With fixed exchange rates, perfect asset substitutability, and perfect capital mobility
A) the LM curve is horizontal.
B) the LM curve is vertical.
C) the BP curve is horizontal.
D) the BP curve is vertical.
C
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Which of the following represents the chain of causation for expansionary policy?
A. An increase in real GDP increases investment, which increases the money supply, which reduces the interest rate. B. An increase in the money supply reduces the interest rate, which increases investment, which increases real GDP. C. An increase in investment increases the interest rate, which increases the money supply, which increases real GDP. D. An increase in the money supply increases investment, which increases the interest rate, which increases real GDP.
The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Point c is Pareto efficient because
A) the MRS's are equal. B) the indifference curves are tangent. C) no mutual gains from trade exist. D) All of the above.
Suppose a Japanese investor purchases a dollar deposit that yields 5 percent interest at the end of a year. What will be the approximate return in terms of yen at maturity if the exchange rate moves from $1 = ¥100 to $1 = ¥105 during the year?
a. 1 percent b. 5 percent c. 10 percent d. 20 percent e. 0 percent
Using an approximation to the UIP eqaution to determine the spot exchange rate, assume that the expected spot rate (after 1 year) for euros (in terms of dollars)= $1.50, the current interest rate on euro deposits is 2% and the current interest rate on dollar deposits is 6%. What current spot for euros would satisfy the equation?
a) $1.5*(1+2%)= $1.53 b) $1.5*(1-2%)= $1.47 c) $(1.5/(1+4%)= $1.442 d) $(1.5/(1-4%)= $1.563