国际经济学题库31036学习资料
华夏银行校园招聘-珍爱生命主题班会
国际经济学题库
31036
International Economics, 8e (Krugman)
Chapter 14 Money, Interest Rates, and
Exchange Rates
14.1 Money Defined: A Brief
Review
1) The exchange rate between
currencies depends on
A) the interest rate
that can be earned on deposits of those
currencies.
B) the interest rate that can be
earned on deposits of those currencies and the
expected future exchange
rate.
C) the
expected future exchange rate.
D) national
output.
E) None of the above.
Answer: B
Question Status: Previous Edition
2)
Money serves as
A) a medium of exchange.
B) a unit of account.
C) a store of
value.
D) All of the above.
E) Only A
and B.
Answer: D
Question Status:
Previous Edition
3) Money includes
A)
currency.
B) checking deposits held by
households and firms.
精品资料
C)
deposits in the foreign exchange markets.
D)
Both A and B.
E) A, B, and C.
Answer: D
Question Status: Previous Edition
4) In
the United States at the end of 2006, the total
money supply, M1, amounted to approximately
A)
10 percent of that year's GNP.
B) 20 percent
of that year's GNP.
C) 30 percent of that
year's GNP.
D) 40 percent of that year's GNP.
E) 50 percent of that year's GNP.
Answer:
A
Question Status: Previous Edition
5)
What are the main functions of money?
Answer:
Money serves in general three important functions:
a medium of exchange; a unit of account; and a
store of value. As a medium of exchange, money
avoids going back to a barter economy, with the
enormous search costs connected with it. As a
unit of account, the use of money economizes on
the
number of prices an individual faces.
Consider an economy with N goods, then one needs
only (N - 1)
prices. As a store of value, the
use of money in general ensures that you can
transfer wealth between
periods.
Question
Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除
谢谢
2
精品资料
14.2
The Demand
for Money by Individuals
1) Individuals base
their demand for an asset on
A) the expected
return the asset offers compared with the returns
offered by other assets.
B) the riskiness of
the asset's expected return.
C) the asset's
liquidity.
D) All of the above.
E) Only
A and B.
Answer: D
Question Status:
Previous Edition
2) The family summer house
on Cape Code pays a return in the form of
A)
interest rate.
B) capital gains.
C) the
pleasure of vacations at the beach.
D) A, B,
and C.
E) B and C only.
Answer: E
Question Status: Previous Edition
3) In
a world with money and bonds only,
A) it is
not risky to hold money.
B) it is risky to
hold money.
C) risk is an important factor in
the demand for money.
D) there is no
relationship between risk and holding money.
E) None of the above.
Answer: B
Question Status: Previous Edition
4)
Which one of the following statements is the most
accurate?
A) A rise in the average value of
transactions carried out by a household or a firm
causes its demand for
money to fall.
B) A
reduction in the average value of transactions
carried out by a household or a firm causes its
demand
for money to rise.
C) A rise in
the average value of transactions carried out by a
household or a firm causes its demand for
money to rise.
D) A rise in the average
value of transactions carried out by a household
or a firm causes its demand for
real money to
rise.
E) None of the above.
Answer: D
Question Status: Previous Edition
5) An
individual's need for liquidity would be up if:
A) the average value of transactions carried
out by the individual fell.
B) the average
value of transactions carried out by the
individual rose.
C) the individual got a
raise.
D) the individual received a new ATM
card.
E) None of the above.
Answer: B
Question Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
3
精品资料
6) What are the factors that determine the
amount of money an individual desires to hold?
Answer: Three main factors: first, the
expected return the asset offers compared with the
returns offered by
other assets; second, the
riskiness of the asset's expected return; and
third, the asset's liquidity.
Question Status:
Previous Edition
14.3 Aggregate Money
Demand
1) The aggregate money demand depends
on
A) the interest rate.
B) the price
level.
C) real national income.
D) All
of the above.
E) Only A and C.
Answer:
D
Question Status: Previous Edition
2)
If there is initially
A) excess demand for
money, the interest rate falls, and if there is
initially an excess supply, it rises.
B)
excess supply of money, the interest rate falls,
and if there is initially an excess demand, it
rises.
C) excess supply of money, the
interest rate increases, and if there is initially
an excess demand, it falls.
D) excess supply
of money, the interest rate falls, and if there is
initially an excess demand, it further falls.
E) None of the above.
Answer: B
Question Status: Previous Edition
3)
Which one of the following statements is the most
accurate?
A) A decrease in the money supply
lowers the interest rate while an increase in the
money supply raises
the interest rate, given
the price level and output.
B) An increase in
the money supply lowers the interest rate while a
fall in the money supply raises the
interest
rate, given the price level.
C) An increase
in the money supply lowers the interest rate while
a fall in the money supply raises the
interest
rate, given the output level.
D) An increase
in the money supply lowers the interest rate while
a fall in the money supply raises the
interest
rate, given the price level and output.
E)
None of the above.
Answer: D
Question
Status: Previous Edition
4) An increase in
A) nominal output raises the interest rate
while a fall in real output lowers the interest
rate, given the price
level and the money
supply.
B) real output decreases the interest
rate while a fall in real output increases the
interest rate, given the
price level.
C)
real output raises the interest rate while a fall
in real output lowers the interest rate, given the
money
supply.
D) nominal output raises
the interest rate while a fall in real output
lowers the interest rate, given the price
level.
E) real output raises the interest
rate while a fall in real output lowers the
interest rate, given the price
level and the
money supply.
Answer: E
Question Status:
Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
4
精品资料
5) The aggregate demand for
money can be expressed by:
A) Md = P ×
L(R,Y).
B) Md = L × P(R,Y).
C) Md = P ×
Y(R, L).
D) Md = R × L(P,Y).
E) Md = R ×
L(R, P).
Answer: A
Question Status:
Previous Edition
6) What are the main factors
determining the aggregate money demand?
Answer: Three main factors: interest rate,
the price level and real national income. A rise
in the interest rate
causes each individual in
the economy to reduce her demand for money. If the
price level rises,
individual households and
firms will spend more money than before. When real
national income
(GNP) rises the demand for
money will rise.
Question Status: Previous
Edition
7) Explain why one can write the
demand for money as follows:
M
d
=
PxL (R, Y)
Answer: The aggregate money
demand is proportional to the price level. Imagine
that all prices in an economy
doubled, but the
interest rate and everyone's real incomes remained
unchanged. Then, the money
value of each
individual's average daily transactions would then
simply double, as would the amount
of money
each wishes to hold.
Question Status:
Previous Edition
14.4 The Equilibrium
Interest Rate: The Interaction of Money Supply and
Demand
1) The aggregate real money demand
schedule L(R,Y)
A) slopes upward because a
fall in the interest rate raises the desired real
money holdings of each
household and firm in
the economy.
B) slopes downward because a
fall in the interest rate reduces the desired real
money holdings of each
household and firm in
the economy.
C) has a zero slope because a
fall in the interest rate keeps constant the
desired real money holdings of
each household
and firm in the economy.
D) slopes downward
because a fall in the interest rate raises the
desired real money holdings of each
household
and firm in the economy.
E) None of the
above.
Answer: D
Question Status:
Previous Edition
2) For a given level of
A) nominal GNP, changes in interest rates
cause movements along the L(R,Y) schedule.
B)
real GNP, changes in interest rates cause a
decrease of the L(R,Y) schedule.
C) real GNP,
changes in interest rates cause an increase of the
L(R,Y) schedule.
D) nominal GNP, changes in
interest rates cause an increase in the L(R,Y)
schedule.
E) real GNP, changes in interest
rates cause movements along the L(R,Y) schedule.
Answer: E
Question Status: Previous
Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
5
精品资料
3) The money supply schedule
is
A)
horizontal because M
S
is
set by the central bank while P is taken as given.
B)
horizontal because M
S
is set
by the central bank.
C)
vertical because
M
S
is set by the households and firms
while P is taken as given.
D)
vertical
because M
S
and P are set by the central
bank.
E)
vertical because M
S
is
set by the central bank while P is taken as given.
Answer: E
Question Status: Previous
Edition
4) If individuals are holding more
money than they desire,
A) they will attempt
to reduce their liquidity by using money to
purchase goods.
B) they will attempt to
reduce their liquidity by using money to purchase
interest-bearing assets.
C) they will attempt
to reduce their liquidity by converting real money
holdings into nominal money
holdings.
D)
they will keep their holdings constant.
Answer: B
Question Status: New
5)
If there is an excess supply of money:
A) the
interest rate falls.
B) the interest rate
rises.
C) the real money supply shifts left
to make an equilibrium.
D) the real money
supply shifts right to make an equilibrium.
E)
A and C.
Answer: A
Question Status:
Previous Edition
6) A reduction in a
country's money supply causes:
A) its
currency to depreciate in the foreign exchange
market.
B) its currency to appreciate in the
foreign exchange market.
C) does not affect
its currency in the foreign market.
D) does
affect its currency in the foreign market in an
ambiguous manor.
E) affects other countries
currency in the foreign market.
Answer: B
Question Status: Previous Edition
7)
What will be the effects of an increase in the
money supply on the interest rate?
Answer:
An increase in the money supply will cause
interest rate to decrease. This should increase
investment
and possibly consumption of durable
goods. The reduction in the interest rate will
cause a
depreciation of the dollar.
Question Status: Previous Edition
8)
What will be the effects of an increase in real
output on the interest rate?
Answer: An
increase in real output will increase the interest
rate. If investment depends only on interest rate,
this will cause investment to go down. The
increases interest rate will cause an appreciation
of the
dollar.
Question Status: Previous
Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
6
精品资料
14.5
The Money Supply
and the Exchange Rate in the Short Run
1) An
increase in a country's money supply causes
A)
its currency to appreciate in the foreign exchange
market while a reduction in the money supply
causes
its currency to depreciate.
B) its
currency to depreciate in the foreign exchange
market while a reduction in the money supply
causes
its currency to appreciate.
C) no
effect on the values of it currency in
international markets.
D) its currency to
depreciate in the foreign exchange market while a
reduction in the money supply causes
its
currency to further depreciate.
E) None of
the above.
Answer: B
Question Status:
Previous Edition
2) Which one of the
following statements is the most accurate?
A)
Given P
US
, when the money supply rises,
the dollar interest rate declines and the dollar
depreciates
against the euro.
B) Given
Y
US
, when the money supply rises, the
dollar interest rate declines and the dollar
depreciates
against the euro.
C) Given
P
US
and Y
US
, when the money supply
decreases, the dollar interest rate declines and
the dollar
depreciates against the euro.
D) Given P
US
and Y
US
, when
the money supply rises, the dollar interest rate
declines and the dollar
appreciates against
the euro.
E) Given P
US
and
Y
US
, when the money supply rises, the
dollar interest rate declines and the dollar
depreciates against the euro.
Answer: E
Question Status: Previous Edition
3)
Given P
US
and Y
US
,
A) An
increase in the European money supply causes the
euro to appreciate against the dollar, but it does
not disturb the U.S. money market equilibrium.
B) An increase in the European money supply
causes the euro to appreciate against the dollar,
and it
creates excess demand for dollars in
the U.S. money market.
C) An increase in the
European money supply causes the euro to
depreciate against the dollar, and it
creates
excess demand for dollars in the U.S. money
market.
D) An increase in the European money
supply causes the euro to depreciate against the
dollar, but it does
not disturb the U.S. money
market equilibrium.
E) None of the above.
Answer: D
Question Status: Previous
Edition
4) Analyze the effects of an increase
in the European money supply on the dollareuro
exchange rate.
Answer: The main points are:
An increase in the European money supply will
reduce the interest rate on the
euro, and thus
causes the euro to depreciates against the dollar.
The U.S. money demand and money
supply are not
going to be affected, and thus the interest rate
in the U.S. will remain the same.
Question
Status: Previous Edition
5) Explain how the
money markets of two countries are linked through
the foreign exchange market.
Answer: The
monetary policy actions by the Fed affect the U.S.
interest rate, changing the dollareuro exchange
rate that clears the foreign exchange market.
The European System of Central Banks (ESCB) can
affect
the exchange rate by changing the
European money supply and interest rate.
仅供学习与交流，如有侵权请联系网站删除 谢谢
7
精品资料
Question Status: Previous Edition
6)
What would be the effect of an increase in the
European Money Supply in the Dollar Euro Exchange
Rate?
Answer: An increase in the European
money supply lowers the dollar return on Euro
deposits, i.e. the dollar
appreciates against
the Euro. There is no change in the US money
market.
Question Status: Previous Edition
7) Using a figure describing both the U.S.
money market and the foreign exchange market,
analyze the effects
of a temporary increase in
the European money supply on the dollareuro
exchange rate.
Answer: An increase in the
European money supply will reduce the interest
rate on the euro and thus will
cause the
schedule of the expected euro return expresses in
dollars to shift down, causing a reduction
in
the dollareuro exchange rate, i.e., an
appreciation of the U.S. Dollar. The euro
depreciates against
the dollar. The U.S. money
demand and money supply are not going to be
affected, and thus the
interest rate in the
U.S. will remain the same.
Question
Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
8
精品资料
8) Using a figure describing both the U.S.
money market and the foreign exchange market,
analyze the effects
of an increase in the U.S.
money supply on the dollareuro exchange rate.
Answer: An increase in the U.S. money supply
will cause interest rate to decrease. This should
increase
investment and possibly consumption
of durable goods. The reduction in the interest
rate will cause a
movement to the left along
the schedule depicting the expected euro return
expressed in dollar. The
result is an increase
in E or a depreciation of the dollar.
Question Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
9
精品资料
9) Explain the following figure.
Answer: The figure explains how the money
markets of two countries are linked through the
foreign exchange
market. The monetary policy
actions by the Fed affect the U.S. interest rate,
changing the dollareuro
exchange rate that
clears the foreign exchange market. The European
System of Central Banks (ESCB)
can affect the
exchange rate by changing the European money
supply and interest rate.
Question Status:
Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
10
精品资料
10) Combine the graph showing
the interest parity condition and one showing
money demand and supply to
demonstrate
simultaneous equilibrium in the money market and
the foreign exchange market.
How would an
increase in the U.S. money supply affect the
DollarEuro exchange rate and the U.S. interest
rate? Illustrate your answer graphically and
explain.
Answer: Above the axis is depicted
the foreign exchange market, where changes in the
rate of return on the
dollar are mapped into
changes in the exchange rate. Below the axis is
depicted the U.S. money market
and shows the
relation between the rate of return on the dollar
and U.S. real money holdings. The
mechanism
works as follows. Consider an increase in the U.S.
real money holdings. Supply and
demand dictate
that the demand for money must increase, so the
rate of return must lower to
equilibrate at
point 2. The lower rate of return on the dollar
will cause the dollar to depreciate
(exchange
rate moves to point 2ʹ).
Question Status:
Previous Edition
仅供学习与交流，如有侵权请联系网站删除
谢谢
11
精品资料
14.6
Money,
the Price Level, and the Exchange Rate in the Long
Run
1) An economy's long-run equilibrium is
A) the equilibrium that would occur if prices
were perfectly flexible.
B) the equilibrium
that would occur if prices were perfectly flexible
and always adjusted immediately.
C) the
equilibrium that would occur if prices were
perfectly flexible and always adjusted immediately
to
preserve full employment.
D) the
equilibrium that would occur if prices were
perfectly fixed to preserve full employment.
E) the equilibrium that would occur if prices
were perfectly fixed at the full employment point.
Answer: C
Question Status: Previous
Edition
2) A permanent increase in a
country's money supply
A) causes a more than
proportional increase in its price level.
B)
causes a less than proportional increase in its
price level.
C) causes a proportional
increase in its price level.
D) leaves its
price level constant in long-run equilibrium.
E) None of the above.
Answer: C
Question Status: Previous Edition
3) A
change in the level of the supply of money
A)
increases the long-run values of the interest rate
and real output.
B) decreases the long-run
values of the interest rate and real output.
C) has no effect on the long-run values of
the interest rate, but may affect real output.
D) has no effect on the long-run values of
real output, but may affect the interest rate.
E) has no effect on the long-run values of
the interest rate and real output.
Answer: E
Question Status: Previous Edition
4)
Changes in the money supply growth rate
A)
are neutral in the short run.
B) need not be
neutral in the short run.
C) are neutral in
the long run.
D) need not be neutral in the
long run.
E) None of the above.
Answer:
D
Question Status: Previous Edition
5)
A sustained change in the monetary growth rate
will,
A) immediately affect equilibrium real
money balances by raising the money interest rate.
B) eventually affect equilibrium nominal
money balances by raising the money interest rate.
C) eventually affect equilibrium real money
balances by reducing the money interest rate.
D) eventually affect equilibrium real money
balances by raising the real interest rate.
E)
eventually affect equilibrium real money balances
by raising the money interest rate.
Answer:
E
Question Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
12
精品资料
6) Money demand behavior may
A) change
as a result of demographic trends or financial
innovations such as electronic cash-transfer
facilities.
B) change only as a result of
demographic trends.
C) change only as a
result of financial innovations such as electronic
cash-transfer facilities.
D) not change as a
result of demographic trends or financial
innovations such as electronic cash-transfer
facilities.
E) change as a result of
demographic trends but not as a result of
financial innovations such as electronic
cash-
transfer facilities.
Answer: A
Question
Status: Previous Edition
7) Using year-by-
year data from 1989-2006 show that
A) there
is a strong positive relation between average
Latin American money-supply growth and inflation.
B) there is a strong negative relation
between average Latin American money-supply growth
and inflation.
C) there is a strong positive
relation between average Latin American money-
supply growth and deflation.
D) it is
difficult to find a strong positive relation
between average Latin American money-supply growth
and inflation.
E) there is a weak
positive relation between average Latin American
money-supply growth and inflation.
Answer: A
Question Status: Previous Edition
8)
Which one of the following statements is the most
accurate?
A) A permanent increase in a
country's money supply causes a proportional long-
run depreciation of its
currency against
foreign currencies.
B) A temporary increase
in a country's money supply causes a proportional
long-run depreciation of its
currency against
foreign currencies.
C) A permanent increase
in a country's money supply causes a proportional
long-run appreciation of its
currency against
foreign currencies.
D) A permanent increase
in a country's money supply causes a proportional
short-run depreciation of its
currency against
foreign currencies.
E) A permanent increase
in a country's money supply causes a proportional
short-run appreciation of its
currency against
foreign currencies.
Answer: A
Question
Status: Previous Edition
9) The long run
effects of money supply change:
A) ambiguous
effect on the long-run values of the interest rate
or real output, a proportional change in the
price level's long-run value in the opposite
direction.
B) proportional effect on the
long-run values of the interest rate or real
output, a proportional change in
the price
level's long-run value in the same direction.
C) no effect on the long-run values of the
interest rate or real output, a proportional
change in the price
level's long-run value in
the same direction.
D) no effect on the long-
run values of the interest rate or real output, no
change in the price level's long-
run value.
E) ambiguous effect on the long-run values of
the interest rate or real output, A
disproportional change in
the price level's
long-run value in the same direction.
Answer:
C
Question Status: Previous Edition
14.7
Inflation and Exchange Rate Dynamics
仅供学习与交流，如有侵权请联系网站删除 谢谢
13
精品资料
1) What term means an explosive and seemingly
uncontrollable inflation in which money loses
value rapidly
and may even go out of use?
A) superinflation
B) stagflation
C)
hyperinflation
D) maginflation
E) None
of the above.
Answer: C
Question Status:
Previous Edition
2) The most extreme
inflationary conditions occurred
A) in Latin
America in the 1990s.
B) in Latin America in
the 1980s.
C) in Eastern Europe in the 1990s.
D) in Eastern Europe in the 1980s.
E) in
Eastern Europe in the 1970s.
Answer: B
Question Status: Previous Edition
3)
For main industrial countries such as Japan and
the U.S.,
A) there is much less month-to-
month variability of the exchange rate, suggesting
that price levels are
relatively sticky in the
short run.
B) there is much more month-to-
month variability of the exchange rate, suggesting
that price levels are
relatively sticky in the
short run.
C) there is almost the same month-
to-month variability of the exchange rate and
price levels.
D) it is hard to tell whether
month-to-month variability of the exchange rate is
similar to changes in price
levels.
E)
there is much more month-to-month variability of
the exchange rate, suggesting that price levels
are
relatively sticky in the long run.
Answer: B
Question Status: Previous
Edition
4) Which one of the following
statements is the most accurate?
A) There is
a lively academic debate over the possibility that
seemingly sticky wages and prices are in
reality quite fixed.
B) There is a lively
academic debate over the possibility that
seemingly sticky wages and prices are in
reality much more sticky than theory assumes.
C) There is a lively academic debate over the
possibility that seemingly sticky wages and prices
are in
reality quite flexible.
D) There
is no debate over the possibility that wages and
prices are sticky in the long run.
E) There
is no debate over the possibility that wages and
prices are sticky in the short run.
Answer:
C
Question Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
14
精品资料
5) During hyperinflation, exploding inflation
causes real money demand to
A) fall over
time, and this additional monetary change makes
money prices rise even more quickly than
the
money supply itself rises.
B) increase over
time, and this additional monetary change makes
money prices rise even more quickly
than the
money supply itself rises.
C) fall over time,
and this additional monetary change makes money
prices decrease even more quickly
than the
money supply itself rises.
D) increase over
time, and this additional monetary change makes
money prices decrease even more
quickly than
the money supply itself rises.
E) fall over
time, and this additional monetary change makes
money prices decrease even less quickly
than
the money supply itself rises.
Answer: A
Question Status: Previous Edition
6) In
a classic paper, Columbia University economist
Phillip Cagan drew the line between inflation and
hyperinflation at an inflation rate of
A)
50 percent per month.
B) 10 percent per
month.
C) 20 percent per month.
D) 5
percent per month.
E) 25 percent per month.
Answer: A
Question Status: Previous
Edition
7) In a classic paper, Columbia
University economist Phillip Cagan drew the line
between inflation and
hyperinflation at an
inflation rate of
A) more than 120 percent
per year.
B) more than 100 percent per year.
C) more than 200 percent per year.
D)
more than 12,000 percent per year.
E) more
than 1,000 percent per year.
Answer: D
Question Status: Previous Edition
8) In
a world where the price level could adjust
immediately to its new long-run level after a
money supply
increase,
A) The dollar
interest rate would increase because prices would
adjust immediately and prevent the
money
supply from rising.
B) The dollar interest
rate would fall because prices would adjust
immediately and prevent the money
supply from
rising.
C) The dollar interest rate would
fall because prices would adjust immediately and
prevent the money
supply from decreasing.
D) The dollar interest rate would decrease
because prices would adjust immediately and
prevent the
money supply from decreasing.
E) None of the above.
Answer: B
Question Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
15
精品资料
9) After a permanent increase in the money
supply,
A) the exchange rate overshoots in
the short run.
B) the exchange rate
overshoots in the long run.
C) the exchange
rate smoothly depreciates in the short run.
D)
the exchange rate smoothly appreciates in the
short run.
E) None of the above.
Answer:
A
Question Status: Previous Edition
10)
A change in the money supply creates demand and
cost pressures that lead to future increases in
the price
level from which main sources:
I. Excess demand for output and labor
II.
Inflationary expectations
III. Raw materials
prices
A) I
B) II
C) II and III
D) I and II
E) I, II, and III
Answer: E
Question Status: Previous
Edition
11) What year did the Bolivian
government introduce a stabilizing plan to end
hyperinflation?
A) 1983
B) 1984
C)
1985
D) 1986
Answer: C
Question
Status: New
12) Which of the following can
help to explain why higher inflation may lead to
currency appreciations?
A) The interest rate,
not the money supply, is the prime instrument of
monetary policy.
B) Most central banks adjust
their policy interest rates expressly so as to
keep inflation in check.
C) Central banks
increase the money supply leading to overshooting
of the exchange rate.
D) A and B.
E) A,
B, and C.
Answer: D
Question Status:
New
13) Which of the countries below are
inflation targeting?
A) Japan
B) U.S.
C) Canada
D) A and B.
E) A, B, and
C.
Answer: C
Question Status: New
仅供学习与交流，如有侵权请联系网站删除 谢谢
16
精品资料
14) Michael Woodford says the following is an
advantage of interest-rate instruments for central
banks:
A) Conduct monetary policy without
inflation.
B) Conduct monetary policy even if
checking deposits pay interest at competitive
rates.
C) Conduct monetary policy without
government approval.
D) A and B.
E) A,
B, and C.
Answer: B
Question Status:
New
15) Inflation targeting was initiated by
which central bank in 1989?
A) U.S.
B)
Japan
C) Canada
D) New Zealand
E)
U.K.
Answer: D
Question Status: New
16) Although the price levels appear to
display short-run stickiness in many countries, a
change in the money
supply creates immediate
demand and cost pressures that eventually lead to
future increase in the price
level.
Answer:
(See Section 7). The statement is true. The
pressures come from three main sources: excess
demand for
output and labor; inflationary
expectations; and, raw material prices.
Question Status: Previous Edition
17)
Explain the effects of a permanent increase in the
U.S. money supply in the short run and in the long
run.
Assume that the U.S. real national income
is constant.
Answer: An increase in the
nominal money supply raises the real money supply,
lowering the interest rate in
the short run.
The money supply increase is considered to
continue in the future; thus, it will affect the
exchange rate expectations. This will make the
expected return on the euro more desirable and
thus
the dollar depreciates. In the case of a
permanent increase in the U.S. money supply, the
dollar
depreciates more than under a temporary
increase in the money supply.
Now, in the long
run, prices will rise until the real money
balances are the same as before the
permanent
increase in the money supply. Since the output
level is given, the U.S. interest rate, which
decreased before, will start to increase,
until it will move back to its original level. The
equilibrium
interest rate must be the same as
its original long run value. This increase in the
interest rate must
cause the dollar to
appreciate against the euro after its sharp
depreciation as a result of the permanent
increase in the money supply. So a large
depreciation is followed by an appreciation of the
dollar.
Eventually, the dollar depreciates in
proportion to the increase in the price level,
which in turn
increases by the same proportion
as the permanent increase in the money supply.
Thus, money is
neutral, in the sense that it
cannot affect in the long run real variables, such
as output, investment, etc.
Question Status:
Previous Edition
仅供学习与交流，如有侵权请联系网站删除 谢谢
17
精品资料
18) Explain the exchange rate
over-shooting hypothesis.
Answer: Many
prices in the economy are written into long-term
contracts and cannot be changed immediately
when changes in the money supply occur. A
permanent increase in M, holding P constant,
increases
the real money supply (MP) and
lowers the nominal interest rate (R). This shifts
the dollar return
schedule left. A permanent
increase in M also creates the expectation that in
the long run all prices
including the exchange
rate would rise. A rise in the expected exchange
rate shifts the ERR(DM)
schedule right.
Therefore, in the short run equilibrium is
established at point 2 In the long run the
price level adjusts and rises proportionately
with the money supply. Therefore, MP and R return
to
their initial levels in the long run and
the equilibrium exchange rate is determined at
point 3. In other
words, the exchange rate
first overshoots and then returns to its long run
level. Therefore, the
fluctuations in E are
much stronger than those of P.
Question
Status: Previous Edition
仅供学习与交流，如有侵权请联系网站删除
谢谢
18
精品资料
19) Using figures
for both the short run and the long run, show the
effects of a permanent increase in the U.S.
money supply. Try to line up your figures to
the short and long run equilibria side by side.
Assume that the
U.S. real national income is
constant.
Answer:
An increase
in the nominal money supply raises the real money
supply, lowering the interest rate in
the
short run (the movement from 1 to 2 on the lower
left figure). The money supply increase is
considered to continue in the future, and thus
it will affect the exchange rate expectations.
This will
make the expected return on the euro
more desirable and thus the dollar depreciates. In
the case of a
permanent increase in the U.S.
money supply, the dollar depreciates more than
under a temporary
increase in the money supply
(from point 1ʹ to point 2ʹ in the upper left
figure).
Now, in the long run, (the right hand
side figure), prices will rise until the real
money balances are the
same as before the
permanent increase in the money supply (from point
2 to point 4, in the lower right
figure).
Since the output level is given, the U.S. interest
rate which decreased before, will start to
increase, until it will move back to its
original level (from Point 2 to 4 in the lower
left figure). The
equilibrium interest rate
must be the same as its original long run value
(at point 4 in the lower right
figure). This
increase in the interest rate must cause the
dollar to appreciate against the euro after its
sharp depreciation as a result of the
permanent increase in the money supply (this
process is depicted
in the upper right figure
from point 2ʹ to 4ʹ). So a large depreciation
(from Point 1ʹ in the left upper
figure to
pint 2ʹ in both the left and right upper figures)
is followed by an appreciation of the dollar
(the movement from 2ʹ to point 4ʹ in the upper
right hand side figure). Eventually, the dollar
depreciates in proportion to the increase in
the price level, which in turn increases by the
same
proportion as the permanent increase in
the money supply. Thus, money is neutral, in the
sense that it
cannot affect in the long run
real variables, such as output, investment, etc.
Note that points 3ʹ and 4ʹ
represent the same
exchange rate.
仅供学习与交流，如有侵权请联系网站删除 谢谢
19
精品资料
Question Status:
Previous Edition
20) Using 4 different
figures, plot the time paths showing the effects
of a permanent increase in the United States
money supply on:
(a) U.S. Money supply
(b) The dollar interest rate.
(c) The U.S.
price level
(d) The dollareuro exchange rate
Answer: See below.
Question Status:
Previous Edition
仅供学习与交流，如有侵权请联系网站删除
谢谢
20