Question

1. The "trilemma" concept refers to the fact that a nation may simultaneously select a combination of any two, but not all three, of the following:

Select one:

a. a managed, dirty float for the exchange rate; a non-independent monetary policy; closure of domestic markets to financial capital flows.

b. flexible bilateral and cross exchange rates; independent, discretionary foreign exchange market interventions; open, liberalized markets for cross-border trade of merchandise and services.

c. fixed bilateral and cross exchange rates; non-independent foreign exchange market interventions; closure of markets to cross-border trade of merchandise and services.

d. fixed exchange rates; an independent, discretionary monetary policy; open, liberalized markets for financial capital.

2. An example of a sterilized foreign exchange market intervention is a purchase of foreign exchange reserves that is exactly matched by an open market purchase.

Select one:

a. TRUE

b. FALSE

3. At a given quantity of a product demanded, an increase in demand for the product results in a rise in marginal revenue and hence the marginal revenue product of labor and demand for labor. Select one:

a. TRUE

b. FALSE

Answer 1

1. Trilemma refers to the fact that a nation may simultaneously select a combination of any two,but not all three, of the following: (1) fixed exchange rates; (2) independent, discretionary monetary policy; and (3) open, liberalized markets for financial capital.

Option d

2. An example of a sterilized foreign exchange market intervention is a purchase of foreign exchange reserves that is exactly matched by an open market purchase.

False option b

An example of a sterilized foreign exchange market intervention is a purchase of foreign exchange reserves that is exactly matched by an open market sale.

3. At a given quantity of a product demanded, an increase in demand for the product results in a rise in marginal revenue and hence the marginal revenue product of labor and demand for labor.

False option b

At a given quantity of a product demanded, an increase in demand for the product results in a fall in marginal revenue and hence the marginal revenue product of labor.