[Hikari Clover]

1. Assume that the price levels in two countries are constant. In this situation, we know that:

A neither the real nor the nominal exchange rate can change.
B the real exchange rate can change, while the nominal exchange rate is constant.
C the nominal exchange rate can change, while the real exchange rate is constant.
D the real and nominal exchange rate must move together, changing by the same percentage.


2. Between 1973 and 1999, annual inflation in developing nations that export mainly manufactured goods averaged 23 percent, compared with an average 59 percent in countries that mainly export raw materials. Other things being equal, the PPP theory would predict that, in the long run, the currencies of the countries exporting raw materials should have

A been approximately stable relative to the currencies of countries exporting manufactured goods.
B appreciated relative to the currencies of countries exporting manufactured goods.
C depreciated relative to the currencies of countries exporting manufactured goods.
D had no predictable relationship to the currencies of countries exporting manufactured goods.


3. pose policy makers want to increase output (Y) and keep net exports (NX) constant. Which of the following policies would most likely achieve this?
A an increase in government spending
B a real depreciation
C an increase in government spending and a decrease in the real exchange rate
D an increase in the real exchange rate

4.
At each value of the domestic interest rate, increases in the riskiness of domestic assets _____ capital inflows, _____ capital outflows and _____ net capital inflows.
A increase; increase; increase
B increase; increase; decrease
C increase; decrease; increase
D decrease; increase; decrease


5.
In an open economy with a given level of real interest rates and risk, a decrease in real interest rates abroad will _____ capital inflows and _____ the equilibrium domestic real interest rate.
A increase; increase
B increase; decrease
C increase; not change
D decrease; increase

6.
A country with a low saving rate tends to have a _____ domestic real interest rate that will _____ capital inflows.
A high; attract
B high; discourage
C high; not affect
D low; attract

7.
Australia's recent large trade deficits

A are a serious policy problem as they reflect speculative investments that are unlikely to provide sufficient returns.
B are unusual compared with earlier years and reflect large government budget deficits.
C are not unusual compared with earlier years and should not pose a problem as long as the foreign savings are well invested in the Australian economy.
D are a result of unfair trading practices by Australia's trading partners and pose a serious problem for Australian policy makers.


8.
As the dollar exchange rate, e, decreases, the quantity of dollars supplied in the foreign exchange market ____ and the quantity of dollars demanded in the foreign exchange market ____.
A increases; increases
B increases; decreases
C does not change; does not change
D decreases; increases


dats all
I lost my textbook yesterday,not able to check the answers:(

thanks in advance

[Curlyben]

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