|
| 1 | In a fixed exchange rate regime, monetary policy is completely independent of exchange rate policy. |
 | A) | TRUE |
| B) | FALSE |
|
| 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. |
| A) | TRUE |
| B) | FALSE |
|
| 3 | The non-neutrality of money in the short run explains why exchange regimes do not matter. |
| A) | TRUE |
| B) | FALSE |
|
| 4 | Under a monetary union, the inflation rate is no longer established by domestic authorities. |
| A) | TRUE |
| B) | FALSE |
|
| 5 | Over time, inflation erodes the gains in purchasing power brought about by short term expansionary monetary policies. |
| A) | TRUE |
| B) | FALSE |
|
| 6 | In the long run money is neutral. It has no lasting effect on __________ but does determine __________. |
| 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. |
|
| 7 | In the short run money is not _________. It can effect the real economy via __________ . |
| 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. |
|
| 8 | Under a fixed exchange rate, monetary policy is fully committed to ________. It is not available to ________. |
| 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 |
|
| 9 | In the IS-LM framework, the LM schedule describes __________. |
| 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. |
|
| 10 | In the IS-LM framework, the IS schedule describes ________. |
| 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 |
|
| 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. |
| |
|
| 12 | The Purchasing Power Parity principle asserts that: |
| 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. |
|
| 13 | Under a flexible exchange rate regime: |
| 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. |
|
| 14 | Crawling peg regimes are characterised by: |
| 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. |
|
| 15 | Regional arrangements in exchange regimes are characterised by: |
| 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. |