Question Details

What is the U.S. money growth rate 



1. "The central bank can defend the long-term external value of our currency only by defending its internal value." The rationale behind this statement is that high exchange rates result from 
a) high prices b) low inflation c) high inflation d) low real interest rates 
2. "There is no historical evidence of countries finding enduring prosperity in a strategy of currency devaluation: We cannot devalue our way to the kind of competitive, high-performance economy we want." The logic behind this is that 
a) exchange rate devaluations decrease competition 
b) high-performance economies imply rising currency values 
c) currency devaluations are usually offset by domestic price increases 
d) currency devaluations are usually offset by domestic price decreases 
3. "Economists claim that a strong dollar is a result of the Fed's pitched battle against inflation." The rationale for this claim is that 
a) according to PPP, if inflation becomes lower than foreign inflation, the exchange rate should rise 
b) to battle inflation the Fed raises the real interest rate, causing capital inflows which bid up the exchange rate 
c) lower inflation means exports go up and imports down, creating a balance of payments surplus which bids up the value of the dollar 
d) all of the above 
4. Suppose the U.S. and Canadian economies, on a flexible exchange rate, are both experiencing a real growth rate of 3 percent, but that the Canadian money supply growth rate is 10 percent compared to only 6 percent in the U.S. Currently, 1 U.S. dollar buys 1.2 Canadian dollars. How many Canadian dollars would you guess 1 U.S. dollar will buy two years from now? 
a) 1.2 or less b) more than 1.2 but not more than 1.25 
c) more than 1.25 but not more than 1.3 d) more than 1.3 
5. Suppose the real rates of growth in the United States and Canada are both 2 percent, inflation in Canada is 9 percent and the U.S. dollar is appreciating against the Canadian dollar by 4 percent per year. What is the U.S. money growth rate ? 
a) 4% or less b) more than 4% but not more than 6% 
c) more than 6% but not more than 8% d) more than 8%



Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help