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1、Name: Date: 1. Compared to a closed economy, an open economy is one that:A)allows the exchange rate to float.B)fixes the exchange rate.C)trades with other countries.D)does not trade with other countries.2. The Mun dell -Flem ing model assumes that:A) prices are flexible, whereas the IS -_M model ass
2、umes that prices are fixed.B) prices are fixed, whereas the IS -_M model assumes that prices are flexible.C) as in the IS -_M model, prices are fixed.D) as in the IS -_M model, prices are flexible.3. The Mundell -Fleming model is a _ model for a _ open economyA)short-run; smallB)short-run; largeC)lo
3、ng-run; largeD)long-run; small4. In the Mundell -Fleming model:A) the exchange rate system must have a floating exchange rate.B) the exchange rate system must have a fixed exchange rate.C) it makes no difference whether the exchange rate system has a floating or a fixed exchange rate.D) the behavior
4、 of the economy depends on whether the exchange rate system has a floating or fixed exchange rate.5. In the Mundell -Fleming model, the domestic interest rate is determined by the:A) intersection of the _M and IS curves.B) domestic rate of inflation.C) world rate of inflation.D) world interest rate.
5、6. In a small open economy with perfect capital mobility, if the domestic interest rate were to rise above the world interest rate, then would drive the domestic interest rate back to the level ofthe world interest rate.A) capital inflowB) capital outflowC) the central bankD) a decline in domestic s
6、aving7. Assuming there is perfect capital mobility, compared to a large open economy, a small open economy is one in which the:A) exchange rate is fixed.B) exchange rate is floating.C) domestic interest rate equals the world interest rate.D) domestic interest rate is not equal to the world interest
7、rate.8. In a small open economy a decrease in the exchange rate will net exports and shift the curve.A)increase; ISB)decrease; ISC)increase; LMD)decrease; LM9. If short-r un equilibrium in the Mun dell-Flem ing model is represe nted by a graph with Y along thehorizontal axis and the exchange rate al
8、ong the vertical axis, then the IS* curve:A) slopes downward and to the right because the higher the exchange rate, the lower the level of net exports and, therefore, of short-run equilibrium income in the goods market.B) is vertical because there is only one investment level that is consistent with
9、 the world interest rate.C) is vertical because the exchange rate does not enter into the IS* equation.D) slopes downward and to the right because the higher the exchange rate, the higher the level of net exports and, therefore, of short-run equilibrium income in the goods market.10. In the Mun dell
10、 -Flem ing model on a Y -e graph, the curves labeled IS* and LM * are labeled that way as a reminder that:A) the price level is held constant at the world price level p*.B) the interest rate is held constant at the world interest rate r*.C) the exchange rate is held constant at the world exchange ra
11、te e*.D) output is held constant at the full employment level.11. If short-r un equilibrium in the Mun dell -Flem ing model is represe nted by a graph with Y along the horizontal axis and the exchange rate along the vertical axis, then the LM* curve:A) slopes upward and to the right because at a hig
12、her income a higher interest rate is needed to increase velocity.B) is vertical because monetary velocity is independent of the interest rate.*C) is vertical because the exchange rate does not enter into the LM* equation.D) slopes upward and to the right because a higher exchange rate leads to a hig
13、her income.12. In the Mun dell -Flem ing model, the exoge nous variables are the:A) world interest rate, the price level, and the exchange rate.B) level of government spending, taxes, and income.C) exchange rate and level of income.D) price level, world interest rate, monetary policy, and fiscal pol
14、icy.13. The intersection of the IS* and LM* curves shows the and the at which both thegoods market and the money market are in equilibrium.A) interest rate; price levelB) price level; exchange rateC) level of output; exchange rateD) level of output; price level14. Under a floating system, the exchan
15、ge rate:A) fluctuates in response to changing economic conditions.B) is maintained at a predetermined level by the central bank.C) is changed at regular intervals by the central bank.D) fluctuates in response to changes in the price of gold.15. In a small open economy with a floating exchange rate,
16、an effective policy to increase equilibrium output is to:A) increase government spending.B) increase taxes.C) increase the money supply.D) decrease the money supply.16. In a small open economy with a floating exchange rate, an effective policy to decrease equilibrium output is to:A) decrease governm
17、ent spending.B) decrease taxes.C) increase the money supply.D) decrease the money supply.17. In a small open economy with a floating exchange rate, the exchange rate will appreciate if:A) the money supply is increased.B) the money supply is decreased.C) government spending is decreased.D) taxes are
18、increased.18. In a small open economy with a floating exchange rate, the exchange rate will depreciate if:A) the money supply is decreased.B) import quotas are imposed.C) government spending is increased.D) taxes are decreased.19. In a small open economy with a floating exchange rate, if the governm
19、ent adopts an expansionary fiscal policy, in the new short-run equilibrium:A) income and the exchange rate will both rise.B) the exchange rate will rise, but income will remain unchanged.C) income will rise, but the exchange rate will remain unchanged.D) both income and the interest rate will rise.2
20、0. In a small open economy with a floating exchange rate, a rise in government spending in the new short-run equilibrium:A) chokes off investment, but not by as much as the new government spending.B) chokes off an amount of investment just equal to the new government spending.C) attracts foreign cap
21、ital, thus raising the exchange rate and reducing net exports, but not by as much as the new government spending.D) attracts foreign capital, thus raising the exchange rate and reducing net exports by an amount just equal to the new government spending.21. In a small open economy with a floating exc
22、hange rate, the supply of real money balances is fixed and a rise in gover nment spe nding:A) raises the in terest rate, so that in come must rise to main ta in equilibrium in the money market.B) raises the interest rate so that net exports must fall to maintain equilibrium in the goods market.C) ca
23、nnot cha nge the in terest rate so that net exports must fall to maintain equilibrium in the goods market.D) cannot cha nge the in terest rate so in come must rise to mai nta in equilibrium in the money market.Use the followi ng to an swer questi ons 22-23:Exhibit: IS* -LM *22. (Exhibit: IS* -LM *)
24、A small open economy with a floating exchange rate is initially at equilibrium A with IS*1, LM * 1, equilibrium excha nge rate e2, and equilibrium output Y1. If there is an in crease in gover nment spe nding to IS*2, the new equilibrium will be at, holdi ng everythi ng else con sta nt.A) AB) BC) CD)
25、 D23. (Exhibit: IS* -_M *) A small open economy with a floating exchange rate is initially at equilibrium A*with IS1*, _M1*, equilibrium exchange rate e2, and equilibrium output Y1. If there is a monetary*expansion to _M 2, the new equilibrium will be at , holding everything else constant.A) AB) BC)
26、 CD) D24. In a small open economy with a floating exchange rate, if the government decreases the money supply, then in the new short-run equilibrium:A) income falls and the exchange rate rises.B) the exchange rate falls and income rises.C) income remains unchanged but the exchange rate rises.D) the
27、exchange rate remains unchanged but income falls.25. In a small open economy with a floating exchange rate, if the government increases the money supply, then in the new short-run equilibrium the:A) interest rate falls and the level of investment rises.B) exchange rate falls and net exports increase
28、.C) interest rate falls but the level of investment does not rise.D) exchange rate falls but net exports do not increase.26. Accord ing to the Mun dell -Flemi ng model for a small ope n economy with flexible excha nge rates, if the Federal Reserve cannot alter domestic interest rates, changes in the
29、 money supply could still influence aggregate income through changes in the:A) exchange rate.B) price level.C) level of government spending.D) tax rates.27. In a small open economy with a floating exchange rate, if the government imposes an import quota, then in the new short-run equilibrium the IS*
30、 curve shifts to the right, raising the exchange rate:A) but not raising net exports or income.B) and net exports but not income.C) and income but not net exports.D) net exports and income.28. In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods,
31、 the n in the new short-run equilibrium:A) imports will decrease while exports remai n con sta nt, leadi ng to a rise in net exports.B) imports will decrease and exports will in crease, leadi ng to a rise in net exports.C) imports will decrease and exports will decrease by an equal amount.D) both im
32、ports and exports will rema in un cha nged.Use the followi ng to an swer questi ons 29-30:329. (Exhibit: Shifting IS* and LM*) A small open economy with a floating exchange rate is initially in* *equilibrium at A withIS| , LM 1 . Holding all else constant, if the government imposes a tariff oncurve
33、will shift toimports in order to protect domestic jobs, the n theB)LM1*; LMLM 1*; LMC)*IS1*; IS2D)IS1*; is3230. (Exhibit: Shifting IS* and LM*) A small open economy with a floating exchange rate is initially in*equilibrium at A with IS1* , LM 1 . Holding all else constant, if domestic consumers deve
34、lopgreater preferences for imported goods, then the curve will shift to .A)*/LM1*; LM 2*B)LM1*; LM 3*C)IS1*; IS2*D)IS1*; IS3*31. Under a fixed system, the exchange rate:A) fluctuates in response to changing economic conditions.B) is maintained at a predetermined level by the central bank.C) is chang
35、ed at regular intervals by the central bank.D) fluctuates in response to changes in the price of gold.32. To maintain a fixed-exchange-rate system, if the exchange rate moves below the fixed-exchange-rate level, then the central bank must:A) buy foreign currency.B) sell foreign currency from reserve
36、s.C) raise taxes.D) decrease government spending.33. If the Fed announced it would fix the exchange rate at 100 yen per dollar, but with the current money supply the equilibrium exchange rate was 150 yen per dollar, then:A) arbitrageurs would sell yen in the marketplace.B) arbitrageurs would buy yen
37、 from the Fed.C) the money supply would fall until the market exchange rate was 100 yen per dollar.D) the money supply would rise until the market exchange rate was 100 yen per dollar.34. Under a fixed-exchange-rate system, the central bank of a small open economy must:A) have a reserve of its own c
38、urrency, 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 a constant growth
39、 rate for the money supply.35. If there is a fixed-excha nge-rate system, the n in the short run described by the Mun dell -Flem ing model:A) the nominal exchange rate is fixed, but the real exchange rate is free to vary.B) the real exchange rate is fixed, but the nominal exchange rate is free to va
40、ry.C) both the nominal and real exchange rates are fixed.D) the nominal exchange rate is fixed, but whether the real exchange rate is fixed depends on whether the central bank follows a rule of constant growth of the money supply.36. If there is a fixed-exchange-rate system, then in the long run:A)
41、the nominal exchange rate is fixed, but the real exchange rate is free to vary.B) the real exchange rate is fixed, but the nominal exchange rate is free to vary.C) both the nominal and real exchange rates are fixed.D) the nominal and real exchange rates vary by a fixed amount.37. During the era of t
42、he gold standard, the price of gold in England:A) was always equal to the price of gold in the United States.B) was always a little higher than the price of gold in the United States, but it could not be higher by more than the cost of transporting gold from the United States to England.C) was alway
43、s a little lower than the price of gold in the United States, but it could not be lower than the cost of transporting gold from England to the United States.D) could be higher or lower than the price of gold in the United States, but not by more than the cost of transporting gold between the two cou
44、ntries.38. In a small open economy with a fixed exchange rate, if the government increases government purchases, then in the new short-run equilibrium:A) the exchange rate rises but income does not rise.B) income rises but the exchange rate does not rise.C) both income and the exchange rate rise.D)
45、neither income nor the exchange rate rises, as the money supply contracts.39. In a small ope n economy with a fixed excha nge rate, if the gover nment in creases gover nment purchases, then in the process of adjusting to the new short-run equilibrium the money supply:A) in creases to keep the excha
46、nge rate un cha nged, thus augme nti ng the effect of gover nment spe nding on in come.B) decreases to keep the excha nge rate un cha nged, thus offsett ing the effect of gover nment spe nding on in come.C) rema ins un cha nged, and there is no effect of gover nment spe nding on in come.D) remai ns
47、un cha nged to keep the in terest rate at the world in terest rate, so that gover nment spe nding reduces in come.40. In a small ope n economy with a fixed excha nge rate, an effective policy to in crease equilibrium output is to:A) decrease gover nment spe nding.B) decrease taxes.C) in crease the m
48、oney supply.D) decrease the money supply.Use the follow ing to an swer questi ons 41-42:Exhibit: IS* -LM *41. (Exhibit: IS* -_M *) A small open economy with a fixed exchange rate e2 is initially at equilibrium Awith* *IS1*, _M1*, and equilibrium output Y1. If there is an increase in government spend
49、ing to*IS*2,the new equilibrium will be at _, holding everything else constant.A)AB)BC)CD)D42. (Exhibit: IS* -_M *) A small open economy with a fixed exchange rate e2 is initially at equilibrium A* * * with IS1*, _M1*, and equilibrium output Y1. If there is a monetary expansion to _M2*, the new equi
50、librium will be at , holding everything else constant.A) AB) BC) CD) D43. In a small open economy with a fixed exchange rate, if the central bank tries to increase the money supply, then in the new short-run equilibrium:A) income rises.B) income falls.C) the exchange rate falls.D) income remains con
51、stant.44. In a small open economy with a fixed exchange rate, if the country devalues its currency, then in thenew short-run equilibrium the exchange rate , and the _M* curve shifts to the .A)decreases; leftB)increases; leftC)decreases; rightD)increases; right45. In the Mun dell -Flemi ng model with
52、 fixed excha nge rates, attempts by the cen tral bank to in creasethe money supply lead the exchange rate to fall, giving arbitrageurs the incentive to thecentral bank, which causes the money supply to .A) sell domestic currency to; increaseB) sell domestic currency to; decreaseC) buy domestic curre
53、ncy from; increaseD) buy domestic currency from; decrease46. In the Mun dell -Flemi ng model with fixed excha nge rates, attempts by the cen tral bank to decrease the money supply:A) lead to a lower equilibrium level of income.B) lead to a higher equilibrium level of income.C) must be abandoned in o
54、rder to maintain the fixed exchange rate.D) must be offset by expansionary fiscal policy.47. A revaluation of a currency under a fixed-exchange-rate system occurs when the level at which the currency is fixed is:A)increased.B)decreased.C)allowed to float.D)kept fixed within a band48. A devaluation o
55、f a currency under a fixed-exchange-rate system occurs when the level at which thecurrency is fixed is:A)increased.B)decreased.C)allowed to float.D)kept fixed within a band49. During the Great Depression, countries that devalued their currencies generally whereascountries that maintained the old exc
56、hange rate .A) suffered longer; experienced no depressionB) recovered relatively quickly; experienced no depressionC) suffered longer; recovered relatively quicklyD) recovered relatively quickly; suffered longer50. In a small open economy with a fixed exchange rate, if the government imposes an impo
57、rt quota, then net exports:A) decrease but the money supply falls and income falls.B) increase, the money supply increases, and income increases.C) are unchanged but the money supply falls and income falls.D) are unchanged, the money supply is unchanged, and income is unchanged.51. In the Mun dell -Flem ing model with fixed excha nge rates, the impositi on of trade restrict ions results in an increase in net exports because:A) investment inc
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