Question 23

Only one of the following flows represents a demandfor Australian dollars (AUD). Which one?

		Short-term financial outflows from Australia
		Profit earned from Australian investment abroad
		Australian investment abroad
		Imports of goods and services into Australia

Question 25

Which of the following policies could a government or central bank pursue to prevent the exchange rate from depreciating?

		Raise taxes
		Raise interest rates
		Increase the money supply through open-market operations
		Buy foreign currencies on the foreign exchange market

Question 26

Which of the following would cause exports to rise?

		An appreciation of the exchange rate
		A depreciation of the exchange rate
		A fall in overseas income
		None of the above

Question 27

A depreciation of the Australian dollar (AUD) would be caused by ________ and/or ________.

		an increase in the supply of AUD; an increase in the demand for AUD
		an increase in the supply of AUD; a reduction in the demand for AUD
		a reduction in the supply of AUD; an increase in the demand for AUD
		a reduction in the supply of AUD; a reduction in the demand for AUD

Question 29

Which of the following is NOT an argument against a an EU country joining the euro?

		It would make adjustment to domestic problems more difficult.
		It would make dealing with asymmetric shocks more difficult.
		It would make fiscal policy ineffective.
		There would be a loss of national independence.

Question 30

Which of the following would cause imports to rise?

		a fall in domestic income levels.
		a rise in domestic income levels.
		a depreciation of the exchange rate.
		a rise in household saving.

Question 31

The record of a country's transactions in goods, services, and assets with the rest of the world is its balance of trade.

True

False

Question 32

Which one of the following would cause an appreciation of the exchange rate (in each case assume that nothing else changes)?

		Speculation that the rate of interest will fall
		A reduction in the current account deficit (and no change in the other parts of the balance of payments)
		An increase in domestic incomes
		Inflation increases relative to inflation rates abroad.

Question 34

Asymmetric shocks in the context of a currency union are when

		all countries have the same problems.
		internal shocks are different from external shocks.
		shocks have different effects in different areas, countries, etc.
		government departments have different goals.

Question 35

Under a system of floating exchange rates, if the quantity of Australian dollars demanded exceeds the quantity of Australian dollars supplied

		reserves will increase.
		the Australian dollars exchange rate will depreciate.
		the government will always increase the supply of money to eliminate this excess demand.
		the Australian dollars exchange rate will appreciate.

Question 36

'Sovereign risk' refers to the risk that a government's or central bank's policies will make that country less favourable to companies doing business there.

True

False

Price 12 10 > 1,200 800 Quantity Looking at the diagram above, if this monopoly market were broken up by the government so that they were forced to become competitive rms in a perfectly competitive market, then the market equilbrium price would be $ lower than under the previous monopoly situation