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13.

(2.0 pts)) According to the Mundell–Fleming model for a small open economy with flexible exchange rates, if the Federal Reserve cannot alter domestic interest rates, changes in the money supply could still influence aggregate income through changes in the:

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14.

(2.0 pts) Explain why in the Mundell–Fleming model with fixed exchange rates, the imposition of trade restrictions results in an increase in net exports.

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

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Related questions

True or False

1. The loanable fund market demand is the demand for consumption.

( ) 2. An increase in the bond price increases the bond yield.

( ) 3. An increase in the stock price increases the stock rate of return.

( ) 4. Monopoly increases unemployment, but monopsony does not.

( ) 5. The open market operation is the changes in interest rate in open market.

( ) 6. The high reserve requirement has the direct relationship with money creation.

( ) 7. The money value and price level have inverse relationship.

( ) 8. The nominal interest rate is related to inflation.

( ) 9. An inflation tax is the tax put on inflation.

( ) 10. Government expenditure belongs to the aggregate supply.

( ) 11. 1973-1975 recession is due to aggregate demand shift.

( ) 12. 2001 recession is due to aggregate demand shift.

( ) 13. As potential GDP is smaller than actual GDP, recession occurs.

( ) 14. A money supply results in shift of aggregate supply GDP.

( ) 15. The multiplier effect is bigger as marginal propensity to consume is smaller.

( ) 16. The multiplier effect comes together with crowding effect.

( ) 17. A recession results in decrease of welfare program.

( ) 18. A recession results in decrease of tax revenue.

( ) 19. The unemployment and inflation are in inverse relation.

( ) 20. The unemployment and inflation relation does not related to aggregate demand.

( ) 21. A quota deceases export

( ) 22. A tariff decreases import.

( ) 23. A real exchange rate is not related to nominal exchange rate.

( ) 24. A purchasing power parity exchange rate is not related to nominal exchange rate.

( ) 25. A flexible exchange rate is not related to nominal exchange rate.

( ) 26. The export increases consumer surplus.

( ) 27. The trade deficit results in capital inflow.

2. Summarize

(1) loanable fund market

(2) monetary policy tools

(3) quantity equation

(4) Okun's law

(5) mutiplier effect and crowding effect

(6) automatic stabilizers

(7) risk aversion and risk taking

(8) Fisher effect

(9) aggregate model

(10) aggregate demand shift

(11) Phillips curve

(12) protectionist policies

(13) capital inflow and capital outflow

Which answer from the highlighted is correct?

1. According to Positive Money, in the traditional money multiplier model, 

A. If the reserve ratio is 10%, the money supply will be about 100 times the economy's base money.

B. If the reserve ratio is 10%, the money supply will be about 10% of the output in the economy.

C. If the money multiplier is 10, a £100 increase in the money supply will increase output by £1000.

D. If the reserve ratio is 10%, the money supply will be about 10 times the base money in the economy.

E. If the money multiplier is 10, a £100 increase in government spending will increase output by £1000.

 

2. According to Positive Money, in 2006, for the British pound, bank-created money was

A. zero, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.

B. 14 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.

C. 80 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.

D. negative, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.

E. 14 times base money, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.

 

3. Consider the risk premium, as defined in the lecture and in the textbook. If the domestic central bank has a fixed exchange rate policy that the markets find credible, then

A. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is zero.

B. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is nonzero.

C. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is negative.

D. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is positive.

E. Nominal interest rates in the domestic country and the foreign one cannot be the same, even if that risk premium is zero since there is another term in the uncovered interest parity formula.

All the questions from "Output, Exchange Rates, Macroeconomic Policy, and Open-economy IS-LM-FX Model."

Please answer these questions completely. It is important to me.

Thanks!

6. The TB (i.e., EX – IM) is part of the short-run spending equation. With sticky prices, what would be the effect on the TB with an increase (depreciation) of the home nation's exchange rate?

A. Consumers in the home nation would find it more expensive to buy domestic goods compared to foreign goods, and the trade balance would decrease.

B. Consumers in the home nation would cut back on both domestic and foreign goods and the trade balance would decrease.

C. Consumers in the home nation would increase spending on both domestic and foreign goods, and the trade balance would be unchanged.

D. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.

11. A shift to the left by the IS curve can be achieved by all of the following EXCEPT a(n):

A. decrease in government spending.

B. increase in taxes.

C. increase in the foreign interest rate.

D. decrease in future expected exchange rate Ee.

13. The LM curve will shift to the left, if there is a(n):

A. increase in money supply.

B. increase in interest rate.

C. decrease in money supply.

D. increase in output.

14. If taxes fall and foreign income falls, what will happen to output, ceteris paribus?

A. It will rise.

B. It will stay the same.

C. It will fall.

D. It is uncertain what will happen.

15. Using the IS-LM-FX framework, if we observe that income and interest rate both rise in the Eurozone, this could be the result of

A. contractionary monetary policy pursued by the European Central Bank.

B. expansionary monetary policy pursued by the Federal Reserve System (U.S. central bank).

C. a stock market crash in the Eurozone.

D. increases in government spending in the Eurozone.

18. Whenever U.S. government spending increases,

A. output will not change at all if the U.S. fixes the exchange rate of dollar against major currencies.

B. output will increase by a larger amount when dollar floats than when dollar pegs to other currencies.

C. output will increase by a smaller amount when dollar floats than when dollar pegs to other currencies.

D. output will not change at all since the U.S. adopts a flexible exchange rate.

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