Procyclical policy:
What will be an ideal response?
fiscal policy in which taxes are lowered and expenditure is raised when the economy is strong, and the opposite
is done when the economy is weak
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Which of the following changes in the exchange rate represents an appreciation of the dollar?
a. 100 yen = $1 to 90 yen = $1 b. 1 yen = $.10 to 1 yen = $.08 c. 1 pound = $3 to 1 pound = $4 d. $1 = 25 rubles to $1 = 20 rubles e. 20 euros = $10 to 19 euros= $10
Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The real risk-free interest rate falls and reserve-related (central bank) transactions becomes more negative (or less positive). b. The real risk-free interest rate remains the same and reserve-related (central bank) transactions becomes more negative (or less positive). c. The real risk-free interest rate and reserve-related (central bank) transactions remain the same. d. The real risk-free interest rate rises and reserve-related (central bank) transactions remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.