price level’s long-run value in the same direction.
no effect on the long-run values of the interest rate or real output, a proportional change
in the price level’s long-run value in the same direction.
no effect on the long-run values of the interest rate or real output, no change in the price
level’s long-run value.
ambiguous effect on the long-run values of the interest rate or real output, A
disproportional change in the price level’s long-run value in the same direction.
QUESTION 6
1. Michael Woodford says the following is an advantage of interest-rate instruments for
central banks.
2.
Conduct monetary policy without inflation.
Conduct monetary policy even if checking deposits pay interest at competitive rates.
Conduct monetary policy without government approval.
Conduct monetary policy with consumers in mind.
Conduct monetary policy with workers in mind.
in Chile in 2012.
in Eastern Europe in the 1990s.
in Western Europe in the 1980s.
in Germany in 20013.
2.
