Answer:
B
4）AU.S.citizenbuysanewlyissuedshareofstockinEngland,payingforhisorderwithacheck,whichtheBritishcompanydepositsinitsownU.S.bankaccountinNewYork.Howisthistransactionaccountedforinthebalanceofpayments?
A）financialaccount,U.S.assetexport
B）currentaccount,U.S.serviceimport
C）currentaccount,Britishgoodexport
D）financialaccount,Britishassetimport
E）financialaccount,U.S.assetimport
Answer:
A
5）TheearningsofaSpanishfactorywithBritishownersare
A）countedinSpain'sGDP.
B）arepartofBritain'sGNP.
C）arecountedinBritain'sGDP.
D）arepartofSpain'sGNP.
E）OnlyAandB.
Answer:
E
6）"TheBalanceofpaymentsisalwaysbalanced."Discuss.
Answer:
True.Everyinternationaltransactionautomaticallyentersthebalanceofpaymentstwice,onceasacreditandonceasadebit.
Currentaccount+financialaccount+capitalaccount=0
7）"Thebalanceofpaymentsaccountsseldombalanceinpractice."Discuss.
Answer:
True.Themainreasonsareduetothefactthatdatacollectedorreceivedfromdifferentsourcesmaydifferincoverage,accuracy,andtiming.Inaddition,dataonservicesarenotreliableaswellasdatafromthefinancialaccount.Moreover,accuratemeasurementsofinternationalinterestanddividendreceiptsareparticularlydifficult.
8）Fillinthefollowingtable:
Answer:
Chapter13ExchangeRatesandtheForeignExchangeMarket:
AnAssetApproach
1）HowmanyBritishpoundswoulditcosttobuyapairofAmericandesignerjeanscosting$45iftheexchangerateis1.80dollarsperBritishpound?
A）10Britishpounds
B）25Britishpounds
C）20Britishpounds
D）30Britishpounds
E）40Britishpounds
Answer:
B
2）Anappreciationofacountry'scurrency,
A）decreasestherelativepriceofitsexportsandlowerstherelativepriceofitsimports.
B）raisestherelativepriceofitsexportsandraisestherelativepriceofitsimports.
C）lowerstherelativepriceofitsexportsandraisestherelativepriceofitsimports.
D）raisestherelativepriceofitsexportsandlowerstherelativepriceofitsimports.
E）Noneoftheabove.
Answer:
D
3）Whichmajoractorisatthecenteroftheforeignexchangemarket?
A）corporations
B）centralbanks
C）commercialbanks
D）non-bankfinancialinstitutions
E）Noneoftheabove.
Answer:
C
4）Whatistheexpecteddollarrateofreturnoneurodepositswithtoday'sexchangerateat$1.10pereuro,nextyear'sexpectedexchangerateat$1.166pereuro,thedollarinterestrateat10%,andtheeurointerestrateat5%?
A）10%
B）11%
C）-1%
D）0%
E）Noneoftheabove.
Answer:
B
5）Whatistheexpecteddollarrateofreturnondollardepositswithtoday'sexchangerateat$1.10pereuro,nextyear'sexpectedexchangerateat$1.165pereuro,thedollarinterestrateat10%,andtheeurointerestrateat5%?
A）10%
B）11%
C）-1%
D）0%
E）Noneoftheabove.
Answer:
A
6）Ifthedollarinterestrateis10percent,theeurointerestrateis6percent,andtheexpectedreturnondollardepreciationagainsttheeurois4percent,then
A）aninvestorshouldinvestonlyindollars.
B）aninvestorshouldinvestonlyineuros.
C）aninvestorshouldbeindifferentbetweendollarsandeuros.
D）Itisimpossibletotellgiventheinformation.
E）Alloftheabove.
Answer:
C
7）Discusstheeffectsofariseintheinterestratepaidbyeurodepositsontheexchangerate.
Answer:
Therearetwoeffectstoconsider.Ifwemaketheunrealisticassumptionthattheexpectedexchangeratewillnotchange,thenariseintheinterestratepaidbyEurodepositscausesthedollartodepreciate.However,iftheexpectedexchangerateweretorise,thenthecurrentexchangeratewouldalsorise.（Seefigure13-6fromthetext.）
8）Calculatetheinterestrateintheeurozoneifinterestparityconditionholds,forthefollowing15cases:
Answer:
Chapter14Money,InterestRates,andExchangeRates
1）Moneyincludes
A）currency.
B）checkingdepositsheldbyhouseholdsandfirms.
C）depositsintheforeignexchangemarkets.
D）BothAandB.
E）A,B,andC.
Answer:
D
2）Theaggregatemoneydemanddependson
A）theinterestrate.
B）thepricelevel.
C）realnationalincome.
D）Alloftheabove.
E）OnlyAandC.
Answer:
D
3）UsingafiguredescribingboththeU.S.moneymarketandtheforeignexchangemarket,analyzetheeffectsofatemporaryincreaseintheEuropeanmoneysupplyonthedollar/euroexchangerate.
Answer:
AnincreaseintheEuropeanmoneysupplywillreducetheinterestrateontheeuroandthuswillcausethescheduleoftheexpectedeuroreturnexpressesindollarstoshiftdown,causingareductioninthedollar/euroexchangerate,i.e.,anappreciationoftheU.S.Dollar.Theeurodepreciatesagainstthedollar.TheU.S.moneydemandandmoneysupplyarenotgoingtobeaffected,andthustheinterestrateintheU.S.willremainthesame.
4）Apermanentincreaseinacountry'smoneysupply
A）causesamorethanproportionalincreaseinitspricelevel.
B）causesalessthanproportionalincreaseinitspricelevel.
C）causesaproportionalincreaseinitspricelevel.
D）leavesitspricelevelconstantinlong-runequilibrium.
E）Noneoftheabove.
Answer:
C
5）Afterapermanentincreaseinthemoneysupply,
A）theexchangerateovershootsintheshortrun.
B）theexchangerateovershootsinthelongrun.
C）theexchangeratesmoothlydepreciatesintheshortrun.
D）theexchangeratesmoothlyappreciatesintheshortrun.
E）Noneoftheabove.
Answer:
A
6）"Althoughthepricelevelsappeartodisplayshort-runstickinessinmanycountries,achangeinthemoneysupplycreatesimmediatedemandandcostpressuresthateventuallyleadtofutureincreaseinthepricelevel."Discuss.
Answer:
Thestatementistrue.Thepressurescomefromthreemainsources:
excessdemandforoutputandlabor;inflationaryexpectations;and,rawmaterialprices.
7）Thelongruneffectsofmoneysupplychange:
A）ambiguouseffectonthelong-runvaluesoftheinterestrateorrealoutput,aproportionalchangeinthepricelevel'slong-runvalueintheoppositedirection.
B）proportionaleffectonthelong-runvaluesoftheinterestrateorrealoutput,aproportionalchangeinthepricelevel'slong-runvalueinthesamedirection.
C）noeffectonthelong-runvaluesoftheinterestrateorrealoutput,aproportionalchangeinthepricelevel'slong-runvalueinthesamedirection.
D）noeffectonthelong-runvaluesoftheinterestrateorrealoutput,nochangeinthepricelevel'slong-runvalue.
E）ambiguouseffectonthelong-runvaluesoftheinterestrateorrealoutput,Adisproportionalchangeinthepricelevel'slong-runvalueinthesamedirection.
Answer:
C
Chapter15PriceLevelsandtheExchangeRateintheLongRun
1）UnderPurchasingPowerParity,
A）E$/E=PUS/PE.
B）E$/E=PE/PES.
C）E$/E=PUS+PE.
D）E$/E=PUS-PE.
E）Noneoftheabove.
Answer:
A
2）AssumingrelativePPP,fillinthetablebelow:
Answer:
3）UnderPPP（andbytheFisherEffect）,allelseequal,
A）ariseinacountry'sexpectedinflationratewilleventuallycauseamore-thanproportionalriseintheinterestratethatdepositsofitscurrencyofferinordertoaccommodateforthehigherinflation.
B）afallinacountry'sexpectedinflationratewilleventuallycauseanequalriseintheinterestratethatdepositsofitscurrencyoffer.
C）ariseinacountry'sexpectedinflationratewilleventuallycauseanequalriseintheinterestratethatdepositsofitscurrencyoffer.
D）ariseinacountry'sexpectedinflationratewilleventuallycausealessthanproportionalriseintheinterestratethatdepositsofitscurrencyoffertoaccommodatetheriseinexpectedinflation.
E）Noneoftheabove.
Answer:
C
4）Describethechainofeventsleadingtoexchangeratedeterminationforthefollowingcases:
（a）AnIncreaseinU.S.moneysupply
（d）IncreaseingrowthrateofU.S.moneysupply
（c）IncreaseinworldrelativedemandforU.S.products
（d）IncreaseinrelativeU.S.outputsupply
Answer:
Chainofeventsleadingtoexchangeratedetermination:
=
×（Pus/PE）
IncreaseinU.S.moneysupply:
Pusrisesinproportiontothemoneysupply;qremainsthesame.Alldollarpriceswillrise（includingdollarpriceofeuro）.
IncreaseingrowthrateofU.S.moneysupply:
Inflationrate,dollarinterestrate,Pus,E,risesinproportiontoPus.
IncreaseinworldrelativedemandforU.S.products:
Efalls,andqdoesaswell.
IncreaseinrelativeU.S.outputsupply:
Dollardepreciates,lowersrel
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