05 Jun Everything else fundamental remaining unchange
Question
QUESTION 1
Everything else fundamental remaining unchanged, the monetary approach predicts that a 5 percent cut in the money supply by the Fed will result in:
inflation in the U.S. economy.
a decrease in the market rate of interest in the U.S.
an increase in foreign investments by the Americans.
an appreciation of the U.S. dollar vis-à-vis other currencies.
QUESTION 2
Which of the following is a controversial proposal for reducing the frequency of financial crises?
Countries should pursue sound macroeconomic policies.
Countries should improve the quality and timeliness of the data they report on their international reserves and debt.
Developing countries should increase the use of controls or impediments to capital inflows.
Countries should strive for better supervision and regulation of their banks.
QUESTION 3
Absolute PPP holds for a product bundle if:
the law of diminishing returns holds for all the goods in the bundle.
the goods are traded with minimum transportation costs.
there exists free trade in all the commodities.
the law of one price holds for each of the goods in the bundle.
QUESTION 4
Consider the interaction between U.S. dollars and U.K. pounds. When the forward premium on the dollar is zero, it means:
the current spot price of dollars equals the future spot price of dollars.
the future spot price of dollars will be equal to the current forward price of dollars.
the current forward price of dollars equals the current spot price of dollars.
the spot exchange rate value of the pound is moving toward $1 per pound.
QUESTION 5
Which of the following is considered a capital inflow?
A sale of U.S. financial assets to a foreign buyer
A loan from a U.S. bank to a foreign borrower
A purchase of foreign financial assets by a U.S. buyer
A U.S. citizen’s repayment of a loan from a foreign bank
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