ECO 305 WK 10 QUIZ 9 CHAPTERS 14 AND 15
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ECO 305 WK 10 QUIZ 9 CHAPTERS 14 AND 15
ECO 305 WK 10 Quiz 9 – Chapters 14 and 15
MULTIPLE CHOICE
1. According to the absorption approach, the economic circumstances that best warrant a currency devaluation is where the domestic economy faces:
a. Unemployment coupled with a payments deficit
b. Unemployment coupled with a payments surplus
c. Full employment coupled with a payments deficit
d. Full employment coupled with a payments surplus
2. According to the J-curve effect, when the exchange value of a country’s currency appreciates, the country’s trade balance:
a. First moves toward deficit, then later toward surplus
b. First moves toward surplus, then later toward deficit
c. Moves into deficit and stays there
d. Moves into surplus and stays there
3. Assume that Brazil has a constant money supply and that it devalues its currency. The monetary approach to devaluation reasons that one of the following tends to occur for Brazil:
a. Domestic prices rise–purchasing power of money falls–consumption falls
b. Domestic prices rise–purchasing power of money rises–consumption rises
c. Domestic prices fall–purchasing power of money rises–consumption falls
d. Domestic prices fall–purchasing power of money rises–consumption rises
4. According to the Marshall-Lerner approach, a currency depreciation will best lead to an improvement on the home country’s trade balance when the:
a. Home demand for imports is inelastic–foreign export demand is inelastic
b. Home demand for imports is inelastic–foreign export demand is elastic
c. Home demand for imports is elastic–foreign export demand is inelastic
d. Home demand for imports is elastic–foreign export demand is elastic
5. Assume an economy operates at full employment and faces a trade deficit. According to…

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