Reference no: EM13834761

True/False

1. At higher interest rates, banks will want to hold more reserves.

2. An increase in the interest rate is associated with an increase in bond prices.

3. Individual banks always respond quickly and significantly to changes in the discount rate.

4. Personal consumption spending is the most sensitive component of aggregate demand to monetary policy.

5. In the Keynesian causal chain, changes in GDP cause changes in the level of interest rates.

6. International trade usually benefits one trading partner while making the other trading partner worse off.

7. The U.S. Constitution prevents tariffs on trade between the individual states.

8. Equilibrium price in international trade is the common price between exporting and importing countries.

9. A quota reduces quantity sold by operating through the demand side of the market.

10. The economic effects of a quota are identical to those of a tariff.

11. Both tariffs and quotas will restrict supplies coming into the country from abroad.

12. A tariff has one distinct advantage over a quota. It increases tax revenues to the government.

13. If the price of the dollar rises from 100 Japanese yen to 120 Japanese yen, the dollar has depreciated.

14. When one currency appreciates, another currency must depreciate.

15. Since its inception in January 1999 until 2004, the dollar has consistently appreciated against the euro.

16. Fixed exchange rates are determined in free markets by the forces of demand and supply.

17. The demand for U.S. dollars is derived from foreign demand for U.S. exports.

18. Inflation plays a major role in determining whether a currency is appreciating or depreciating.

19. The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

20. A country devaluing its currency reduces the official value of its currency.

21. The gold standard prevented a nation from controlling its domestic economy through monetary policy.

22. A fixed exchange rate system encourages speculators to attack weaker currencies.

23. An increase in the U.S. price level will increase U.S. net exports.

24. If the dollar appreciates, American consumers will buy more foreign goods and services.

25.  An exchange rate depreciation acts to reduce inflation.

26. A depreciating currency makes foreign inputs cheaper and shifts the aggregate supply curve outward.

27. In an open economy, aggregate supply consists of domestic production plus imports.

28. As the international value of the dollar rises, AS shifts outward and AD shifts inward.