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S2013 - Solution to Test 2 - ECO209 - July 19, 2013-2.pdf

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Department
Economics
Course
ECO209Y1
Professor
Robert Gazzale
Semester
Fall

Description
DepartmentofEconomicsProfGustavoIndart University of TorontoJuly 19 2013ECO 209YL0101 SOLUTIONSMACROECONOMIC THEORYTerm Test 2 LAST NAME FIRST NAME STUDENT NUMBERINSTRUCTIONS1 The total time for this test is 1 hour and 50 minutes 2 Aids allowed a simple calculator 3 Use pen instead of pencil DO NOT WRITE IN THIS SPACEP a r t I 3 6P a r t I I 1 4PartIII1102 1 0 3 1 0T O T A L 8 0Page 1 of 12PART I36 marksInstructions Enter your answer to each question in the table below Only the answer recorded in the table will be marked Table cells left blank will receive a zero mark for that question Each question is worth 3 marks No deductions will be made for incorrect answers1 2 3 4 5 6 7 8 9 10 11 12 B C B D C A B C C E E C1 Consider the fixedprice model of an open economy with fixed exchange rates and imperfect capital mobility Which one of the following statements is correct in this model A Expansionary monetary policy will appreciate the domestic currencyB Expansionary fiscal policy will cause output to increaseC Expansionary monetary policy will cause output to increaseD Both expansionary monetary policy and expansionary fiscal policy will cause output to increase E None of the above is correct2 Consider the fixedprice model of an open economy with fixed exchange rates In this model an increase in the international rate of interest will causeA both the domestic rate of interest and the level of output to fall B both the domestic rate of interest and the level of output to rise C the domestic rate of interest to rise and the level of output to fall D the domestic rate of interest to fall and the level of output to rise E the domestic rate of interest to rise with no change in the level of outputUse this space for rough work Page 2 of 12
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