Set of flashcards Macro Maribor

Flashcards	26
Language	English
Category	Macro-Economics
Level	University
Created / Updated	06.12.2016 / 06.12.2016
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In 1990, Britain joined the ERM. If the German Bundesbank increased interest rates, assuming Britain maintains its exchange rate peg:

the British would be forced to increase their interest rates

the British would increase their money supply

the British would have to lower their interest rates

the British government would have to use expansionary fiscal policy

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the British would be forced to increase their interest rates

the British would increase their money supply

the British would have to lower their interest rates

the British government would have to use expansionary fiscal policy

The greater the degree of economic integration between markets in the home country and the base country:

the greater the volume of transactions and the greater the benefit to the home country of fixed exchange rates

the smaller the volume of transactions and the lesser the benefit to the home country of fixed exchange rates

the greater the volume of transactions and the greater the benefit to the home country of flexible exchange rates

the less important the volume of transactions and the greater the importance of ethnic similarities

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the greater the volume of transactions and the greater the benefit to the home country of fixed exchange rates

the smaller the volume of transactions and the lesser the benefit to the home country of fixed exchange rates

the greater the volume of transactions and the greater the benefit to the home country of flexible exchange rates

the less important the volume of transactions and the greater the importance of ethnic similarities

Why do symmetric shocks not disturb fixed exchange rate systems?

Symmetric shocks happen only once and cause a one-time shift in interest rates

Symmetric shocks imply differences in rates of interest, which is irrelevant to fixed exchange rate systems

A demand shock can easily be dealt with using domestic policies that do not involve other nations

Symmetric shocks require the same medicine in both economies, so monetary policy will be in a direction to help both situations

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Symmetric shocks happen only once and cause a one-time shift in interest rates

Symmetric shocks imply differences in rates of interest, which is irrelevant to fixed exchange rate systems

A demand shock can easily be dealt with using domestic policies that do not involve other nations

Symmetric shocks require the same medicine in both economies, so monetary policy will be in a direction to help both situations

What is the most powerful argument against a fixed exchange rate?

The nation must administer the rates at all currency exchange venues, and it is expensive to do

The nation usually gets opposition from other trading partners who are excluded

The nation has to have a large store of gold on hand to exchange at fixed rates

The nation gives up its ability to control its money supply and affect its own interest rates

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The nation must administer the rates at all currency exchange venues, and it is expensive to do

The nation usually gets opposition from other trading partners who are excluded

The nation has to have a large store of gold on hand to exchange at fixed rates

The nation gives up its ability to control its money supply and affect its own interest rates

If the central bank holds no foreign currency reserves, the nation's exchange rate is:

fixed

pegged

under the control of the IMF

floating

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fixed

pegged

under the control of the IMF

floating

Consider an economy with a fixed exchange rate and money supply equal to 2 billion pesos. The country has 1 billion in reserves and 1 billion in domestic credit. If there is a sudden decline in the demand for money, then:

the country needs to reduce its reserves to maintain the exchange rate

the country needs to increase its reserves to maintain the exchange rate

the country will face rising interest rates and, thus, a sharp appreciation of the peso

the country will see a sharp increase in demand for loans

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the country needs to reduce its reserves to maintain the exchange rate

the country needs to increase its reserves to maintain the exchange rate

the country will face rising interest rates and, thus, a sharp appreciation of the peso

the country will see a sharp increase in demand for loans

Which statement below is correct?

The likelihood of an exchange rate crisis increases if a country is having a banking crisis.

The likelihood of an exchange rate crisis decreases if a country is having a banking and default crisis

There is no relationship between an exchange rate crisis and banking or default crises

When a banking or default crisis occurs, countries typically are forced to appreciate their currencies

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The likelihood of an exchange rate crisis increases if a country is having a banking crisis.

The likelihood of an exchange rate crisis decreases if a country is having a banking and default crisis

There is no relationship between an exchange rate crisis and banking or default crises

When a banking or default crisis occurs, countries typically are forced to appreciate their currencies

Which of the following statements is correct?

Exchange rate crises typically impose larger costs on advanced countries than on emerging-market countries

Exchange rate crises typically impose larger costs on emerging-market countries than on advanced countries

Exchange rate crises typically impose the same costs on advanced countries and on emerging-market countries

Exchange rate crises typically do not impose any costs on advanced countries

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Exchange rate crises typically impose larger costs on advanced countries than on emerging-market countries

Exchange rate crises typically impose larger costs on emerging-market countries than on advanced countries

Exchange rate crises typically impose the same costs on advanced countries and on emerging-market countries

Exchange rate crises typically do not impose any costs on advanced countries

An American buys a Japanese car, paying by writing a check on an account with a bank in New York. How would this be accounted for in the balance of payments ?

current account, a Japanese good import

current account, a U.S. good import

financial account, a U.S. asset import

financial account, a U.S. asset export

current account, a Japanese good import

current account, a U.S. good import

financial account, a U.S. asset import

financial account, a U.S. asset export

Macro Maribor

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