In a small open economy in a flexible exchange rate system with perfect capital
ID: 1095220 • Letter: I
Question
In a small open economy in a flexible exchange rate system with perfect capital mobility, there is complete ________ crowding-out of ________ policy.
A) domestic, monetary B) domestic, fiscal
C) international, fiscal D) international, monetary
15) If the dollar depreciates against the yen, this tends to ________ our imports of Japanese goods and ________ our exports of goods to Japan, so that our net exports ________.
A) decrease, decrease, decrease
B) increase, decrease, are unchanged
C) decrease, increase, increase
D) decrease, increase, are unchanged
E) increase, increase, increase
18) An increase in the nominal money supply will shift
A) AD up and raise the price level. B) SAS down and lower the price level.
C) SAS up and raise the price level. D) AD down and lower the price level.
19) A rise in the price level causes
A) movement down along an LM curve. B) movement up along an LM curve.
C) the LM curve to shift downward. D) the LM curve to shift upward.
Explanation / Answer
In a small open economy in a flexible exchange rate system with perfect capital mobility, there is complete International crowding-out of fiscal policy.
The answer is B. This is because fiscal policy is ineffective in floating exchange rate.
15) If the dollar depreciates against the yen, this tends to decrease our imports of Japanese goods and increase our exports of goods to Japan, so that our net exports increases.
The answer is C.
18) An increase in the nominal money supply will shift AD up and shift the price level up.
The answer is A.
19) A rise in the price level causes LM curve to shift upward.
The answer is D. This means the real interest rate increases with increase in price.