1. When the U.S. dollar appreciates, what happens to exports and imports in the United States, why?  

 

2. If the Japanese price level decreases by 2% relative to the price level in the United States, what does the theory of purchasing power parity predict will happen to the value of the Japanese yen in terms of dollars, show the detail.

 

3. If the Indian government unexpectedly announces that it will be imposing higher tariffs on foreign goods one year from now, what will happen to the value of the Indian rupee today, why?  

 

4. What three motives for holding money did Keynes consider in his liquidity preference theory of the demand for real money balances, briefly explain.  

 

5. During the time horizon from 2018 to 2020: Suppose the money supply M has been growing at 10% per year, and nominal GDP, PY, has been growing at 20% per year. In 2018 we have M equals to 200 and PY equals to 2000 (in billions of dollars). Calculate the velocity for each year. At what rate is the velocity growing?  

 

6. In each of the following cases, determine whether the IS curve shifts to the right or left, does not shift, or is indeterminate in the direction of shift.  

a)The real interest rate decrease.  

b)The marginal propensity to consume declines.  

c)Financial frictions decrease.  

d)Autonomous consumption decreases.  

e)Both taxes and government spending increase by the same amount.  

f)The sensitivity of net exports to changes in the real interest rate decreases.  

g)The government provides tax incentives for research and development programs for firms.  

 

7. For a required reserve ratio of 0.15, currency in circulation equals to $1000 billion, checkable deposits equals to $1200 billion, excess reserves equals to $2000 billion, and a measure of M1 for money supply,

a) How big is the money supply?  

b) What is the value of the money multiplier?  

c) Given the value you have for the money multiplier, what does it mean?  

 

8. According to the book, what are the goals for monetary policy?  

 

9. What are the benefits of using a nominal anchor for the conduct of monetary policy?  

 

10. According to the book, what are the three players in the money supply process, how are they influencing the money supply process.