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1、International Economics, 8e (Krugman) II Chapter 12 National Income Accounting and the Balance of Payments1) A countrys gross national product (GNP) is A) the value of all final goods and services produced by its factors of production and sold on the market in a given time period. B) the value of al
2、l intermediate goods and services produced by its factors of production and sold on the market in a given time period. C) the value of all final goods produced by its factors of production and sold on the market in a given time period. D) the value of all final goods and services produced by its fac
3、tors of production and sold on the market. E) the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period. Answer: A2）The CA is equal to A) Y - (C - I + G). B) Y + (C + I + G). C) Y - (C + I + G). D) Y - (C + I - G).
4、E) None of the above. Answer: A3）For open economies, A) S = I. B) S = I + CA. C) S = I - CA. D) S I + CA. E) S I + CA. Answer: B4）A U.S. citizen buys a newly issued share of stock in England, paying for his order with a check, which the British company deposits in its own U.S. bank account in New Yo
5、rk. How is this transaction accounted for in the balance of payments? A) financial account, U.S. asset export B) current account, U.S. service import C) current account, British good export D) financial account, British asset import E) financial account, U.S. asset import Answer: A5) The earnings of
6、 a Spanish factory with British owners are A) counted in Spains GDP. B) are part of Britains GNP. C) are counted in Britains GDP. D) are part of Spains GNP. E) Only A and B. Answer: E 6）The Balance of payments is always balanced. Discuss. Answer: True. Every international transaction automatically e
7、nters the balance of payments twice, once as a credit and once as a debit.Current account + financial account + capital account = 0 7) The balance of payments accounts seldom balance in practice. Discuss. Answer: True. The main reasons are due to the fact that data collected or received from differe
8、nt sources may differ in coverage, accuracy, and timing. In addition, data on services are not reliable as well as data from the financial account. Moreover, accurate measurements of international interest and dividend receipts are particularly difficult. 8）Fill in the following table: Answer: Chapt
9、er 13 Exchange Rates and the Foreign Exchange Market: An Asset Approach1）How many British pounds would it cost to buy a pair of American designer jeans costing $45 if the exchange rate is 1.80 dollars per British pound? A) 10 British pounds B) 25 British pounds C) 20 British pounds D) 30 British pou
10、nds E) 40 British pounds Answer: B2) An appreciation of a countrys currency, A) decreases the relative price of its exports and lowers the relative price of its imports. B) raises the relative price of its exports and raises the relative price of its imports. C) lowers the relative price of its expo
11、rts and raises the relative price of its imports. D) raises the relative price of its exports and lowers the relative price of its imports. E) None of the above. Answer: D 3) Which major actor is at the center of the foreign exchange market? A) corporations B) central banks C) commercial banks D) no
12、n-bank financial institutions E) None of the above. Answer: C 4) What is the expected dollar rate of return on euro deposits with todays exchange rate at $1.10 per euro, next years expected exchange rate at $1.166 per euro, the dollar interest rate at 10%, and the euro interest rate at 5%? A) 10% B)
13、 11% C) -1% D) 0% E) None of the above. Answer: B 5) What is the expected dollar rate of return on dollar deposits with todays exchange rate at $1.10 per euro, next years expected exchange rate at $1.165 per euro, the dollar interest rate at 10%, and the euro interest rate at 5%? A) 10% B) 11% C) -1
14、% D) 0% E) None of the above. Answer: A 6）If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is 4 percent, then A) an investor should invest only in dollars. B) an investor should invest only in euros. C) an
15、 investor should be indifferent between dollars and euros. D) It is impossible to tell given the information. E) All of the above. Answer: C 7）Discuss the effects of a rise in the interest rate paid by euro deposits on the exchange rate. Answer: There are two effects to consider. If we make the unre
16、alistic assumption that the expected exchange rate will not change, then a rise in the interest rate paid by Euro deposits causes the dollar to depreciate. However, if the expected exchange rate were to rise, then the current exchange rate would also rise. (See figure 13-6 from the text.)8) Calculat
17、e the interest rate in the euro zone if interest parity condition holds, for the following 15 cases:Answer: Chapter 14 Money, Interest Rates, and Exchange Rates1）Money includes A) currency. B) checking deposits held by households and firms. C) deposits in the foreign exchange markets. D) Both A and
18、B. E) A, B, and C. Answer: D2）The aggregate money demand depends on A) the interest rate. B) the price level. C) real national income. D) All of the above. E) Only A and C. Answer: D 3）Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of a temp
19、orary increase in the European money supply on the dollar/euro exchange rate. Answer: An increase in the European money supply will reduce the interest rate on the euro and thus will cause the schedule of the expected euro return expresses in dollars to shift down, causing a reduction in the dollar/
20、euro exchange rate, i.e., an appreciation of the U.S. Dollar. The euro depreciates against the dollar. The U.S. money demand and money supply are not going to be affected, and thus the interest rate in the U.S. will remain the same.4) A permanent increase in a countrys money supply A) causes a more
21、than proportional increase in its price level. B) causes a less than proportional increase in its price level. C) causes a proportional increase in its price level. D) leaves its price level constant in long-run equilibrium. E) None of the above. Answer: C5）After a permanent increase in the money su
22、pply, A) the exchange rate overshoots in the short run. B）the exchange rate overshoots in the long run. C) the exchange rate smoothly depreciates in the short run. D) the exchange rate smoothly appreciates in the short run. E) None of the above. Answer: A6）Although the price levels appear to display
23、 short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lead to future increase in the price level. Discuss. Answer: The statement is true. The pressures come from three main sources: excess demand for output and labor; inflat
24、ionary expectations; and, raw material prices. 7）The long run effects of money supply change: A) ambiguous effect on the long-run values of the interest rate or real output, a proportional change in the price levels long-run value in the opposite direction. B） proportional effect on the long-run val
25、ues of the interest rate or real output, a proportional change in the price levels long-run value in the same direction. C) no effect on the long-run values of the interest rate or real output, a proportional change in the price levels long-run value in the same direction. D) no effect on the long-r
26、un values of the interest rate or real output, no change in the price levels long-run value. E) ambiguous effect on the long-run values of the interest rate or real output, A disproportional change in the price levels long-run value in the same direction. Answer: CChapter 15 Price Levels and the Exc
27、hange Rate in the Long Run1）Under Purchasing Power Parity, A) E$/E = PUS/PE. B) E$/E = PE/PES. C) E$/E = PUS + PE. D) E$/E = PUS - PE. E) None of the above. Answer: A2）Assuming relative PPP, fill in the table below:Answer: 3) Under PPP (and by the Fisher Effect), all else equal, A) a rise in a count
28、rys expected inflation rate will eventually cause a more-than proportional rise in the interest rate that deposits of its currency offer in order to accommodate for the higher inflation. B) a fall in a countrys expected inflation rate will eventually cause an equal rise in the interest rate that dep
29、osits of its currency offer. C) a rise in a countrys expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer. D) a rise in a countrys expected inflation rate will eventually cause a less than proportional rise in the interest rate that dep
30、osits of its currency offer to accommodate the rise in expected inflation. E) None of the above. Answer: C4）Describe the chain of events leading to exchange rate determination for the following cases:(a)An Increase in U.S. money supply(d)Increase in growth rate of U.S. money supply(c)Increase in wor
31、ld relative demand for U.S. products(d)Increase in relative U.S. output supply Answer: Chain of events leading to exchange rate determination: = (Pus/PE)Increase in U.S. money supply: Pus rises in proportion to the money supply; q remains the same. All dollar prices will rise (including dollar price
32、 of euro).Increase in growth rate of U.S. money supply: Inflation rate, dollar interest rate, Pus, E, rises in proportion to Pus.Increase in world relative demand for U.S. products: E falls, and q does as well.Increase in relative U.S. output supply: Dollar depreciates, lowers relative price of U.S.
33、 output, rise in q, effect on E is not clear since q and Pus work in opposite directions. 5）Which of the following statements is the most accurate? A) Relative PPP is not a reasonable approximation to the data. B) Relative PPP is sometimes a reasonable approximation to the data but often performs po
34、orly. C) Relative PPP is sometimes a reasonable approximation to the data. D) PPP is sometimes a reasonable approximation to the data. E) PPP is sometimes a reasonable approximation to the data but usually performs poorly. Answer: B 6) Interest rate differences between countries depend on A) differe
35、nces in expected inflation, but not on expected changes in the real exchange rate. B) differences in expected changes in the real exchange rate, but not on expected inflation. C) neither differences in expected inflation, nor on expected changes in the real exchange rate. D) differences in expected
36、inflation and nothing else. E) differences in expected inflation, and on expected changes in the real exchange rate. Answer: E 8) What is the real exchange rate between the dollar and the euro equal to? Answer: Let,Real dollar/euro exchange rate = Nominal exchange rate = Price of an unchanging baske
37、t in US = PusPrice of an unchanging basket in Europe = PEThen, = ( PE)/PusA rise in the real dollar/euro exchange rate is called a real depreciation of the dollar against the euro, a fall in purchasing power of the dollar.A fall in the real dollar/euro exchange rate is called a real appreciation of
38、the dollar against the euro, a rise in purchasing power of the dollar. Chapter 16 Output and the Exchange Rate in the Short Run1）A countrys domestic currencys real exchange rate, q, is best described by A) the price of similar goods in the same market. B) the price of the domestic basket in terms of
39、 the foreign one. C) the price of a domestic basket. D) the price of the foreign basket in terms of the domestic basket. E) the price of different goods baskets in the same market. Answer: D 2）Fill in the following table:Answer：3) How does a rise in real income affect aggregate demand? A) Y implies
40、Yd implies Im implies CA implies AD , but Y implies Yd implies C implies AD by more B) Y implies Yd implies Im implies CA implies AD , but Y implies Yd implies C implies AD by more C) Y implies Yd implies Im implies CA implies AD , and Y implies Yd implies C implies AD D) Y implies Yd implies Im imp
41、lies CA implies AD , but Y implies Yd implies C implies AD by less E) Y implies Yd implies Im implies CA implies AD , but Y implies Yd implies C implies AD by less Answer: A 4）The aggregate demand for home input can be written as a function of:I.Real exchange rate.II.Government spending.III.Disposab
42、le income. A) I only B) III only C) I and III D) II and III E) I, II, and III Answer: E 5) In the short-run, any rise in the real exchange rate, EP/P, will cause A) an upward shift in the aggregate demand function and a reduction in output B) an upward shift in the aggregate demand function and an e
43、xpansion of output C) a downward shift in the aggregate demand function and an expansion of output D) an downward shift in the aggregate demand function and a reduction in output E) an upward shift in the aggregate demand function but leaves output intact Answer: B 6) In the short-run, any fall in E
44、P/P, regardless of its causes, will cause A) an upward shift in the aggregate demand function and an expansion of output B) an upward shift in the aggregate demand function and a reduction in output C) a downward shift in the aggregate demand function and an expansion of output D) an downward shift
45、in the aggregate demand function and a reduction in output E) an upward shift in the aggregate demand function but leaves output intact Answer: D7) In the short-run, a temporary increase in the money supply A) shifts the AA curve to the right, increases output and depreciates the currency. B) shifts
46、 the AA curve to the left, increases output and depreciates the currency. C) shifts the AA curve to the left, decreases output and depreciates the currency. D) shifts the AA curve to the left, increases output and appreciates the currency. E) shifts the AA curve to the right, increases output and appreciates the currency. Answer: A 8）If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause A) an increase in exchange rate, E. B) a decrease in exchange rate, E. C) an increase in output, Y. D)