18.A problem with a single currency area is:

Question 18 options:

different countries may require different interest rates.

elimination of the costs of currency conversion.

absolute fixed exchange rates between member countries.

the ability to compare prices across countries.

19.The theory of comparative advantage states that countries will specialize in production of goods and services for which they have a comparative advantage. One factor that inhibits this specialization is:

some countries do not have an absolute advantage at producing any product.

the fact that some products are not traded internationally means comparative advantage will not describe the real world.

exchange rate volatility inhibits international trade and prevents complete specialization.

the theory of comparative advantage is incorrect.

20.If a country's central bank has shown a tendency to expand the money supply excessively and cause inflation, one possible solution is:

21.A loss of confidence by savers that increases net capital outflows from a country

increases the real exchange rate, reducing net exports, output and inflation.

increases the real exchange rate, increasing net exports, output and inflation.

reduces the real exchange rate, increasing net exports, output and inflation.

reduces the real exchange rate, reducing net exports, output and inflation.

22.Suppose the U.S. dollar is abolished. To replace it, each of the 12 Federal Reserve Banks issues a currency for its region. The Boston Fed issues the New England dollar, the Richmond Fed issues the Mid-Atlantic dollar, and so on. What are the benefits of this change?

This change will make it easier for technology to spread.

This change will make it easier to conduct independent monetary policy that is appropriate for the region.

This change will make it easier for goods and services to move across the United States.

This change will make it easier to control inflation in the United States.

23.The ________ in confidence that is caused by a rise in the stock market would cause the real exchange rate to ________.

rise;fall

fall:fall

other options as well not sure which one

24.in a country such as Canada, where trade is a very high percentage of GDP, monetary policy likely reacts to

25.The strategy of a speculative attack is to

Question 2 options:

force a revaluation of a fixed exchange rate.

hedge against exchange-rate risk.

force a devaluation of a fixed exchange rate.

appreciate a floating exchange rate.

26.Suppose government spending rises in Boversia, shifting the AE curve outward. The central bank would like to keep both output and the real exchange rate constant. How can policymakers accomplish these goals through a combination of an interest-rate adjustment and capital controls.

The central bank has to increase the real interest rate and prevent capital inflows.

The central bank has to decrease the real interest rate and prevent capital outflows.

The central bank has to increase the real interest rate and prevent capital outflows.

The central bank cannot achieve the two goals simultaneously.