ECON5002_Macroeconomics_2007 Semester 2_Quiz 5

must be approximately equal to:

the foreign interest rate.

the expected rate of depreciation of the domestic currency. the expected rate of appreciation of the domestic currency.

the foreign interest rate minus the expected rate of appreciation of the domestic currency.

the foreign interest rate plus the expected rate of appreciation of the domestic currency.

Question 2

saving (S)?

investment plus tax revenues less government expenditure plus net exports, I + T - G + NX I + T - G - NX I + G + NX

G - T + NX - I none of the above

Question 3

which of the following in the domestic country?

a reduction in output a reduction in consumption a reduction in net exports

all of the above none of the above

Question 4

Suppose the domestic and foreign interest rates are i = 12%, i = 10%, and that the domestic currency is expected to appreciate by 3% during the coming year. Given this information, we know that:

individuals will only hold domestic bonds. individuals will only hold foreign bonds.

individuals will be indifferent about holding domestic or foreign bonds.

the interest parity condition holds.

Question 5

Assume the Marshall-Lerner condition holds. Which of the following would

occur as a result of a real depreciation?

an improvement of the trade balance

a reduction in the quantity of imports

an increase in domestic output

all of the above none of the above

Question 6

depreciation will cause:

an increase in net exports. an increase in imports. a reduction in output.

a decrease in government spending. all of the above.

Question 7

When the Australian dollar appreciates, we know that, other things equal:

the dollar is less expensive to foreigners. foreign goods are less expensive to Australians. foreign currency is more expensive to Australians.

Australian goods are less expensive to foreigners. none of the above

Question 8

the following will occur as a result of this change?

Monetary policy will become a more effective tool for changing output.

Fiscal policy will become a less effective tool for changing output.

Both fiscal and monetary policy will become more effective in

changing GDP.

Both fiscal and monetary policy will become completely ineffective in changing GDP. none of the above

Question 9

exchange rate and foreign interest rate are constant. Given this information, an increase in the domestic interest rate will cause:

an increase in the exchange rate expected in the future.

an increase in the current exchange rate.

greater appreciation of the domestic currency expected in the future.

all of the above none of the above

Question 10

prefers to be the one to increase demand. prefers to be the one to appreciate its currency. prefers that other countries increase their demand.

prefers to be the one to increase taxes. prefers that other countries increase taxes.

Question 11

policy will always cause:

a rise in output.

a drop in the interest rate. a fall in the exchange rate, E.

all of the above both a. and b.

Question 12

The existence of the J-curve indicates that which of the following will occur after a depreciation?

The trade deficit will improve temporarily before it worsens. The trade deficit will worsen temporarily before it improves. The real exchange rate will fall temporarily before it rises.

The real exchange rate will rise temporarily before it falls. none of the above

Question 13

appreciation of the domestic currency, which of the following will occur?

an increase in exports a decrease in imports

an increase in net exports

an increase in demand for domestic output

none of the above

Question 14

the U.S. interest rate is greater than the U.K. interest rate. Given this

information, we know that investors expect:

the pound to depreciate.

the pound to appreciate.

the dollar-pound exchange rate to remain fixed.

the U.S. interest rate to fall.

none of the above

Question 15

a reduction in domestic income and a reduction in imports.

a reduction in imports and an increase in net exports.

the net export (NX) line in terms of output to shift up.

an increase in the demand for domestic goods.

Question 16

a reduction in the exchange rate of foreign currency for domestic

currency, E

an increase in the foreign price of goods, P*

a decrease in the domestic price of goods, P

all of the above

none of the above

Question 17

on domestic demand?

domestic income

the real exchange rate

taxes

the interest rate (r)

none of the above

Question 18

rate will cause an increase in which of the following?

investment

exports

net exports

all of the above none of the above

Question 19

and the foreign i * = 7%, we know that:

individuals will only hold foreign bonds. individuals will only hold domestic bonds.

the domestic currency is expected to appreciate by 2%. the domestic currency is expected to depreciate by 2%.

Question 20

A nominal appreciation of the Mexican peso against the Australian dollar indicates that:

the exchange rate of pesos per dollar, E, has increased. E has decreased.

the peso price of the U.K. pound has increased.

the number of units of foreign currency that one can obtain with one peso has decreased.