Question 1

According to the monetary approach of the balance of payments MABP,an increase in U.S.money supply growth will cause the U.S.foreign reserves :

Accepted Answer

A)   to fall, as foreign central bank selling its currency and buying U.S. dollars.
B)   to fall, as foreign central bank selling U.S. dollars and buying its currency.
C)   to rise, as foreign central bank selling its currency and buying U.S. dollars.
D)   to rise, as foreign central bank selling U.S. dollars and buying its currency.E) A) and B)
F) A) and C) A

Question 2

Which of the following equations correctly represents the monetary approach to the balance of payments MABP?

Accepted Answer

A)   
B)   
C)   
D)   E) All of the above
F) B) and D)

Question 3

The monetary approach in the case of a managed floating exchange rate:

Accepted Answer

A)   Is like that of currency boards.
B)   Introduces variables to represent changes in fiscal policy.
C)   Is a combination of MABP and MAER.
D)   Is not possible to model.E) B) and C)
F) A) and D)

Question 4

One key implication of the MABR is that expansionary monetary policy:

Accepted Answer

A)   Always increases output.
B)   Always decreases output.
C)   Alters output in the short run, but not in the long run.
D)   Does not alter output in the short run or the long run.E) C) and D)
F) A) and C)

Question 5

The monetary approach is derived from the assumptions that:

Accepted Answer

A)   money demand equals money supply.
B)   money demand is a fixed proportion of the domestic price level times real income.
C)   the law of one price holds.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 6

Suppose that a central bank sells domestic currency to buy foreign assets to fix the exchange rate.To sterilize this intervention,the central bank will have to:

Accepted Answer

A)   buy bonds in the open market operations to increase domestic money supply.
B)   buy bonds in the open market operations to decrease domestic money supply.
C)   sell bonds in the open market operations to increase domestic money supply.
D)   sell bonds in the open market operations to decrease domestic money supply.E) A) and D)
F) All of the above D

Question 7

In the Bretton Woods system,if the U.S.increases its money supply,foreign central banks will have to intervene by ______ dollars and ______ foreign currencies to maintain a fixed exchange rate.

Accepted Answer

A)   selling; selling
B)   selling: buying
C)   buying; selling
D)   buying; buyingE) A) and D)
F) A) and B)

Question 8

Base money equals to:

Accepted Answer

A)   domestic credit plus domestic bonds
B)   domestic credit plus international reserves
C)   domestic credit minus international reserves
D)   domestic bonds plus foreign bondsE) A) and B)
F) All of the above

Question 9

Which of the following equations correctly represents the monetary approach to the exchange rate MAER?

Accepted Answer

A)   
B)   
C)   
D)   E) A) and B)
F) A) and C)

Question 10

To derive the monetary approach,we need money demand equals to money supply and:

Accepted Answer

A)   leakages equal injections.
B)   absolute purchasing power parity to hold.
C)   covered interest parity to hold.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 11

The MAER emphasizes money demand and money supply as determinants of:

Accepted Answer

A)   The balance of payments under the fixed exchange rate.
B)   The balance of payments under the floating exchange rate.
C)   Exchange rate movements
D)   Capital flowsE) B) and D)
F) B) and C)

Question 12

When China's central bank authorities acquire U.S.dollars faster than the Federal Reserve Bank acquires Chinese yuan,then the percentage change of U.S.international reserves :

Accepted Answer

A)   decreases
B)   increases
C)   stays the same
D)   increases first and then decreases.E) B) and C)
F) All of the above

Question 13

The offsetting of international reserve flows by central banks that wish to follow an independent monetary policy is known as:

Accepted Answer

A)   Printing money
B)   Balancing the official settlements
C)   The monetary approach
D)   SterilizationE) None of the above
F) All of the above

Question 14

Inflation from one country can be transmitted to another if a floating exchange rate is being used.

Accepted Answer

A) True 
 B)False  False

Question 15

Currency plus commercial bank reserves held against deposits:

Accepted Answer

A)   Base money
B)   Temporary money
C)   International credit
D)   Domestic reservesE) A) and C)
F) All of the above

Question 16

According to the monetary approach,when a monetary disequilibrium exists,either ____________ or _____________ has to adjust depending on the type of exchange rate system.

Accepted Answer

A)   the balance of payments; domestic production
B)   the balance of payments; exchange rate value
C)   domestic production; exchange rate value
D)   domestic production; foreign inflation rateE) A) and D)
F) A) and C)

Question 17

Assume that China and the U.S.are in a managed floating exchange rate agreement.Suppose that the Fed decreases the money supply by 50%.China's central bank lets the exchange rate partly adjust and also intervenes in foreign exchange market.What would happen to the foreign reserve position for the U.S.and the exchange rate $/yuan?

Accepted Answer

A)   Foreign reserves decrease and exchange rate decreases.
B)   Foreign reserves increases and exchange rate increases.
C)   Foreign reserves decrease and exchange rate increases.
D)   Foreign reserves increase and exchange rate decreases.E) A) and B)
F) A) and C)

Question 18

Assume floating exchange rates.Suppose there are a 5% growth in U.S output and the Fed increases in U.S.money supply by 5%.Then,which of the following will offset these changes?

Accepted Answer

A)   10% increase in exchange rate.
B)   10% decrease in exchange rate.
C)   10% increase in the foreign inflation.
D)   The two changes offset each other.E) A) and D)
F) A) and C)

Question 19

Starting from a position where a nation's money demand equals the money supply and its balance of payments is in equilibrium.According to the monetary approach to the balance of payments,when the nation's central bank increases money supply,the balance of trade moves into ________ position and net official holding of foreign reserves ________.

Accepted Answer

A)   surplus; increases
B)   surplus; decreases
C)   deficit; increases
D)   deficit; decreasesE) A) and D)
F) All of the above

Question 20

Under the flexible exchange rate,an increase in the foreign price level leads to a domestic currency __________.

Accepted Answer

A)   appreciation
B)   depreciation
C)   devaluation
D)   overshootingE) A) and B)
F) None of the above

Exam 14: The Monetary Approach

According to the monetary approach of the balance of payments MABP,an increase in U.S.money supply growth will cause the U.S.foreign reserves :

Correct Answer
verified
A

Which of the following equations correctly represents the monetary approach to the balance of payments MABP?

Correct Answer
verified

The monetary approach in the case of a managed floating exchange rate:

Correct Answer
verified

One key implication of the MABR is that expansionary monetary policy:

Correct Answer
verified

The monetary approach is derived from the assumptions that:

Correct Answer
verified

Suppose that a central bank sells domestic currency to buy foreign assets to fix the exchange rate.To sterilize this intervention,the central bank will have to:

Correct Answer
verified
D

In the Bretton Woods system,if the U.S.increases its money supply,foreign central banks will have to intervene by dollars and foreign currencies to maintain a fixed exchange rate.

Correct Answer
verified

Base money equals to:

Correct Answer
verified

Which of the following equations correctly represents the monetary approach to the exchange rate MAER?

Correct Answer
verified

To derive the monetary approach,we need money demand equals to money supply and:

Correct Answer
verified

The MAER emphasizes money demand and money supply as determinants of:

Correct Answer
verified

When China's central bank authorities acquire U.S.dollars faster than the Federal Reserve Bank acquires Chinese yuan,then the percentage change of U.S.international reserves :

Correct Answer
verified

The offsetting of international reserve flows by central banks that wish to follow an independent monetary policy is known as:

Correct Answer
verified

Inflation from one country can be transmitted to another if a floating exchange rate is being used.

Correct Answer
verified
False

Currency plus commercial bank reserves held against deposits:

Correct Answer
verified

According to the monetary approach,when a monetary disequilibrium exists,either or _ has to adjust depending on the type of exchange rate system.

Correct Answer
verified

Correct Answer
verified

Assume floating exchange rates.Suppose there are a 5% growth in U.S output and the Fed increases in U.S.money supply by 5%.Then,which of the following will offset these changes?

Correct Answer
verified

Correct Answer
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Under the flexible exchange rate,an increase in the foreign price level leads to a domestic currency __________.

Correct Answer
verified

Exam 14: The Monetary Approach

According to the monetary approach of the balance of payments MABP,an increase in U.S.money supply growth will cause the U.S.foreign reserves :

Correct AnswerverifiedA

Which of the following equations correctly represents the monetary approach to the balance of payments MABP?

Correct AnswerverifiedShow Answer

The monetary approach in the case of a managed floating exchange rate:

Correct AnswerverifiedShow Answer

One key implication of the MABR is that expansionary monetary policy:

Correct AnswerverifiedShow Answer

The monetary approach is derived from the assumptions that:

Correct AnswerverifiedShow Answer

Suppose that a central bank sells domestic currency to buy foreign assets to fix the exchange rate.To sterilize this intervention,the central bank will have to:

Correct AnswerverifiedD

In the Bretton Woods system,if the U.S.increases its money supply,foreign central banks will have to intervene by ______ dollars and ______ foreign currencies to maintain a fixed exchange rate.

Correct AnswerverifiedShow Answer

Base money equals to:

Correct AnswerverifiedShow Answer

Which of the following equations correctly represents the monetary approach to the exchange rate MAER?

Correct AnswerverifiedShow Answer

To derive the monetary approach,we need money demand equals to money supply and:

Correct AnswerverifiedShow Answer

The MAER emphasizes money demand and money supply as determinants of:

Correct AnswerverifiedShow Answer

When China's central bank authorities acquire U.S.dollars faster than the Federal Reserve Bank acquires Chinese yuan,then the percentage change of U.S.international reserves :

Correct AnswerverifiedShow Answer

The offsetting of international reserve flows by central banks that wish to follow an independent monetary policy is known as:

Correct AnswerverifiedShow Answer

Inflation from one country can be transmitted to another if a floating exchange rate is being used.

Correct AnswerverifiedFalse

Currency plus commercial bank reserves held against deposits:

Correct AnswerverifiedShow Answer

According to the monetary approach,when a monetary disequilibrium exists,either ____________ or _____________ has to adjust depending on the type of exchange rate system.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume floating exchange rates.Suppose there are a 5% growth in U.S output and the Fed increases in U.S.money supply by 5%.Then,which of the following will offset these changes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the flexible exchange rate,an increase in the foreign price level leads to a domestic currency __________.

Correct AnswerverifiedShow Answer

Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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D

In the Bretton Woods system,if the U.S.increases its money supply,foreign central banks will have to intervene by dollars and foreign currencies to maintain a fixed exchange rate.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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According to the monetary approach,when a monetary disequilibrium exists,either or _ has to adjust depending on the type of exchange rate system.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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