To avoid the imposition of capital controls, a government wishing to keep its exchange rate at a certain level, may rely on:
a. forbidding all sales or purchases of foreign currency.
b. asking the large banks to keep the prices at a certain level.
c. asking for loans from the International Monetary Fund (IMF).
d. intervention in the foreign exchange market to raise or lower the exchange rate.
Ans: d. intervention in the foreign exchange market to raise or lower the exchange rate.
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Suppose a tax cut that had been anticipated by households and businesses doesn't happen. Describe a new Keynesian analysis of the consequences of this "event."
What will be an ideal response?
Which of the following formulas is used to find the cumulative increase in AD from a particular fiscal stimulus?
A. The multiplier × fiscal stimulus. B. Fiscal stimulus ÷ MPC. C. MPC × fiscal stimulus. D. Fiscal stimulus ÷ the multiplier.
Bonds rated as "highly speculative" are:
A. rated so because they guarantee high returns for the buyer. B. rated so because they do not have any default risk. C. commonly referred to as junk bonds. D. ranked just above investment grade by Standard amp; Poor's.
The model of supply and demand leads to the prediction that low interest rates cause:
A. a decrease in housing prices, especially in cities with plenty of room for expansion. B. an increase in housing prices, especially in cities with plenty of room for expansion. C. an increase in housing prices, especially in cities with limited land. D. a decrease in housing prices, especially in cities with limited land.