Question 1

Demonstrate how a permanent fiscal expansion will not increase output in the long run.

Accepted Answer

The answer of Demonstrate how a permanent fiscal expansion will...

Question 2

If the economy starts in long-run equilibrium,a permanent fiscal expansion will cause

Accepted Answer

The answer of If the economy starts in long-run equilibrium,a...

Question 3

Explain the following figure:

Accepted Answer

The answer of Explain the following figure: ...

Question 4

In the short run,a permanent increase in the domestic money supply causes

Accepted Answer

A permanent increase in the domestic money supply leads to a greater upward shift in the AA curve compared to a transitory increase because it has a more lasting effect on expectations and interest rates, influencing exchange rates and output more significantly.

Question 5

In long-run equilibrium after a permanent money-supply increase there follows:

Accepted Answer

The answer of In long-run equilibrium after a permanent money-supply...

Question 6

Which statement best describes the current account balance in the short run?

Accepted Answer

Monetary expansion leads to an increase in the money supply and a decrease in interest rates, which makes domestic goods cheaper for foreigners and increases demand for exports, leading to an increase in the current account balance.

Question 7

A permanent fiscal expansion

Accepted Answer

The answer of A permanent fiscal expansion
...

Question 8

In the short run

Accepted Answer

The answer of In the short run
...

Question 9

Which one of the following statements is the MOST accurate?

Accepted Answer

Over time, a permanent expansion of the money supply is more likely to push the price level to its long-run value and return the economy to full employment, according to the long-run neutrality of money concept. Temporary expansions do not have the same long-term effects on the economy's output and employment levels.

Question 10

Using the DD-AA framework,which one of the following statements is the MOST accurate?

Accepted Answer

The answer of Using the DD-AA framework,which one of the...

Question 11

What is inflation bias? What measures have governments taken to avoid it?

Accepted Answer

The answer of What is inflation bias? What measures have...

Question 12

Which one of the following statements is the MOST accurate?

Accepted Answer

A permanent increase in money demand can indeed be offset by a permanent increase in the money supply of equal magnitude, maintaining equilibrium in the money market. This is a fundamental principle in monetary economics, where adjusting the money supply can counteract changes in money demand to stabilize the economy.

Question 13

Using the DD model,explain what happens to out put when Government demands increase.Use a figure to explain when it is taking place.

Accepted Answer

The answer of Using the DD model,explain what happens to...

Question 14

According to historical data,what is the effect of a sharp change in the current account on the exchange rate (both in the short and long run)?

Accepted Answer

The answer of According to historical data,what is the effect...

Question 15

In the short run,a permanent increase in the domestic money supply

Accepted Answer

A permanent increase in the domestic money supply has stronger effects on the exchange rate and output than an equal temporary increase. This is because a permanent increase in the money supply leads to a sustained increase in demand for domestic goods and services, resulting in a higher output level in the long run. However, this sustained increase in demand also leads to higher inflation expectations, which puts downward pressure on the domestic currency's value in the foreign exchange market. In contrast, a temporary increase in the money supply has less impact on output as it only leads to a short-lived increase in demand, but it still affects the exchange rate through the inflation expectations channel. Therefore, a permanent increase in the money supply has stronger effects on both output and the exchange rate than an equal temporary increase.

Question 16

Explain and give some examples of governmental policy problems.

Accepted Answer

The answer of Explain and give some examples of governmental...

Question 17

Using the DD-AA framework,show the phenomenon of overshooting.Use a figure to explain when it is taking place.

Accepted Answer

The answer of Using the DD-AA framework,show the phenomenon of...

Question 18

Which of the following is TRUE of the current account balance?

Accepted Answer

The answer of Which of the following is TRUE of...

Question 19

A permanent increase in the domestic money supply

Accepted Answer

A permanent increase in the domestic money supply typically leads to inflation, which reduces the value of the domestic currency. This results in a proportional rise in the exchange rate (E), where E represents the price of foreign currency in terms of the domestic currency. Consequently, the expected future exchange rate must also rise proportionally, reflecting the anticipated continued effect of the increased money supply on the currency's value.

Question 20

Show the effects of a permanent increase in the money supply.

Accepted Answer

The answer of Show the effects of a permanent increase...

Quiz 17: Output and the Exchange Rate in the Short Run

Demonstrate how a permanent fiscal expansion will not increase output in the long run.

If the economy starts in long-run equilibrium,a permanent fiscal expansion will cause

Explain the following figure:

In the short run,a permanent increase in the domestic money supply causes

In long-run equilibrium after a permanent money-supply increase there follows:

Which statement best describes the current account balance in the short run?

A permanent fiscal expansion

In the short run

Which one of the following statements is the MOST accurate?

Using the DD-AA framework,which one of the following statements is the MOST accurate?

What is inflation bias? What measures have governments taken to avoid it?

Which one of the following statements is the MOST accurate?

Using the DD model,explain what happens to out put when Government demands increase.Use a figure to explain when it is taking place.

According to historical data,what is the effect of a sharp change in the current account on the exchange rate (both in the short and long run) ?

In the short run,a permanent increase in the domestic money supply

Explain and give some examples of governmental policy problems.

Using the DD-AA framework,show the phenomenon of overshooting.Use a figure to explain when it is taking place.

Which of the following is TRUE of the current account balance?

A permanent increase in the domestic money supply

Show the effects of a permanent increase in the money supply.