question 46 One characteristic of a financial crisis caused by macroeconomic imb

Question

question 46

One characteristic of a financial crisis caused by macroeconomic imbalances is that it

Select one:

a. may or may not be predictable.

b. will occur eventually even though its timing is unpredictable.

c. may be caused by expansionary fiscal policies accompanied by high budget deficits.

d. may be caused by high deficits financed by increases in the money supply.

e. All of the choices.

Question 47

Suppose that the nominal exchange rate between the U.S. dollar and the Canadian dollar is 0.75 U.S. dollars per Canadian dollar. If Canada's rate of inflation is 0 percent and the U.S. rate is 10 percent, then the real exchange rate for the U.S. dollar will

Select one:

a. appreciate by about 9 percent.

b. appreciate by 10 percent.

c. depreciate by about 9 percent.

d. depreciate by 10 percent.

e. None of the choices.

Question 48

Which of the following is NOT part of the current account?

Select one:

a. Dividends received on a foreign investment

b. Purchase of a plane ticket on a foreign airline

c. Shipment of food aid to a poor country

d. Purchase of a foreign bond

e. All of the choices.

Question 49

An increase in the U.S. demand for the Mexican peso

Select one:

a. causes an increase in the U.S. dollar price of a Mexican peso.

b. causes the Mexican peso to appreciate.

c. causes the U.S. dollar to depreciate.

d. causes Mexican goods to be relatively more expensive.

e. All of the choices.

Question 50

A flexible exchange rate system crisis involves

Select one:

a. a revaluation of the currency.

b. a rapid and uncontrolled depreciation of the currency.

c. a decrease in the dollar value of the country's international debt.

d. a sure political collapse of the ruling government.

e. All of the above.

Explanation / Answer

46. The correct answer is (e) i.e all of the choices because all of the options are true in the case of a financial crisis due to macroeconomic imbalances.

48. The correct answer is (e) i.e all of the choices as none of the given options form part of the current account. Current account includes transactions including goods and services.

49. The correct answer is (e) i.e all of the above choices as all of the above options mean the same thing. It means that Mexican peso appreciates against the U.S dollar.

50. The correct answer is (b) i.e a rapid and uncontrollable depreciation of a currency. This happens when there is a sudden loss of trust from the currency leading to a currency collapse.

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