17. With respect to a country having a fixed exchange rate, which of the following state ments is notcorrect? A. The fixed exchange rate system imposes strict discipline on the central bank. B. The economy is vulnerable to foreign but not domestic demand disturbances. C. The Taylor Rule schedule is irrelevant. D. Shifts in world interest rates can pose a risk to the sustainability of the fixed excha nge rate.
17. With respect to a country having a fixed exchange rate, which of the following state ments is notcorrect? A. The fixed exchange rate system imposes strict discipline on the central bank. B. The economy is vulnerable to foreign but not domestic demand disturbances. C. The Taylor Rule schedule is irrelevant. D. Shifts in world interest rates can pose a risk to the sustainability of the fixed excha nge rate.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5:44 PM A p
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17. With respect to a country having a fixed exchange rate, which of the following state
ments is notcorrect?
A. The fixed exchange rate system imposes strict discipline on the central bank,
B. The economy is vulnerable to foreign but not domestic demand disturbances.
C. The Taylor Rule schedule is irrelevant.
Q Shifts in world interest rates can pose a risk to the sustainability of the fixed excha
nge rate.
18. The Mundell-Fleming framework studies (A) -, (B)
orld with (C)__ financial markets and (D) _capital mobility.
economies in a w
A. (A) small; (B) open; (C) integrated; (D) free
B. (A) large; (B) open; (C) integrated; (D) free
C. (A) small; (B) mercantilist; (C) integrated; (D) free
D (A) large; (B) open; (C) restricted; (D) free
19. Which of the following policy options would simultaneously increase interest rates and d
ecrease output?
A. The Bank of Zambia sells bonds through open market operations.
B. he Government increases its defense purchases.
C. The Bank of Zambia expands the money supply.
D. The government increases the tax rate
20. An increase in the money supply and a drop in consumer confidence will lead to
A. A decrease in output with an ambiguous effect on the interest rate.
B. An increase in output and a decrease in the interest rate.
C. An ambiguous effect on output and an increase in the interest rate.
D. An ambiguous effect on output and a decrease in the interest rate.
21. Marginal Propensity to Consume is
A. Increase in consumption due to one unit increase in income.
B. Total consumption divided by total income.
C. Both (a) and (b).
D Neither (a) nor (b).
22. Which of the following are not characteristics of Keynesian consumption function?
A. The main influence on consumption in the short run is current disposable income
B. The marginal propensity to consume is less than one
Q
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21. Marginal Propensity to Consume is
A. Increase in consumption due to one unit increase in income.
B. Total consumption divided by total income
C. Both (a) and (b).
D. Neither (a) nor (b).
22. Which of the following are not characteristics of Keynesian consumption function?
A. The main influence on consumption in the short run is current disposable income
B. The marginal propensity to consume is less than one
C. The average propensity to consume decreases as income increases
D. The average propensity to consume increases as income increases
23. Monetary policy under fixed exchange rate
A. is more effective if international capital movement is very sensitive.
B. is more effective if international capital movement is not sensitive.
C. is never effective.
D. None of the above
24. In Keynesian consumption function, the property shows :
A. MPC = APC
В. МРC < АРС
С. МРС> АРС
D. APC = zero
SECTION 4: TRUE OR FALSE OR UNCERTAIN
25. According to the classical macroeconomic model, expansionary fiscal policy has an infla
tionary effect.
26. Assuming that you have free capital mobility and fixed exchange rate policy, then fiscal p
olicy has a positive effect on output
27. Expansionary fiscal policy always has a depreciating effect on the domestic exchange ra
te
28. According to the relative income hypothesis, the savings rate is a non-linear function of t
he ratio of current to previous peak income.
29. In the IS-LM-BOP model, macroeconomic adjustments occur through changes in money
supply if the country adopts a fixed exchange rate regime.
30. According to the impossible trinity, a country that has a liberalized capital account and i
ndependent monetary policy will also achieve a stable exchange rate.
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