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Finance: Demand, Tariffs, Exchange Rate, Money Supply

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5. If the demand for a country's exports falls at the same time that tariffs on imports are raised, will the country's currency tend to appreciate or depreciate in the long run?

10. Mexican peso trading at 10 pesos per dollar. If expected U.S. inflation rate is 2% while expected Mexican inflation rate is 23% over next year, what is the expected exchange rate in one year?

1. If Federal Reserve buys dollars in foreign exchange market but conducts offsetting open market operation to sterilize the intervention, what will be the impact on international reserves, the money supply, and the exchange rate?

2. If Federal Reserve buys dollars in foreign exchange market but does not sterilize the intervention, what will be the impact on international reserves, the money supply, and the exchange rate?

18. Why might central banks in emerging-market countries find that engaging in a lender-of-last-resort operation might be counterproductive? Does this provide a rationale for having an international lender of last resort like the IMF?

1. What is the purpose of the U.S. balance-of-payments system?

2. Do you feel the IMF is an effective organization? Why? Why not?

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Solution Summary

This solution of 416 words discusses various scenarios that touches on concepts such as demand, tariffs, exchange rate, money supply, IMF, and balance of payments.

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Which of the following is one of the Fed's policy instruments?

50 questions on basic macroeconomics. This study guide is focus on Monetary Policy, Trading with the world, and International Finance. Ref. Economics, Seventh Edition. by Michael Parkin.

Please see the attached file.
1. Which of the following is one of the Fed's policy instruments?
a. help the President win reelection
b. discount rate
c. monetary base
d. price level stability

2. In general, the monetary policy record since 1971 has shown
a. an increase in government spending.
b. a decrease in the discount rate.
c. increases in M2 as presidential elections approach.
d. overall declines in interest rate.

3. An example of a monetarist fixed-rule policy would be
a. "every time GDP decreases, decrease the growth rate of the
quantity of money."
b. "every time GDP decreases, increase the growth rate of the
quantity of money."
c. "do not change the growth rate of the quantity of money."
d. "use all information available to determine the growth rate of
the quantity of money each time GDP changes."

4. If the Fed follows a feedback-rule monetary policy and aggregate demand decreases, the Fed
a. increases the growth rate of the quantity of money.
b. does not change the quantity of money.
c. decreases the growth rate of the quantity of money.
d. None of the above answers is correct.

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