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Britain was on a fixed exchange rate in the early 1990's with Germany. Why did the reunification in Germany in the early 1990s and the resulting higher German interest rates cause a macroeconomic policy dilemma in Britain O Lower interest rates in Germany meant that Britain had to increase its money supply. O Lower interest rates in Germany meant that Britain had to cut its money supply. O Higher interest rates in Germany meant that Britain had to increase its money supply. O Higher interest rates in Germany meant that Britain had to cut its money supply O None of the above

Britain was on a fixed exchange rate in the early 1990's with Germany. Why did the reunification in Germany in the early 1990s and the resulting higher German interest rates cause a macroeconomic policy dilemma in Britain O Lower interest rates in Germany meant that Britain had to increase its money supply. O Lower interest rates in Germany meant that Britain had to cut its money supply. O Higher interest rates in Germany meant that Britain had to increase its money supply. O Higher interest rates in Germany meant that Britain had to cut its money supply O None of the above

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
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QUESTION 12 Britain was on a fixed exchange rate in the early 1990's with Germany. Why did the reunification in Germany in the early 1990s and the resulting higher German interest rates cause a macroeconomic policy dilemma in Britain O Lower interest rates in Germany meant that Britain had to increase its money supply. O Lower interest rates in Germany meant that Britain had to cut its money supply. O Higher interest rates in Germany meant that Britain had to increase its money supply. Higher interest rates in Germany meant that Britain had to cut its money supply None of the above
Transcribed Image Text:QUESTION 12 Britain was on a fixed exchange rate in the early 1990's with Germany. Why did the reunification in Germany in the early 1990s and the resulting higher German interest rates cause a macroeconomic policy dilemma in Britain O Lower interest rates in Germany meant that Britain had to increase its money supply. O Lower interest rates in Germany meant that Britain had to cut its money supply. O Higher interest rates in Germany meant that Britain had to increase its money supply. Higher interest rates in Germany meant that Britain had to cut its money supply None of the above
QUESTION 13 Which of the following sets of two events would unambiguously increase the gains from creating a fixed exchange rate between two countries? O The volume of trade between the countries increases and their business cycles become less synchronized. O The volume of trade between the countries increases and their business cycles become more synchronized. O The volume of trade between the countries decreases and their business cycles become less synchronized. O The volume of trade between the countries decreases and their business cycles become more synchronized. QUESTION 14 Consider the case of a fixed exchange rate system as held in Europe before the Euro. All countries were fixed to Germany and capital was mobile O Neither Germany nor the other countries have monetary policy autonomy. O The countries fixing to Germany have monetary policy autonomy while Germy does not. O Germany has monetary policy autonomy while the other countries do not. O All countries have monetary policy autonomy. QUESTION 15 In terms of the exchange rate trilemma, under the Bretton Woods system from 1946 to 1973, countries: O maintained a fixed peg to the U.S. dollar, had monetary policy autonomy, but had to impose capital controls. O maintained a fixed peg to the U.S. dollar, eliminated capital controls, but had to sacrifice monetary policy autonomy. O had monetary policy autonomy, eliminated capital controls, but had to sacrifice a fixed peg to the U.S. dollar. O managed to implement all three policy options from the trilemma.
Transcribed Image Text:QUESTION 13 Which of the following sets of two events would unambiguously increase the gains from creating a fixed exchange rate between two countries? O The volume of trade between the countries increases and their business cycles become less synchronized. O The volume of trade between the countries increases and their business cycles become more synchronized. O The volume of trade between the countries decreases and their business cycles become less synchronized. O The volume of trade between the countries decreases and their business cycles become more synchronized. QUESTION 14 Consider the case of a fixed exchange rate system as held in Europe before the Euro. All countries were fixed to Germany and capital was mobile O Neither Germany nor the other countries have monetary policy autonomy. O The countries fixing to Germany have monetary policy autonomy while Germy does not. O Germany has monetary policy autonomy while the other countries do not. O All countries have monetary policy autonomy. QUESTION 15 In terms of the exchange rate trilemma, under the Bretton Woods system from 1946 to 1973, countries: O maintained a fixed peg to the U.S. dollar, had monetary policy autonomy, but had to impose capital controls. O maintained a fixed peg to the U.S. dollar, eliminated capital controls, but had to sacrifice monetary policy autonomy. O had monetary policy autonomy, eliminated capital controls, but had to sacrifice a fixed peg to the U.S. dollar. O managed to implement all three policy options from the trilemma.
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