some questions

Posted by tanudas on May 26, 2015; 1:06pm
URL: http://discussion-forum.276.s1.nabble.com/some-questions-tp7597215.html

1. Which one of the following is NOT likely to lead to cost push inflation?

A An increase in trade union powers.
B An appreciation of the domestic currency’s exchange rate.
C An increased budget deficit which causes interest rates to rise.
D An increase in the profit margins applied by firms.


2. If a country experiences high domestic inflation compared to its trading partners with
a fixed exchange rate then the effect of the inflation will be to:

A decrease the country’s imports.
B increase the country’s exports.
C shift the country’s currency supply curve in the foreign exchange market to the
right requiring central bank purchases of the domestic currency to maintain the
fixed exchange rate.
D shift the demand curve for the country’s foreign exchange to the right
requiring central bank purchases of the domestic currency to maintain the
fixed exchange rate.


3. Consider an economy where the demand for real money balances is interest elastic
and the demand for investment is interest inelastic. A change in the money supply
will result in a relatively:
A small change in the rate of interest and the level of investment.
B large change in the rate of interest and the level of investment.
C small change in the rate of interest and a relatively large change in the level of
investment.
D large change in the rate of interest and a relatively small change in the level of
investment.