1、Name: _ Date: _1. Compared to a closed economy, an open economy is one that:A) allows the exchange rate to float.B) fixes the exchange rate.C) trades with other countries.D) does not trade with other countries.2. The MundellFleming model assumes that:A) prices are flexible, whereas the ISLM model as
2、sumes that prices are fixed.B) prices are fixed, whereas the ISLM model assumes that prices are flexible.C) as in the ISLM model, prices are fixed.D) as in the ISLM model, prices are flexible.3. The MundellFleming model is a _ model for a _ open economy.A) short-run; smallB) short-run; largeC) long-
3、run; largeD) long-run; small4. In the MundellFleming model:A) the exchange rate system must have a floating exchange rate.B) the exchange rate system must have a fixed exchange rate.C) it makes no difference whether the exchange rate system has a floating or a fixed exchange rate.D) the behavior of
4、the economy depends on whether the exchange rate system has a floating or fixed exchange rate.5. In the MundellFleming model, the domestic interest rate is determined by the:A) intersection of the LM and IS curves.B) domestic rate of inflation.C) world rate of inflation.D) world interest rate.6. In
5、a small open economy with perfect capital mobility, if the domestic interest rate were to rise above the world interest rate, then _ would drive the domestic interest rate back to the level of the world interest rate.A) capital inflowB) capital outflowC) the central bankD) a decline in domestic savi
6、ng7. Assuming there is perfect capital mobility, compared to a large open economy, a small open economy is one in which the:A) exchange rate is fixed.B) exchange rate is floating.C) domestic interest rate equals the world interest rate.D) domestic interest rate is not equal to the world interest rat
7、e.8. In a small open economy a decrease in the exchange rate will _ net exports and shift the _ curve.A) increase; ISB) decrease; ISC) increase; LMD) decrease; LM9. If short-run equilibrium in the MundellFleming model is represented by a graph with Y along the horizontal axis and the exchange rate a
8、long the vertical axis, then the IS* curve:A) slopes downward and to the right because the higher the exchange rate, the lower the level of net exports and, therefore, of short-run equilibrium income in the goods market.B) is vertical because there is only one investment level that is consistent wit
9、h the world interest rate.C) is vertical because the exchange rate does not enter into the IS* equation.D) slopes downward and to the right because the higher the exchange rate, the higher the level of net exports and, therefore, of short-run equilibrium income in the goods market.10. In the Mundell
10、Fleming model on a Y e graph, the curves labeled IS* and LM* are labeled that way as a reminder that:A) the price level is held constant at the world price level p*.B) the interest rate is held constant at the world interest rate r*.C) the exchange rate is held constant at the world exchange rate e*
11、.D) output is held constant at the full employment level.11. If short-run equilibrium in the MundellFleming model is represented by a graph with Y along the horizontal axis and the exchange rate along the vertical axis, then the LM* curve:A) slopes upward and to the right because at a higher income
12、a higher interest rate is needed to increase velocity.B) is vertical because monetary velocity is independent of the interest rate.C) is vertical because the exchange rate does not enter into the LM* equation.D) slopes upward and to the right because a higher exchange rate leads to a higher income.1
13、2. In the MundellFleming model, the exogenous variables are the:A) world interest rate, the price level, and the exchange rate.B) level of government spending, taxes, and income.C) exchange rate and level of income.D) price level, world interest rate, monetary policy, and fiscal policy.13. The inter
14、section of the IS* and LM* curves shows the _ and the _ at which both the goods market and the money market are in equilibrium.A) interest rate; price levelB) price level; exchange rateC) level of output; exchange rateD) level of output; price level14. Under a floating system, the exchange rate:A) f
15、luctuates in response to changing economic conditions.B) is maintained at a predetermined level by the central bank.C) is changed at regular intervals by the central bank.D) fluctuates in response to changes in the price of gold.15. In a small open economy with a floating exchange rate, an effective
16、 policy to increase equilibrium output is to:A) increase government spending.B) increase taxes.C) increase the money supply.D) decrease the money supply.16. In a small open economy with a floating exchange rate, an effective policy to decrease equilibrium output is to:A) decrease government spending
17、.B) decrease taxes.C) increase the money supply.D) decrease the money supply.17. In a small open economy with a floating exchange rate, the exchange rate will appreciate if:A) the money supply is increased.B) the money supply is decreased.C) government spending is decreased.D) taxes are increased.18
18、. In a small open economy with a floating exchange rate, the exchange rate will depreciate if:A) the money supply is decreased.B) import quotas are imposed.C) government spending is increased.D) taxes are decreased.19. In a small open economy with a floating exchange rate, if the government adopts a
19、n expansionary fiscal policy, in the new short-run equilibrium:A) income and the exchange rate will both rise.B) the exchange rate will rise, but income will remain unchanged.C) income will rise, but the exchange rate will remain unchanged.D) both income and the interest rate will rise.20. In a smal
20、l open economy with a floating exchange rate, a rise in government spending in the new short-run equilibrium:A) chokes off investment, but not by as much as the new government spending.B) chokes off an amount of investment just equal to the new government spending.C) attracts foreign capital, thus r
21、aising the exchange rate and reducing net exports, but not by as much as the new government spending.D) attracts foreign capital, thus raising the exchange rate and reducing net exports by an amount just equal to the new government spending.21. In a small open economy with a floating exchange rate,
22、the supply of real money balances is fixed and a rise in government spending:A) raises the interest rate, so that income must rise to maintain equilibrium in the money market.B) raises the interest rate so that net exports must fall to maintain equilibrium in the goods market.C) cannot change the in
23、terest rate so that net exports must fall to maintain equilibrium in the goods market.D) cannot change the interest rate so income must rise to maintain equilibrium in the money market.Use the following to answer questions 22-23:Exhibit: IS*LM*22. (Exhibit: IS*LM*) A small open economy with a floati
24、ng exchange rate is initially at equilibrium A with IS*1, LM*1, equilibrium exchange rate e2, and equilibrium output Y1. If there is an increase in government spending to IS*2, the new equilibrium will be at _, holding everything else constant.A) AB) BC) CD) D23. (Exhibit: IS*LM*) A small open econo
25、my with a floating exchange rate is initially at equilibrium A with equilibrium exchange rate e2, and equilibrium output Y1. If there is a monetary 1,IS,LMexpansion to the new equilibrium will be at _, holding everything else constant.*2A) AB) BC) CD) D24. In a small open economy with a floating exc
26、hange rate, if the government decreases the money supply, then in the new short-run equilibrium:A) income falls and the exchange rate rises.B) the exchange rate falls and income rises.C) income remains unchanged but the exchange rate rises.D) the exchange rate remains unchanged but income falls.25.
27、In a small open economy with a floating exchange rate, if the government increases the money supply, then in the new short-run equilibrium the:A) interest rate falls and the level of investment rises.B) exchange rate falls and net exports increase.C) interest rate falls but the level of investment d
28、oes not rise.D) exchange rate falls but net exports do not increase.26. According to the MundellFleming model for a small open economy with flexible exchange rates, if the Federal Reserve cannot alter domestic interest rates, changes in the money supply could still influence aggregate income through
29、 changes in the:A) exchange rate.B) price level.C) level of government spending.D) tax rates.27. In a small open economy with a floating exchange rate, if the government imposes an import quota, then in the new short-run equilibrium the IS* curve shifts to the right, raising the exchange rate:A) but
30、 not raising net exports or income.B) and net exports but not income.C) and income but not net exports.D) net exports and income.28. In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods, then in the new short-run equilibrium:A) imports will decre
31、ase while exports remain constant, leading to a rise in net exports.B) imports will decrease and exports will increase, leading to a rise in net exports.C) imports will decrease and exports will decrease by an equal amount.D) both imports and exports will remain unchanged.Use the following to answer
32、 questions 29-30:Exhibit: Shifting IS* and LM*29. (Exhibit: Shifting IS* and LM*) A small open economy with a floating exchange rate is initially in equilibrium at A with Holding all else constant, if the government imposes a tariff on 1,IS*.LMimports in order to protect domestic jobs, then the _ cu
33、rve will shift to _.A) LM1*; *2B) LM1*; 3LC) IS1*; *2ISD) IS1*; 330. (Exhibit: Shifting IS* and LM*) A small open economy with a floating exchange rate is initially in equilibrium at A with Holding all else constant, if domestic consumers develop greater 1,IS*.LMpreferences for imported goods, then
34、the _ curve will shift to _.A) LM1*; *2B) LM1*; 3LC) IS1*; *2ISD) IS1*; 331. Under a fixed system, the exchange rate:A) fluctuates in response to changing economic conditions.B) is maintained at a predetermined level by the central bank.C) is changed at regular intervals by the central bank.D) fluct
35、uates in response to changes in the price of gold.32. To maintain a fixed-exchange-rate system, if the exchange rate moves below the fixed-exchange-rate level, then the central bank must:A) buy foreign currency.B) sell foreign currency from reserves.C) raise taxes.D) decrease government spending.33.
36、 If the Fed announced it would fix the exchange rate at 100 yen per dollar, but with the current money supply the equilibrium exchange rate was 150 yen per dollar, then:A) arbitrageurs would sell yen in the marketplace.B) arbitrageurs would buy yen from the Fed.C) the money supply would fall until t
37、he market exchange rate was 100 yen per dollar.D) the money supply would rise until the market exchange rate was 100 yen per dollar.34. Under a fixed-exchange-rate system, the central bank of a small open economy must:A) have a reserve of its own currency, which it must have accumulated in past tran
38、sactions.B) have a reserve of foreign currency, which it can print.C) allow the money supply to adjust to whatever level will ensure that the equilibrium exchange rate equals the announced exchange rate.D) follow a rule specifying a constant growth rate for the money supply.35. If there is a fixed-e
39、xchange-rate system, then in the short run described by the MundellFleming model:A) the nominal exchange rate is fixed, but the real exchange rate is free to vary.B) the real exchange rate is fixed, but the nominal exchange rate is free to vary.C) both the nominal and real exchange rates are fixed.D
40、) the nominal exchange rate is fixed, but whether the real exchange rate is fixed depends on whether the central bank follows a rule of constant growth of the money supply.36. If there is a fixed-exchange-rate system, then in the long run:A) the nominal exchange rate is fixed, but the real exchange
41、rate is free to vary.B) the real exchange rate is fixed, but the nominal exchange rate is free to vary.C) both the nominal and real exchange rates are fixed.D) the nominal and real exchange rates vary by a fixed amount.37. During the era of the gold standard, the price of gold in England:A) was alwa
42、ys equal to the price of gold in the United States.B) was always a little higher than the price of gold in the United States, but it could not be higher by more than the cost of transporting gold from the United States to England.C) was always a little lower than the price of gold in the United Stat
43、es, but it could not be lower than the cost of transporting gold from England to the United States.D) could be higher or lower than the price of gold in the United States, but not by more than the cost of transporting gold between the two countries.38. In a small open economy with a fixed exchange r
44、ate, if the government increases government purchases, then in the new short-run equilibrium:A) the exchange rate rises but income does not rise.B) income rises but the exchange rate does not rise.C) both income and the exchange rate rise.D) neither income nor the exchange rate rises, as the money s
45、upply contracts.39. In a small open economy with a fixed exchange rate, if the government increases government purchases, then in the process of adjusting to the new short-run equilibrium the money supply:A) increases to keep the exchange rate unchanged, thus augmenting the effect of government spen
46、ding on income.B) decreases to keep the exchange rate unchanged, thus offsetting the effect of government spending on income.C) remains unchanged, and there is no effect of government spending on income.D) remains unchanged to keep the interest rate at the world interest rate, so that government spe
47、nding reduces income.40. In a small open economy with a fixed exchange rate, an effective policy to increase equilibrium output is to:A) decrease government spending.B) decrease taxes.C) increase the money supply.D) decrease the money supply.Use the following to answer questions 41-42:Exhibit: IS*LM*41. (Exhibit: IS*LM*) A small open economy with a fixed exchange rate e2 is initially at equilibrium A with and equilibrium output Y1. If there is an increase in government spending to 1,IS,LM *2,ISthe new equilibrium will be at _, holding everything else constant.A) AB) BC) CD) D
