Deck 12: A Society-Centered Approach to Monetary and Exchange-Rate Policies

Question 1

Of the ten recessions that have occurred in the United States between 1946 and 2002,

A) 4 of 10 have happened under Republican administrations.
B) 5 of 10 have happened under Republican administrations.
C) 6 of 10 have happened under Republican administrations.
D) 7 of 10 have happened under Republican administrations.
E) 8 of 10 have happened under Republican administrations.

Answer 1

E

Question 2

Which of the following is not a part of aggregate demand? Consumption and investment expenditures made by

A) government.
B) domestic customers.
C) foreign consumers.
D) domestic producers.
E) foreign producers.

Answer 2

E

Question 3

Between 2003 and 2010,the dollar has depreciated against America's principal trading partners

A) between 5 and 10 percent.
B) between 15 and 20 percent.
C) between 25 and 30 percent.
D) between 30 and 40 percent.
E) between 40 and 50 percent.

Answer 3

D

Question 4

Which of the following reasons is a weakness of the explanation of exchange-rate policy changes according to the electoral approach?

A) It tells us little about exchange-rate policy at other times other than election periods.
B) Different political parties pursue distinct macroeconomic objectives.
C) Right wing parties are typically less concerned about unemployment and more concerned about inflation.
D) It does not assume that all governments value monetary autonomy more than exchange-rate stability.
E) Exchange rate policy is determined by the group that has the greatest influence regardless of elections.

Question 5

Between 1995 and 2001,the dollar rose in value against America's largest trading partners by

A) 10%.
B) 15%.
C) 20%.
D) 25%.
E) 30%.

Question 6

Investment expenditures typically account for about __________ of total national expenditures.

A) 10%
B) 20%
C) 30%
D) 40%
E) 50%

Question 7

In the early 1920s,British unemployment rose to about

A) 10%.
B) 14%.
C) 16%.
D) 20%.
E) 22%.

Question 8

The "Unholy Trinity" framework deals with three government policy goals:

A) floating exchange rate, domestic autonomy of monetary policy, and capital mobility.
B) fixed exchange rate, domestic autonomy of monetary policy, and labor mobility.
C) fixed exchange rate, domestic autonomy of monetary policy, and capital mobility.
D) fixed exchange rate, domestic autonomy of fiscal policy, and capital mobility.
E) floating exchange rate, domestic autonomy of fiscal policy, and labor mobility.

Question 9

The chief weakness of the partisan model is that

A) it is not a good predictor of leftist governments but it is of rightist governments.
B) it is not a good predictor of rightist governments but it is of leftist governments.
C) partisan macroeconomic policies are differentiated too sharply.
D) it is not a good predictor of U.S. governments but it is of European governments.
E) it is not a good predictor of European governments but it is of U.S. governments.

Question 10

According to Keynes,economies can get stuck at high levels of unemployment because of

A) government budget deficits.
B) uncertainty of investment decisions.
C) adverse parliamentary regulations.
D) exchange rate instability.
E) cash hoarding.

Question 11

In Great Britain until 1884,only

A) 3.3% of the population could vote.
B) 6.3% of the population could vote.
C) 9.3% of the population could vote.
D) 12.3% of the population could vote.
E) 15.3% of the population could vote.

Question 12

Governmental attitudes toward economic management after WW I changed because

A) electoral systems were more restrictive concerning minimum voting age after the war.
B) electoral systems were more restrictive concerning minimum income or property conditions after the war.
C) universal male suffrage had been adopted in all Western European countries by 1911.
D) universal female suffrage had been adopted in all Western European countries by 1931.
E) Interests of workers had been but excluded from the political process until after the war.

Question 13

The three society-based models of monetary and exchange rate politics are a ) an institutional model,a partisan model,and a factor model.
B) an organizational model, a partisan model, and a sectoral model.
C) an institutional model, a neutral model, and a sectoral model.
D) an institutional model, a production model, and a sectoral model.
E) an institutional model, a partisan model, and a sectoral model.

Question 14

Which of the following statements is true?

A) When capital is mobile, imbalances arise slowly after a change in monetary policy.
B) When capital is immobile, imbalances arise rapidly after a change in monetary policy.
C) When capital is mobile, imbalances are usually pretty small.
D) When capital is immobile, imbalances are usually very large.
E) When capital is immobile, imbalances are usually pretty small.

Question 15

Because Keynes believed that the cause of persistent high unemployment ultimately lay in adequate demand for goods,he proposed that governments use fiscal and monetary policies to

A) manage interest rates.
B) manage aggregate demand.
C) manage savings rates.
D) manage budget deficits.
E) manage imports.

Question 16

In constitutional democracies politicians must win approval of veto players to adjust macroeconomic policies to their benefit.Examples of veto players do not include

A) opposition political parties.
B) independent domestic government institutions.
C) sub-national units with influence over economic policy.
D) state governments in the United States.
E) foreign government institutions.

Question 17

Governments in advanced industrial societies have consistently chosen domestic economic autonomy over exchange-rate stability only since the

A) 1860s.
B) 1880s.
C) 1900s.
D) 1920s.
E) 1940s.

Question 18

According to the electoral model,eighteen months prior to an election,politicians are more likely to adopt

A) policies that fight inflation.
B) policies that inhibit economic growth.
C) policies that try to lower unemployment.
D) policies that try to stabilize exchange rates.
E) policies that devalue the currency.

Question 19

Keynes' revolutionary theories and policy recommendations focused primarily on the problem of

A) employment.
B) inflation.
C) consumer prices.
D) exports.
E) fixed exchange rate systems.

Question 20

The Philips curve is based on a tradeoff between

A) inflation and unemployment.
B) deflation and unemployment.
C) inflation and budget deficit.
D) unemployment and trade deficit.
E) inflation and imports.

Question 21

Which of the following statements about the level of the exchange is correct according to the sectoral model?

A) The export-oriented sector prefers a strong currency.
B) The import-competing sector prefers a strong currency.
C) The traded-goods sector prefers a strong currency.
D) The nontraded goods sector prefers a weak currency.
E) Financial services sector tend to be agnostic with respect to the level of exchange rates.

Question 22

To maintain a fixed exchange rate,a government does not have to surrender its ability to manage the domestic economy.

Question 23

Briefly explain the similarities and differences between the three society-based models of monetary and exchange-rate politics.

Question 24

Keynes argued that governments must accept persistent high employment until wages fell low enough for the demand for labor to increase.

Question 25

The nontraded-goods and the import-competing sectors are not greatly affected by exchange-rate movements,and they attach little value to exchange-rate stability.

Question 26

What was Keynes' recommendation for government intervention in fiscal and monetary policies at this time? Were they successful?

Question 27

Explain and discuss how electoral reform and the Keynesian revolution had a profound effect on exchange rate policies.

Question 28

By 1921,universal male suffrage had been adopted in all West European countries.

Question 29

What was Keynes' explanation for high levels of unemployment in the 1920s & 1930s? How did this challenge neoclassical theory at that time?

Question 30

Between 1995 and 2001 when the dollar rose in value against America' largest trading partners,American exporters found it increasingly easier to sell in foreign markets.

Question 31

The sectoral model of monetary and exchange-rate politics assumes that all governments want to value monetary policy autonomy more than exchange-rate stability.

Question 32

A large body of research suggests that leftist and rightist governments in the advanced industrialized countries have not in fact pursued distinct macroeconomic policies throughout the post WW II era.

Question 33

Both the institutional and partisan models of monetary and exchange-rate politics assume that all governments want to retain monetary policy autonomy in order to manage the domestic economy.

Question 34

Explain the concept of the "Unholy Trinity" as the trade-off between domestic economic autonomy and exchange-rate stability.

Question 35

Which of the following statements is incorrect according to the sectoral model?

A) Export-oriented producers prefer a fixed exchange rate.
B) Import-competing producers prefer a floating exchange rate.
C) Nontraded producers prefer a floating exchange rate.
D) Financial services prefer a fixed exchange rate.
E) Financial services prefer monetary-policy autonomy.

Question 36

The partisan model of monetary and exchange-rate politics is based on a trade-off between unemployment and inflation.

Question 37

According to Oatley,which of the following groups is not a domestic actor group according to the sectoral model?

A) Import-competing producers
B) Export-oriented producers
C) Nontraded-goods producers
D) Financial services industry
E) Natural resources industry

Question 38

Which of the following criticisms of the society-centered approaches to exchange rate politics is not generally valid?

A) They don't explain outcomes.
B) They omit the interests of noneconomic interest groups.
C) They assume that governments do have independent preferences.
D) They assume that policy outcomes result from decisions made by the party that controls government.
E) They overstate the ability of domestic interest groups to influence policy.

Question 39

Keynes believed that the cause of persistent high unemployment ultimately lay in the inadequate demand for goods.

Question 40

Which of the following reasons is a weakness of the explanation of exchange-rate policy changes according to the sectoral model?

A) The sectoral approach may underestimate the importance that export-oriented firms attach to exchange rate stability.
B) The sectoral approach may overestimate the importance that the traded goods sector attaches to a strong currency.
C) The sectoral model tells us little about exchange-rate policy outcomes.
D) The sectoral approach may overestimate the importance that export-oriented firms attach to monetary-policy autonomy.
E) The sectoral approach may underestimate the importance that the traded goods sector attaches to a weak currency.

Question 41

Describe and explain the partisan model of monetary and exchange-rate politics.

Question 42

Describe and explain the electoral model of monetary and exchange-rate politics.

Question 43

Explain the pros and cons of a weak versus a strong dollar in the contemporary international political economy.

Question 44

Compare and contrast the similarities of the sectoral model of monetary and exchange-rate politics with the electoral and partisan models.

Question 45

What are the weaknesses of each of the three society-based models of monetary and exchange-rate politics?