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1 | |
In a fixed exchange rate regime, monetary policy is completely independent of exchange rate policy. |
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| | A) | TRUE |
| | B) | FALSE |
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2 | |
Neutrality of money implies that changes in nominal variables such as the money supply or nominal interest rates do not affect real variables such as growth. |
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| | A) | TRUE |
| | B) | FALSE |
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3 | |
The non-neutrality of money in the short run explains why exchange regimes do not matter. |
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| | A) | TRUE |
| | B) | FALSE |
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4 | |
Under a monetary union, the inflation rate is no longer established by domestic authorities. |
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| | A) | TRUE |
| | B) | FALSE |
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5 | |
Over time, inflation erodes the gains in purchasing power brought about by short term expansionary monetary policies. |
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| | A) | TRUE |
| | B) | FALSE |
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6 | |
In the long run money is neutral. It has no lasting effect on __________ but does determine __________. |
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| | A) | the nominal economy, the real rate of exchange. |
| | B) | the real economy, the rate of inflation rate and of appreciation/depreciation of the exchange rate. |
| | C) | monetary policy, the rate of inflation and of appreciation/depreciation of the exchange rate. |
| | D) | exchange rates, prices and wages. |
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7 | |
In the short run money is not _________. It can effect the real economy via __________ . |
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| | A) | neutral; increased credit and lower interest rates. |
| | B) | sticky; real depreciation, lower interest rates and greater liquidity. |
| | C) | expansionary; higher stock prices and greater liquidity. |
| | D) | neutral; three channels namely the interest rate, credit and stock market channels. |
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8 | |
Under a fixed exchange rate, monetary policy is fully committed to ________. It is not available to ________. |
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| | A) | controlling inflationary pressures; pursue fiscal targets |
| | B) | foreign exchange intervention; control interest rate targets |
| | C) | upholding exchange rates; pursue domestic targets |
| | D) | attain purchasing power parity; pursue domestic targets |
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9 | |
In the IS-LM framework, the LM schedule describes __________. |
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| | A) | the equilibrium in the money market for a given real money supply. |
| | B) | the equilibrium in the goods market. |
| | C) | the demand for labour holding prices constant. |
| | D) | trade-off between inflation and unemployment. |
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10 | |
In the IS-LM framework, the IS schedule describes ________. |
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| | A) | the equilibrium in the money market for a given real money supply |
| | B) | the equilibrium in the goods market |
| | C) | the supply of labour holding constant the degree of competition |
| | D) | the Inflation-Savings trade-off |
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11 | |
The simplest exchange rate regime is the freely floating one, where the exchange rate is determined by the market. List 3 currencies that are currently freely floating. |
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12 | |
The Purchasing Power Parity principle asserts that: |
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| | A) | the rate of appreciation of a currency follows the rate of foreign inflation. |
| | B) | there is no visible link between volatile exchange rates and money growth and inflation. |
| | C) | over the long run the nominal exchange rate, prices and wages all adjust to each other so that external equilibrium is restored. |
| | D) | nominal exchange rates are volatile while prices are much more stable. |
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13 | |
Under a flexible exchange rate regime: |
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| | A) | monetary policy is fully available but fiscal policy ceases to be effective. |
| | B) | fiscal policy is fully available but monetary policy ceases to be effective. |
| | C) | both fiscal and monetary policy cease to be effective. |
| | D) | both fiscal and monetary policy are effective. |
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14 | |
Crawling peg regimes are characterised by: |
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| | A) | the fact that authorities choose a wide range within which the exchange rate is allowed to move vis-à-vis its chosen anchor. |
| | B) | the fact that authorities allow the central parity and the associated maximum and lower levels to slide regularly. |
| | C) | the fact that authorities intervene on the foreign exchange market to ‘lean against the wind’, i.e. counter any significant market pressure in either direction. |
| | D) | the fact that authorities fix a central parity vis-à-vis an anchor currency as well as a narrow band of fluctuation. |
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15 | |
Regional arrangements in exchange regimes are characterised by: |
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| | A) | two corner currency arrangements. |
| | B) | inflationary monetary policy. |
| | C) | free labour mobility. |
| | D) | exchange rates that are pegged vis a vis each other and floating vis a vis all currencies outside of the region. |