Recent Question

If domestic costs rose above foreign costs then 1. "If Ukrainian prices hadn't risen in line with Russia, market forces would have sucked Ukraine dry of food and consumer goods as Russians sought cheaper goods than they could get at home." How would this result have been different if both areas had their own currencies? a) the Ukraine currency would have fallen and the Russian currency risen b) the Ukraine currency would have risen an ...

Other / Other 11 May 2016

What are the factors behind the recent decline in the value of the dollar 1. "The 4.8 percent yield on Japanese short-term securities is due to a strong yen; Australia's 16.1 percent yield is a product of its weak dollar." The most reasonable explanation for these numbers is that 132 a) Japan has a low inflation rate and Australia a high inflation rate b) interest rates are not relevant here - Japan must have a balance of payments sur ...

Other / Other 11 May 2016

What does PPP predict is the 1980 exchange rate 1. Suppose the American and Canadian economies are in equilibrium with a flexible exchange rate of 1.3 $C/$US and a common inflation rate of 5 percent. If the U.S. increases its money growth rate by two percentage points, when these economies have settled to their new mutual equilibrium the exchange rate ($C/$US) a) will be unchanged in both nominal and real terms b) will be unchanged in n ...

Other / Other 11 May 2016

Before the Europeans increased their investment in our bonds 1. To produce 2 tons of steel the U.S. must forego 10 tons of bricks and to produce 5 tons of steel Canada must forego 30 tons of bricks. Canada and the U.S. will specialize in their comparative advantage and trade if the prevailing price of a ton of steel is, in tons of bricks, between a) 2 and 5 b) 5 and 6 c) 5 and 15 d) 10 and 30 2. To produce 2 TVs the U.S. must forego 1 ...

Other / Other 11 May 2016

How are the Asian central banks financing them 1. “The Czech central bank is trying to stop the government issuing the country’s maiden sovereign international bond [ie, the first bond issued by the Czech government in a foreign currency (Euros)] next year because it fears it could create another exchange rate bubble.” Why would this bond issue create a rise in the value of the Czech currency? a) exports should rise ...

Other / Other 11 May 2016

The Bank of Canada's actual path is somewhere in the middle 1. "As interest rates rose by record leaps this week, the dollar continued its slide." What is most likely going on here? a) the rise in interest rates is decreasing exports b) the rise in interest rates is decreasing capital inflows c) the slide in the dollar must be causing the Fed to increase interest rates d) the slide in the dollar is increasing the cost of living and ...

Other / Other 11 May 2016

The Fed's tight monetary policy drove up interest rates in an attempt to smother inflation 1. "By avoiding policies to slow the growth of domestic demand and instead forcing the U.S. dollar to serve as the adjustment vehicle in narrowing the trade deficit, the United States will ensure that the global economic landscape during the next five years will be turned upside down." The main implication of this is that a) the U.S. dollar will ris ...

Other / Other 11 May 2016

The majority view on fixed exchange rates is that they aren't worth the cost for most countries 1. "But adopting fixed exchange rates entails a steep price, namely, that the government is prohibited from using ________to fight slumps. The upshot is a neat illustration of the "no-free-lunch" maxim so beloved by economists." The blank is best filled in with a) fiscal policy b) tariff policy c) monetary policy d) supply-side policy 2. "T ...

Other / Other 11 May 2016

Are too many Americans at work these days for the economy's own good 1. "Even some Fed critics are reluctant to change its structure. Mr. Feldstein warns that "substituting political judgements for economic judgements brings a built-in bias toward ______." The blank is most appropriately filled with a) the rich b) inflation c) high taxes d) unemployment 2. "It is economists who repeat their own mistakes, because their calculations a ...

Other / Other 11 May 2016

Economists who a week ago were talking about economic sluggishness 1. "Bonds were at the mercy of the dollar this week as a mid-week currency slump sent ..........." Complete this clipping. a) interest rates higher as the Fed protected the dollar b) interest rates lower as the Fed protected the dollar c) bond prices higher as the Fed bought dollars on the foreign exchange market d) bond prices lower as the Fed sold dollars on the ...

Other / Other 11 May 2016