1. According to the monetary approach to the exchange rate, an increase in the nation's supply of money leads to:

a. A depreciation of the foreign currency

b. An appreciation of the domestic currency

c. Depreciation of the domestic currency

d. Depreciation of both the foreign and domestic currencies

e. None of the above

8. An increase in the interest rate in Australia but not in the UK will lead to:

a. An Australian dollar depreciation

b. An Australian dollar appreciation

c. The dollar/sterling exchange rate will remain unchanged

d.

a, b. and c.

e. None of the above

17. External balance refers to

a. An economy which is on its LM curve.

b. An economy which is on its IS curve.

c. An economy which is on its BP curve.

d. An economy on the IS, LM and BP curves.

e. All of the above.

18. Financial inflows:

a. Refer to an increase in foreign assets in the nation

b. Refer to a reduction in the nation's assets abroad

c. Lead to a payment from foreigners

d. All of the above

e. a. and b. only

23. Internal balance describes

a. Equilibrium in the goods market

b. A desired level of trade or capital flows

c. Where the IS and BP curves intersect

d. Where the IS and LM curves intersect

e. Where the LM and BP curves intersect