Assume that policy makers are pursuing a fixed exchange rate regime. Assume that the economy is initially operating at the natural level (i.e., Y = Yn). Suppose fiscal policy makers increase government spending. This fiscal contraction will cause which of the following?
A) The real exchange rate will be permanently higher in the medium run.
B) The real exchange rate will be permanently lower in the medium run.
C) The effects of this devaluation on the real exchange rate will be ambiguous in the medium run.
D) The real exchange rate will be unchanged in the medium run.
E) none of the above
B
You might also like to view...
Speculators absorb additional risk in futures markets as a result of the actions taken by
A) longs. B) hedgers. C) brokers. D) shorts.
An increase in the interest rate will
a. Leave the price of bonds unchanged b. Increase the price of bonds c. decrease the price of bonds d. Increase of decrease the price of bonds depending upon whether the money supply has increased or decreased.
When the Fed buys a Treasury bill from the public, how does it usually pay for the T-bill?
A. By writing a check on a commercial bank account B. By printing new Federal Reserve notes C. By creating new reserves in bank accounts D. By prepaying taxes into the Treasury’s account
The mathematics of amortization for mortgage loans must utilize the
A. payment frequency. B. payment frequency and the period of time over which the debt will be repaid. C. period of time over which the debt will be repaid. D. structure of marginal tax rates.