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1) if the multiplier in a keynesian open economy is 2.0, this is consistent with which
one of the following combinations of the marginal propensity to consume (mpc) and the
marginal propensity to import (mpm)? (assume that there is no government sector.)
a. mpc = 0.7, mpm = 0.2
b. mpc = 0.3, mpm = 0.2
c. mpc = 0.8, mpm = 0.2
d. mpc = 0.5, mpm = 0.2
2) if a u.s. citizen gives $1,000 to a french citizen by writing a check on a new york
bank for deposit to the french citizens new york bank account, the credit item in the u.s.
balance-of-payments accounts is __________ and the debit item is __________.
a. exports; unilateral transfers made
b. increase in foreign short-term private assets in the united states; exports
c. increase in foreign short-term private assets in the united states; unilateral transfers
made
d. unilateral transfers made; decrease in foreign short-term private assets in the united
states
3) the post-bretton woods international monetary system is generally thought to have
been characterized by all except one of the following features. which one does not seem
to have been a characteristic of the system?
a. there has been substantial variability in the nominal exchange rates of developed
countries, and this variability has included the phenomenon of overshooting
b. real exchange rates have been relatively constant during the period, and so the
existence of the system per se has not had real economic effects
c. countries with basically floating rates have not been completely insulated from
outside economic disturbances
d. the size of international reserves held by central banks has increased substantially
during the period
4) the increasing importance of international stock transactions most likely will
a. result in international portfolio diversification
b. facilitate the movement of financial capital to its best use
c. possibly contribute to greater world volatility in world financial markets
d. all of the above
5) the recent growth in the last 10-20 years in international bond markets
a. should result in exactly equal interest rates on two identical assets, even though the
assets are located in different countries
b. should reduce exchange rate risk
c. will likely slow down, and may even become negative
d. will likely result in a more efficient allocation of financial capital
6) the view that inflation in a country can lead to depreciation of the countrys currency
which in turn can cause further inflation is known as
a. the vicious circle hypothesis
b. the autonomous spending multiplier concept
c. the purchasing power parity problem
d. the exchange risk hypothesis
if a country has a currency board arrangement (with a 100 percent reserve system) in
place, then the countrys money supply can be increased by a __________ by the countrys
central bank.
7) a. purchase of domestic assets from domestic citizens
b. purchase of foreign (external) assets from domestic citizens
c. sale of domestic assets to domestic citizens
d. sale of foreign (external) assets to domestic citizens
