Question

1.With perfect capital mobility and other things equal, an exogenous increase in demand for a country's exports will lead to ______ increase in the country's national income under fixed exchange rates than under flexible exchange rates.

a. a greater

b. a smaller

c. the same

d. a greater, a smaller, or the same; it is impossible to determine without more information

2.When a nation chooses to fix or float its currency exchange rate, it should consider

a. only its domestic banks, importers, and exports.

b. only whether it has a great deal of economic integration.

c. only whether it has similar circumstances in terms of demand or supply shocks with its trading partners.

d. both the level of economic integration and the similarity of demand or supply shocks.

3.In the AD/AS framework, when the economy is in long-run equilibrium,

a. inflation is occurring.

b. the entire labour force is employed.

c. actual prices are equal to expected prices.

d. actual levels of income and employment are less than the natural levels of income and employment.

Answer 1

Ans1) the correct option is a. a greater

Ans2) the correct option is d. both the level of economic integration and the similarity of demand or supply shocks.

Ans3) the correct option is d) actual levels of income and employment are less than the natural levels of income and employment.