Solved by verified expert :21. Under
sticky prices,
A. an interest rate rise
is associated with lower expected deflation and a long-run currency
appreciation, so the currency appreciates immediately.
B. an interest rate rise
is associated with higher expected inflation and a long-run currency
appreciation, so the currency appreciates immediately.
C. an interest rate rise
is associated with lower expected inflation and a long-run currency
depreciation, so the currency appreciates immediately.
D. an interest rate rise
is associated with lower expected inflation and a long-run currency
depreciation, so the currency depreciates immediately.
E. an interest rate
rise is associated with lower expected inflation and a long-run currency
appreciation, so the currency appreciates immediately.
22. Under
the monetary approach to the exchange rate,
A. an interest rate
decrease is associated with higher expected inflation and a currency that will
be weaker on all future dates.
B. an interest rate
increase is associated with higher expected deflation and a currency that will
be weaker on all future dates.
C. an interest rate
increase is associated with higher expected inflation and a currency that will
be strengthened on all future dates.
D. an interest rate
increase is associated with higher expected deflation and a currency that will
be strengthened on all future dates.
E. an interest rate
increase is associated with higher expected inflation and a currency that will
be weaker on all future dates.
23. Under
the monetary approach to the exchange rate,
A. a reduction in the
money supply will cause immediate currency depreciation.
B. a rise in the money
supply will cause currency depreciation.
C. a rise in the money
supply will cause immediate currency appreciation.
D. a rise in the money
supply will cause depreciation.
E. a rise in the money
supply will cause immediate currency depreciation.
24. In
practice,
A. changes in national
price levels often tell us little or nothing about exchange rate movements.
B. changes in national
price levels raise the exchange rate.
C. changes in national
price levels lower the exchange rate.
D. changes in national
price levels often tell us about exchange rate movements.
E. None of the above
statements is true.
25. Which
of the following statements is the most accurate?
A. The prices of
identical commodity baskets, when converted to a single currency, are the same
across countries.
B. The prices of
identical commodity baskets, when converted to a single currency, differ
substantially across countries.
C. The prices of
identical commodity baskets, when converted to a single currency, do not differ
substantially across countries.
D. The prices of
identical commodity baskets, when converted to a single currency, are often the
same across countries.
E. None of the above
statements is true.
26. Which
of the following statements is the most accurate?
A. The law of one price does fare well in
all recent studies.
B. The law of one price does fare well in
many recent studies.
C. The law of one price sometimes fares
well in recent studies.
D. The law of one price does not fare well
in recent studies.
E. None of the above statements is true.
27. Which
of the following statements is the most accurate?
A. Relative PPP is not a
reasonable approximation to the data.
B. Relative PPP is
sometimes a reasonable approximation to the data but usually performs poorly.
C. Relative PPP is
sometimes a reasonable approximation to the data.
D. PPP is sometimes a
reasonable approximation to the data.
E. PPP is sometimes a
reasonable approximation to the data but usually performs poorly.
28. Which
of the following statements is the most accurate?
A. PPP appears to be of
limited use as a short-run explanation of exchange rate movements.
B. PPP appears to be of
limited use even as a short-run explanation of exchange rate movements.
C. PPP appears to be of
limited use even as a long-run explanation of exchange rate movements.
D. Relative PPP appears
to be of limited use even as a short-run explanation of exchange rate
movements.
E. None of the above
statements is true.
29. Which
of the following statements is the most accurate?
A. Relative PPP has not
held up well since the 1960s.
B. Relative PPP has not
held up well since the early 1970s, but in the 1960s it was a more reliable
guide to the relationship among exchange rates and national price levels.
C. Relative PPP has held
up well since the early 1960s, but in the 1970s it was a more reliable guide to
the relationship among exchange rates and national price levels.
D. Relative PPP has held
up well since the early 1970s.
E. None of the above
statements is true.
30. Which
of the following statements is the most accurate?
A. The price differences
of Big Macs in Atlanta, Chicago, New York. and San Francisco are not larger
than the international disparities.
B. The price differences
of Big Macs in Atlanta, Chicago, New York. and San Francisco are close to zero.
C. The price differences
of Big Macs in Atlanta, Chicago, New York. and San Francisco are less than 10
percent.
D. The price differences
of Big Macs in Atlanta, Chicago, New York. and San Francisco are less than 15
percent.
E. The price
differences of Big Macs in Atlanta, Chicago, New York. and San Francisco are in
many cases larger than the international disparities.