Download Quiz 6

ECON 4020/ SPRING 2005
Instructor: Dr. M. Nirei
Quiz 6
Date: April 12, 2005
Duration: 15 minuets
Instructions:
Please write your name clearly on the SCANTRON sheet. Hand in only the
SCANTRON paper upon completion.
(1) During the Great Depression, the real GDP decreased by:
a.
b.
c.
d.
50%
30%
15%
5%
(2) Which of the following is not true with the Great Depression :
a.
b.
c.
d.
Contraction of the IS curve
Stock market crash
Sharp fall in real money balances
Investment demand shifted to the left
(3) In the Mundell-Fleming model, the domestic interest rate is determined by the:
a.
b.
c.
d.
Domestic rate of inflation
World rate of inflation
World interest rate
Domestic price level
(4) Measuring exchange rate along the vertical axis and income along the horizontal
axis, the LM * curve will be:
a.
b.
c.
d.
Downward sloping
Upward sloping
Horizontal
Vertical
(5) In a small, open economy with a floating exchange rate, an effective policy to
increase equilibrium output is to:
a.
b.
c.
d.
Increase government spending
Increase taxes
Increase the money supply
Decrease the money supply
(6) In a small, open economy with a floating exchange rate, if the government adopts
an expansionary fiscal policy, in the new short run equilibrium:
a.
b.
c.
d.
Income rises, exchange rate rises
Income falls, exchange rate rises
Income remains unchanged, exchange rate rises
Income rises, exchange remains unchanged
(7) Under the fixed-exchange rate system, the central bank of a small open economy
must:
a. Have a reserve of its own currency, which it must have accumulated in past
transactions
b. Have a reserve of foreign currency, which it can print
c. Allow the money supply to adjust to whatever level will ensure that the
equilibrium exchange rate equals the announced exchange rate
d. Follow a rule specifying the constant growth of money supply.
(8) In a small open economy with a fixed exchange rate, an effective policy to
increase equilibrium output is to:
a.
b.
c.
d.
Decrease government spending
Decrease taxes
Increase the money supply
Decrease the money supply
(9) In a fixed exchange rate system, a fiscal expansion is followed by:
a.
b.
c.
d.
A monetary expansion
A monetary contraction
A fiscal contraction
Another fiscal expansion
(10) In a fixed exchange rate system, the monetary policy is:
a.
b.
c.
d.
Fully effective
Fully ineffective
Partially effective
Partially ineffective