From uncovered interest parity, we know that when the domestic currency is expected to depreciate, the domestic interest rate should be
A) greater than the foreign interest rate
B) greater than the foreign return
C) less than the foreign interest rate
D) less than the foriegn return
Ans: A) greater than the foreign interest rate
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In the long run, an increase in the quantity of money, other things remaining the same,
A) decreases the price level. B) increases real GDP. C) increases the price level. D) decreases real GDP. E) has no effect on the price level or real GDP.
Use the following graph to answer the next question.
Suppose an economy's full employment output is at the level Qf shown on the graph. Further, suppose the economy's current aggregate demand is represented by AD1. If the government swiftly implements a stimulus program that immediately shifts the economy's aggregate demand to AD2, the aggregate demand in the short-to-medium term would be most closely represented by
A. AD0. B. AD1. C. AD2. D. AD3.