1-If two countries choose to fix the exchange rates among theircurrencies, then Select one: A. the country with a current accountsurplus can decrease its money supply to delay the need forintervention. B. the country with a lower rate of inflation willeventually have large current account surpluses. C. both countrieswill have an inflation rate of zero. D. there usually is morepressure on the government whose country has an overall paymentssurplus than on the government whose country has an overallpayments deficit.
2-The strongest argument in favor of fixed exchange rates isSelect one: A. that floating exchange rates are often veryvolatile, disrupting international trade. B. that a fixed exchangerate allows unrestricted flow of financial capital from and into acountry. C. the ease of defending fixed exchange rates duringspeculative attacks. D. the country's ability to use independentmonetary policy to pursue internal balance.
3-Monetary policy is most effective in influencing aggregatedemand Select one: A. when there is low capital mobility. B. undera freely floating exchange-rate system. C. under a fixedexchange-rate system without sterilization. D. under a fixedexchange-rate system with sterilization.
4-Fiscal policy is most effective in influencing aggregatedemand Select one: A. under a floating exchange-rate system with alow degree of capital mobility. B. under a fixed exchange-ratesystem without sterilization. C. under a fixed exchange-rate systemwith sterilization. D. under a floating exchange-rate system with ahigh degree of capital mobility.
5-A domestic monetary shock is least disruptive Select one: A.under both fixed and floating exchange rates. B. under a floatingexchange-rate system. C. under a fixed exchange-rate system withoutsterilization. D. under a fixed exchange-rate system withsterilization.
6-A domestic spending shock is likely to be least disruptiveunder a Select one: A. floating exchange-rate system when there islow capital mobility. B. fixed exchange-rate system withoutsterilization. C. floating exchange-rate system when there is highcapital mobility. D. fixed exchange-rate system when there is highcapital mobility.
