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Monetary Economics Final Questions and Answers Grade A+ 2023

1. The exchange rate is ____________________________________________ A) the price of one currency relative to gold. B) the value of a currency relative to inflation. C) the change in the value of m... oney over time. D) the price of one currency relative to other currency - -D -2. When the value of the British pound changes from $1.25 to $1.50, the pound has __________, while the US dollar has ___________ in relative sense. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated - -C -3. Everything else held constant, when a country's currency appreciates, the country's goods exported to foreign countries become __________ expensive and foreign goods imported in that country become _________ expensive. A) more; less B) more; more C) less; less D) less; more - -A -4. According to the theory of purchasing power parity (PPI), exchange rates between any two currencies will adjust to reflect changes in ___________________________________________ A) the trade balances of the two countries. B) the current account balances of the two countries. C) fiscal policies of the two countries. D) the price levels of the two countries determined by different labor productivity. - -D -5. When Americans or foreigners expect the return on dollar assets to be high relative to the return on foreign assets, there is a _________ demand for dollar-denominated assets and a correspondingly __________ demand for assets denominated in foreign currency. A) higher; higher B) higher; lower [Show More]

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