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⭐SOLUTIONS⭐
ECS2602
ONLINE
ASSIGNMENT 03
COMPILED BY KHEITHYTUTORIALS
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ECS2602
ASSIGNMENT 3 – ONLINE ASSESSMENT (SEMESTER 2 – 2018)
POSSIBLE QUESTIONS AND SOLUTIONS
Question 1 of 15
This question is based on the following diagram of an IS-LM model for an open economy
A decrease in government spending causes ...
A. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance deteriorates as exports increases.
B. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases.
C. a decrease in the demand for goods and the level of output; an increase in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases.
D. a decrease in the demand for goods and the level of output; a decrease in the demand for money and an
increase in the interest rate; an appreciation of the domestic currency and the trade balance improves as
exports increases.
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Question 2 of 15
An expansionary fiscal policy, for example an increase in government spending (G), causes an increase in the
demand for goods (Z) and the level of output and income (Y) and consequently ...
A. an increase in the demand for money and the interest rate; a depre ciation of the domestic currency and the
trade balance improves as exports increases.
B. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and
the trade balance deteriorates as exports decreases.
C. a decrease in the demand for money and the interest rate; a depreciation of the domestic currency and the
trade balance improves as exports increases.
D. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and
the trade balance deteriorates as exports increases.
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Question 3 of 15
Study the following question and complete the sentence: A decrease in the money supply causes ...
A. A capital inflow, a depreciation of the exchange rate and an improvement of the trade balance.
B. A capital outflow, a depreciation of the exchange rate and an improvement of the trade balance.
C. A capital inflow, an appreciation of the exchange rate and a deterioration of the trade balance.
D. A capital outflow, an appreciation of the exchange rate and an improvement of the trade balance.
Question 4 of 15
In the IS-LM model for an open economy monetary contraction implies that the …
A. LM curve will shift to the upwards and the interest rate increases.
B. LM curve will shift to the downwards and the interest rate decreases.
C. nominal exchange rate decreases and a depreciation of the domestic currency takes place.
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Mgwebs
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⭐SOLUTIONS⭐
ECS2602
ONLINE
ASSIGNMENT 03
COMPILED BY KHEITHYTUTORIALS
Downloaded by: Mgwebs |
Distribution of this document is illegal
, Stuvia.com - The study-notes marketplace
ECS2602
ASSIGNMENT 3 – ONLINE ASSESSMENT (SEMESTER 2 – 2018)
POSSIBLE QUESTIONS AND SOLUTIONS
Question 1 of 15
This question is based on the following diagram of an IS-LM model for an open economy
A decrease in government spending causes ...
A. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance deteriorates as exports increases.
B. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases.
C. a decrease in the demand for goods and the level of output; an increase in the demand for money and the
interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases.
D. a decrease in the demand for goods and the level of output; a decrease in the demand for money and an
increase in the interest rate; an appreciation of the domestic currency and the trade balance improves as
exports increases.
Feedback:
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Question 2 of 15
An expansionary fiscal policy, for example an increase in government spending (G), causes an increase in the
demand for goods (Z) and the level of output and income (Y) and consequently ...
A. an increase in the demand for money and the interest rate; a depre ciation of the domestic currency and the
trade balance improves as exports increases.
B. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and
the trade balance deteriorates as exports decreases.
C. a decrease in the demand for money and the interest rate; a depreciation of the domestic currency and the
trade balance improves as exports increases.
D. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and
the trade balance deteriorates as exports increases.
Feedback:
Question 3 of 15
Study the following question and complete the sentence: A decrease in the money supply causes ...
A. A capital inflow, a depreciation of the exchange rate and an improvement of the trade balance.
B. A capital outflow, a depreciation of the exchange rate and an improvement of the trade balance.
C. A capital inflow, an appreciation of the exchange rate and a deterioration of the trade balance.
D. A capital outflow, an appreciation of the exchange rate and an improvement of the trade balance.
Question 4 of 15
In the IS-LM model for an open economy monetary contraction implies that the …
A. LM curve will shift to the upwards and the interest rate increases.
B. LM curve will shift to the downwards and the interest rate decreases.
C. nominal exchange rate decreases and a depreciation of the domestic currency takes place.
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