Question Details

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 produce 15 computers or 200 snowboards. Then the U.S. has a comparative advantage in the production of 
a) computers b) snowboards 
c) both computers and snowboards d) neither computers nor snowboards. 
3. "A trade deficit, he said, is not an indication that a country has low productivity or low-quality products. It is an indication that the domestic investment rate is high relative to the rate of _______." The blank is best filled with 
a) taxation b) interest c) inflation d) national saving 
4. "At the moment, the market for the U.S. dollar is completely ignoring things like record U.S. trade deficits and the widening current account deficit. It also seems not to be afraid of the possibility of Federal Reserve rate _____. Instead, speculators appear to be counting on fiscal and monetary _____ in Japan." 
The blanks are best filled in with 109 
a) increases; tightening b) increases; easing 
c) decreases; tightening d) decreases; easing 
5. "The Fed has shared in all of the Clinton administration's interventions so far. Through last June, the most recent period for which Fed disclosures are available, its biggest single intervention came on June 24, 1994, spending yen and marks to buy $1.56 billion when the dollar ____ to 101 yen for the first time. That failed to stem the ____." The blanks are best filled with 
a) fell; rise b) fell; fall c) rose; rise d) rose: fall




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