Recent Question

The Fed has shared in all of the Clinton administration's interventions 1. Suppose the central bank has intervened in the foreign exchange market to fix the exchange rate by selling $4 billion. If the current account deficit is $10 billion, the capital account balance is a surplus of a) $4b b) $6b c) $10b d) $14b 2. Suppose for a cost of $100,000 the U.S. can produce 20 computers or 250 snowboards and for the same cost France can prod ...

Other / Other 11 May 2016

The lower dollar has not stimulated this economy because it has been offset by 1. "In three to five years, the U.S. dollar will presumably resume its long-term slide unless Washington reverses its economic policies of the post-Second World War period and takes a tough stand against inflation." A tough stand against inflation would stop the slide of the dollar because a) capital inflows will decrease b) with less inflation the demand f ...

Other / Other 11 May 2016

The missing part of this clipping is best filled by 1. “This month’s slight uptick in the Australian unemployment rate to 4.5 percent shouldn’t be taken too literally. It’s probably just a blip. But it’s a timely reminder that 99 unemployment shouldn’t fall much lower. If it does, it won’t be a good sign.” We would not want unemployment to fall much lower because a) resources will ...

Other / Other 11 May 2016

The narrowing of the trade deficit caused the price of bonds to rise because 1. "They conclude that in many Canadian export sectors the devaluation of the Canadian dollar will not greatly aid sales. Progress will be slow, they stated, because any U.S. slowdown would overshadow the price effects of the devalued dollar." Canadian export sales will not jump because a) American imports fall during a recession b) American exports will domi ...

Other / Other 11 May 2016

Why would the Chinese central bank be against higher interest rates “China’s central bank, the People’s Bank of China, has raised the deposit reserve ratio requirement for financial institutions from 6 percent to 7 percent to stem rapid lending growth. An analyst said the central bank had few options because recent verbal admonishments against excessive lending had proved ineffective and raising interest rates would have ...

Other / Other 11 May 2016

A budget deficit leads to a shortfall in domestic savings relative to investment because 1. "While some in the U.S. put the trade deficit down to failing U.S. competitiveness, or protectionist policies abroad, he claims its genesis lies in the budget deficit, and the consequent shortfall in U.S. domestic saving relative to investment." Explain how the U.S. budget deficit could be responsible for the U.S. trade deficit. The U.S. budget def ...

Other / Other 11 May 2016

Expansionary monetary policy under fixed exchange rates in the short run tends to 1. A country that is buying its own currency to maintain a given exchange rate a) has a flexible exchange rate b) has an undervalued currency c) has a balance of payments surplus d) is automatically decreasing its money supply 2. Expansionary monetary policy under fixed exchange rates in the short run tends to a) reduce an inflationary gap and reduce ...

Other / Other 11 May 2016

What must currently be happening with regard to the exchange rate 1. “Cheng said that China should shift part of its $US 1.4 trillion in foreign exchange reserves out of U.S. dollars and into other, stronger currencies. But Gilmore replied that this would cause a run on the dollar and China will not drive a run on the dollar, not now and not ever.” What is the reasoning behind the view that China will never drive a run on the ...

Other / Other 11 May 2016

Because Canadian inflation will continue to accelerate 1. "Economists and important figures in the U.S. government have been debating whether it is government spending deficits, restrictive monetary policy, capital inflows, or anticipated inflation that is the real culprit for interest-rate increases in the U.S." Which of these could definitely not have caused high interest rates? a) capital inflows b) anticipated inflation c) restric ...

Other / Other 11 May 2016

Suppose that to produce 10 gallons of wine the United States must forego 3 tons of strawberries 1. "The following, attributed to Abraham Lincoln, sums up this argument: 'I don't know much about the tariff. But I do know this much. When we buy manufactured goods abroad we get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money.'" Which of the following is not a good coun ...

Other / Other 11 May 2016