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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 for money rises, increasing its value 
c) the required tight monetary policy will decrease the demand for money 
d) lower inflation makes exports more attractive, increasing the demand for our currency 
2. "News that job creation in January was more robust than anticipated sent a signal to currency markets to expect a stepped-up fight against inflation, unleashing a bout of buying fervor for the dollar." People would buy the dollar because 
a) a stepped-up fight against inflation means higher real interest rates 
b) higher employment means higher income and so higher imports 
c) higher employment means more income and so higher demand for money 
	lower inflation means lower interest rates and so a higher demand for money 

3. "This is the reason why the fixed exchange rate system was scrapped in 1971. The U.S. had been pursuing an inflationary monetary policy to help pay for the Vietnam war and new social programs, and its trading partners did not all want to participate in it." To avoid participating in this inflation a trading partner would have to adopt a flexible exchange rate and 
a) raise its money growth rate and allow its currency to appreciate steadily 
b) raise its money growth rate and allow its currency to depreciate steadily 
c) lower its money growth rate and allow its currency to appreciate steadily 
d) lower its money growth rate and allow its currency to depreciate steadily 
4. "The report said that the dollar has already fallen in the last half-dozen years and raises the question of why things have not gone better if exchange rate depreciation is so good for the economy." The lower dollar has not stimulated this economy because it has been offset by 
a) inflation b) capital inflows 
c) a current account deficit d) contractionary monetary policy 
5. "News that U.S. job creation in January was more robust than anticipated sent a signal to currency markets to expect a stepped-up fight against inflation, unleashing a bout of buying fervor for the U.S. dollar." The main reason people were buying the U.S. dollar is because 
a) according to PPP it should deppreciate 
b) job creation increases imports which should appreciate the dollar 
c) fighting inflation involves a rise in interest rates which should appreciate the dollar 
d) fighting inflation involves decreasing the money supply by buying dollars on the foreign exchange market



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