Question Details

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. "The depression in Asia and the fall in Asian exchange rates acts as a coolant to keep the U.S. engine of growth from overheating." The cooling comes about because lower Asian exchange rates 
a) increase demand for U.S. exports b) increase the cost of U.S. imports 
c) mean increased competition for U.S. producers 
d) force U.S. producers to increase aggregate supply 
3. "Last week, as arguments over the Bank's latest move rattled around the financial community, the majority view was that the Bank of Canada had blundered. The dollar's decline was what many economists call an external shock - the Asian financial crisis has sent commodity prices tumbling - and the Bank should have ....." This clipping is best completed by 
a) allowed the dollar to fall to alleviate inflationary forces 
b) allowed the dollar to fall to cushion decreases in Canadian exports 
c) protected the value of the Canadian dollar to ensure domestic stability 
d) protected the value of the Canadian dollar to cushion decreases in Canadian exports 
4. "One has to be very careful in talking about exchange rate stability to recognize that goals trade off," Lawrence H. Summers, the deputy treasury secretary, told a Senate panel last month, "and that to pursue exchange rate stability as a goal, one inevitably gives something else up." What is given up by pursuing exchange rate stability? 
a) fiscal policy b) monetary policy c) tariff policy d) incomes policy 
5. "The majority view on fixed exchange rates is that they aren't worth the cost for most countries because they can require painful actions in the domestic economy, such as ....... " This clipping is best completed with 120 
a) using an inappropriate fiscal policy when in recession 
b) using an inappropriate monetary policy when in recession 
c) the imposition of inappropriate tariffs when in recession 
d) applying inappropriate incomes policies when in recession


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