Question

12) In the IS-LM Model, assuming a downward slop Model, assuming a downward sloping IS curve and an upward sloping LM curve; an increase in consumer wealth is going to A) cause a rightward shift of the IS curve. B) cause a rightward shift of the LM curve. C) cause a movement along the IS curve. D) cause a leftward shift of the LM curve. 13) The biggest difference between the 2008-09 recession and its aftermath, as compared to the 1981-82 recession and its aftermath, was in the behavior of A) output gap B) total unemployment rate C) long-term unemployment rate D) short-term unemployment rate exchange rates 14) Monetary policy is more powerful than fiscal policy under due to the amplifying effect from changes in interest rates to exchange rates to A) flexible, monetary accommodation B) fixed, net exports C) fixed, monetary accommodation D) flexible, net exports 15) When the nominal exchange rate in terms of dollars per yen rises, A) the dollar buys more yen and the dollar has depreciated. B) the dollar buys fewer yen and the dollar has depreciated. C) the dollar buys more yen and the dollar has appreciated. D) the dollar buys fewer yen and the dollar has appreciated. 16) From 1980 to 2000, the yen-dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar, while the dollar-pound exchange rate fell from 2.22 dollars/pound to 1.62 dollars/pound. As a result A) the dollar appreciated relative to the yen, but depreciated relative to the pound. B) the dollar depreciated relative to the yen, but appreciated relative to the pound. C) the dollar appreciated relative to both the yen and the pound. D) the dollar depreciated relative to both the yen and the pound. 17) When the British pound rises in value relative to other currencies, then A) goods imported into Britain rise in price. B) British exports rise in price. C) neither British exports nor imports rise in price. D) both British exports and imports rise in price.

Answer 1

12. B) causes a rightward shift of the LM curve.

Any change in the supply of money will induce change in the LM curve.

13. D) the short term unemployment rate.

The short term unemployment rate was higher during the recession of 1980s as compared to the recession of 2008. In the long term both the recessions lead to higher rate of unemployment.

14. D) flexible, net exports

The changes in interest rate induces changes in exchange rate and this inturn will affect the net exports.

15. C) the dollar buys more yen and the dollar has appreciated.

The rate at which one currency can be exchanged for another is known as the nominal exchange rate.

16. B) the dollar depreciated relative to yen but appreciated relative to pound.

In 1980, for one dollar you could get 240 yen but in 2000 you could only get 102 yen. The dollar has depreciated

In the case with pound, you needed 2.22 dollar in order to buy one pound but in 2000 the rate reduced to 1.62.

17 . B) the export rise in price