Question Details

If we are at full employment and the rate of growth of our money supply increases


1. If the U.S. money growth rate increases by two percentage points, then under a fixed exchange rate when equilibrium is reattained 
a) Canada's nominal and real exchange rates should be higher 
b) Canada's nominal and real exchange rates should be constant 
c) Canada's nominal exchange rate should be higher and real exchange rate constant 
d) Canada's nominal exchange rate should be constant and real exchange rate higher 
2. If we are at full employment and the rate of growth of our money supply increases, in the long run we should expect 
a) a fall in bond prices and our exchange rate 
b) an increase in bond prices and our exchange rate 
c) an increase in bond prices and a fall in our exchange rate 
d) a fall in bond prices and an increase in our exchange rate 
3. In countries experiencing hyperinflation we should see 
a) low interest rates and a depreciating currency 
b) high interest rates and a depreciating currency 
c) low interest rates and an appreciating currency 
d) high interest rates and an appreciating currency 
4. "In 1993, for example, the peso declined 0.6% whereas consumer prices rose 9.8% in Mexico versus just 2.5% in the United States. This led to an ______ of the peso, causing a current account _____, contributing to the forces causing the Mexican financial crisis of December 1994." The blanks are best filled with 
a) undervaluation; deficit b) undervaluation: surplus 
c) overvaluation; deficit d) overvaluation; surplus 130 
5. "An even better case study is Singapore. The Singapore Monetary Authority deliberately targets a trend appreciation in the Singapore dollar versus the U.S. dollar in order to maintain price stability." This policy implies that when the Singapore dollar appreciates by more than the target trend rate, the Singapore Monetary Authority should 
a) increase its money growth rate 
b) decrease its money growth rate 
c) hold its money growth rate constant 
d) alter the money growth rate up or down, depending on the unemployment rate



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