Country Level Economics: Policies,
Institutions, and Macroeconomic Performance – Coursera all week answers
Week 1 - Module
1 Quiz
Question 1
When do net exports
rise?
When current aggregate income declines
When the real exchange rate declines
When foreign income rises
All of the above
None of the above
Question 2
In the short run,
when prices are sticky and the goods market is in equilibrium, income rises as
the interest rate declines because:
Investment expenditure rises
Imports decline
Exports rise
All of the above
None of the above
Question 3
Suppose P,
P*, Y, Y*, �π, R, T, and G are exogenously given and the
interest parity condition holds. Then aggregate “preferred” expenditure, D,
rises when:
The domestic aggregate price level rises.
The foreign
aggregate price level rises.
The nominal interest rate rises.
Net taxes collected by the government rises.
All of the above
4.
Question 4
In general, as
aggregate income of an economy rises:
Consumption demand
rises by less than the income increase.
Consumption demand rises by more than the income increase.
Consumption demand rises by the same amount as the income increase.
Net exports rise by more than the income increase.
Net exports rise by
the same amount as the income increase.
5.
Question 5
Which of the
following factors does not shift the aggregate
"preferred" expenditure (D) curve of an economy?
The aggregate real
income of the economy
Government expenditure
The aggregate price level
The aggregate real
income of the rest of the world
6.
Question 6
Which of the
following factors shifts the IS curve?
Government expenditure
Real income of the rest of the world
The aggregate price level
All of the above
None of the above
7.
Question 7
Latin America is a
major export market for the US. If, as a result of a slump in commodity prices,
the real incomes in Latin American countries decline, what would be the impact
on the IS curve of the US economy?
The IS curve would not be affected.
The IS curve would shift to the right.
The IS curve would
shift to the left.
The impact on the
IS curve cannot be determined.
8.
Question 8
This year, country
B held presidential elections and the government of the incumbent president
temporarily increased public expenditure to win greater political support.
Assuming that Ms, P, P*, Y*,
and T were exogenously given, what kind of impact must this policy have
had on the IS curve in country B?
The IS curve should not have been affected.
The IS curve must
have shifted to the right.
The IS curve must have shifted to the left.
The impact on the
IS curve cannot be determined.
9.
Question 9
This year, country
T held politically sensitive parliamentary elections and the government of the
incumbent ruling party temporarily increased public expenditure to enhance its
popularity. The government financed the additional expenditure by selling more
bonds. Assuming that Ms, P, P*, Y*,
and T were exogenously given, what kind of impact must this policy have
had on the LM curve in country T?
The LM curve should
not have been affected.
The LM curve must have shifted to downward.
The LM curve must have shifted to upward.
The impact on the
LM curve cannot be determined.
10.
Question 10
This year, country
E held politically sensitive parliamentary elections and the government of the
incumbent ruling party temporarily increased public expenditure to enhance its
popularity. The government financed the additional expenditure by getting the country’s
central bank to print money to finance the additional expenditure. Assuming
that P, P*, Y*, and T were
exogenously given, what kind of impact must this policy have had on the real
income and interest rate in country E?
Both real income and interest rate must have declined.
Real income must have declined and interest rate must have risen.
Real income must have risen and interest rate must have declined.
Both real income and interest rate must have risen.
Real income must have risen, but the
impact on interest rate would depend on other factors.
Week 2 - Module
2 Quiz
Question 1
Suppose the price level in the US is 150 while the corresponding price
level in the UK is 100. If the nominal exchange rate is e=2/3£/$, what is the
real exchange rate between the US dollar and the British pound (that is, how
many baskets of British goods can be purchased with one corresponding basket of
US goods)?
1
2
3/2
2/3
3
2.
Question 2
During 1960-1990, the cost of a representative basket of goods produced
in Japan steadily rose compared to a similar basket of goods produced in the
US, when both baskets were evaluated in the same currency using the spot market
exchange rate. Which one of the following factors contributed to that long-term
real exchange rate appreciation?
Faster productivity growth of non-tradable sector in Japan compared to
that in the US
Faster productivity growth of tradable sector in Japan compared to that
in the US
Faster productivity growth of tradable sector in the US compared to that
in Japan
Faster growth of government
expenditure in the US compared to that in Japan
3.
Question 3
During 1980-2008, the Chinese government followed a successful policy of
increasing the productivity of the country's tradable sectors much faster than
was the case in the rest of the world. If this policy had continued over the
2009-2016 period and if the productivity in China's non-tradable sector had
grown at the same rate as that in the rest of the world, what would have been
the impact on the real exchange rate of the Chinese currency, the yuan,
vis-à-vis the US dollar?
The real exchange rate of the yuan would have remained unchanged
vis-à-vis the US dollar.
The real exchange rate of the yuan would have appreciated vis-à-vis the
US dollar.
The real exchange rate of the yuan would have depreciated vis-à-vis the
US dollar.
The real exchange rate of the yuan may have appreciated, depreciated, or
remained unchanged vis-à-vis the US dollar; the impact cannot be predicted.
The real exchange
rate of the yuan would have first depreciated and then appreciated vis-à-vis
the US dollar.
4.
Question 4
Suppose the government of the United States introduces a permanent tax
reduction without cutting expenditure over the next several years. The plan
will go into effect next year. Assuming that tradables' prices in foreign
currency are given, what will be the impact of this policy on the real exchange
rate of the dollar vis-à-vis other currencies a few years from now?
The real exchange rate of the US dollar will depreciate.
The real exchange rate of the US dollar will appreciate.
The real exchange rate of the US dollar will remain unchanged.
The real exchange rate of the US dollar will first depreciate and then
appreciate.
The real exchange
rate of the US dollar may appreciate, depreciate, or remain unchanged.
5.
Question 5
Which of the following reasons may account for the failure of the law of
one price?
Trade restrictions
Transportation costs
Imperfect competition
All of the above
None of the above
6.
Question 6
The PPP hypothesis implies that the real exchange rate must be equal to
which of the following? Select all that apply.
P*/P, where P is
the aggregate price level in home country, P* in foreign country
1
eP*/P, where P is
the aggregate price level in home country, P* in foreign country
eP/P*, where P is
the aggregate price level in home country, P* in foreign country
7.
Question 7
The prices of the inputs used for the production of airplanes in United
States will be included in which of the two price indices?
Entirely in the tradables’ price index, PT
Entirely in the non-tradables’ price index, PN
Partly in PT and partly in PN
None of the above
8.
Question 8
The real exchange rate of an economy _________ when the relative price
of non-tradables to tradables _________.
Rises; rises
Remains unchanged; rises
Rises; declines
Declines; rises
9.
Question 9
In the long run, the relative price of non-tradables to tradables is
determined by the rate of growth of money supply.
True
False
10.
Question 10
Suppose the productivity of the non-tradables sector in the Pakistan
economy permanently reduces due to a natural calamity while the tradable sector
remains unaffected. If all economic policies and other exogenous events in all
countries remain unchanged, in the long-run, the real exchange rate of Pakistani
Rupee vis-à-vis the US dollar:
Remains unchanged
Appreciates
Depreciates
May appreciate,
depreciate, or remain unchanged; the impact cannot be predicted
Week 3 - Module
3 Quiz :
Question 1
The Fed increased the supply of US dollars at an average rate of 6
percent per year over the 1980-2005 period. Based on the theory of production
capacity, if the Fed had instead increased the money supply at the rate of 7
percent per year during that period, given other policies: (Select all that
apply.)
The average inflation rate during 1980-2005 would have been one
percentage point higher than it actually was in that period.
The output of the economy in the mid-2000s would not have been very
different from the levels it actually reached.
The price level in 2005 would have been about 28 percent higher than
what it actually reached in that year.
The economy would
have enjoyed a much higher level of output in the mid-2000s.
2.
Question 2
At the time of its independence in 1947, India was a very poor country
with a very small stock of physical capital. Between 1947 and 1980, the
government of India believed that the best way to improve the standard of
living in that country was to increase investment and create more jobs with the
existing technology. Importing advanced technology and encouraging cost-saving
innovations were seen as unnecessary because the government believed that such
developments would reduce the need for labor and contribute to unemployment.
Other things equal, the consequence of this policy for the long-run growth of
the economy must have been:
Economic stagnation throughout the 1947-1980 period
Steady economic growth throughout the 1947-1980 period
Slowing economic growth throughout the 1947-1980 period
Accelerating
economic growth throughout the 1947-1980 period
3.
Question 3
Country J’s economy has been stagnant for some time. The government has
now decided to stimulate the economy and achieve long-term growth by spending
more and by running large budget deficits. Such a policy:
Can indeed bring about long-term growth
Can bring about growth in the short run, but not in the long run
Cannot bring about short-term or long-term growth under any
circumstances
May not bring about
growth in the short run, but lays the foundation for long-term growth
4.
Question 4
Venezuela’s economy was operating at production capacity until political
turmoil reduced the production capacity of the country. To deal with the drop
in GDP and to return the aggregate output to its pre-crisis level, the
government of Venezuela has decided to increase its expenditure and stimulate
demand, but it has found it hard to sell bonds and fund its expenditures. To
solve this problem, the government has forced the central bank to print money
and buy the bonds directly from the government. In this situation, the
equilibrium income in Venezuela determined by the crossing of IS and LM curves:
Must be above production capacity
Must be below production capacity
Must be equal to production capacity
Could be above or
below production capacity
5.
Question 5
In the above question, what is likely to happen to the rate of inflation
if the political turmoil continues and the government of Venezuela tries to
keep the output level steady by continued fiscal and monetary expansion?
The rate of inflation will accelerate.
The rate of inflation will rise in the short run, but decline in the
long run.
The rate of inflation will rise for a short while, but become steady
afterwards.
The change in
inflation rate is indeterminate in this situation.
6.
Question 6
In 1997, East Asian economies faced a major financial crisis, which
reduced their incomes and their demands for US exports. Suppose the Fed
believed that the negative impact of the crisis on the US economy would be
sizable and would take a few years. Assume that before the crisis, the US
economy was on its long-run equilibrium path. In that case, if the Fed wanted
to stabilize the level of income and inflation in the US for the duration of
the adverse demand shock, what should it have done?
The Fed should have increased money supply.
Nothing. The economy would have quickly adjusted to the shock and
returned to stability by itself.
The Fed should have reduced money supply.
The Fed should have
waited for a couple of years to assess the situation better before acting.
7.
Question 7
Your company wants to expand its production and needs to know the impact
of a surge in East Asian incomes this year on the US economy. You know that
East Asian economies have been growing at an average rate of 5 percent per
year, and the US economy has been growing at 3 percent per year along its
long-run equilibrium path. You hire a consultant who tells you that everyone
believes that: (1) the faster pace of East Asian countries this year is a
one-time jump in income level and those economies will return to their 5
percent growth rate after this year; (2) the (risk-free) interest rates in East
Asia will remain constant; and (3) the economic policies in the US will not
change as a result of the temporary increase in Asia’s growth rate. If you
believe these claims, you should conclude that by the end of this year, the
developments in East Asia will tend to:
Leave GDP growth and the production capacity of the US economy unchanged
Temporarily raise GDP growth and the production capacity of the US
economy
Temporarily lower GDP growth and the production capacity of the US
economy
Temporarily raise GDP growth of the US economy, but leave the production
capacity unchanged
Temporarily lower
GDP growth of the US economy, but leave the production capacity unchanged
8.
Question 8
In the above question (Question 7), given the assumptions about the
current and future conditions, you can also conclude that over the next couple
of years, the events in East Asia will tend to:
Raise the inflation
rate and the real exchange rate of the US economy
Lower the inflation rate and the real exchange rate of the US economy
Raise the inflation rate, but lower the real exchange rate of the US
economy
Lower the inflation rate, but raise the real exchange rate of the US
economy
Lower the inflation
rate, but leave the real exchange rate of the US economy
9.
Question 9
Complete the following sentence.
“Accumulating capital without technological progress cannot generate
long-term growth because as capital stock grows, its depreciation _____________,
while total production rises at _____________ rate and _____________ portion of
the savings that it generates has to be used for replacing depreciated capital,
rather than being available for production capacity expansion.”
Diminishes; a proportional; an increasing
Rises proportionately; an increasing; a diminishing
Increases; a proportional; a diminishing
Rises
proportionately; a diminishing; an increasing
10.
Question 10
Which of the following are among the six major dimensions of governance
as laid down by The Worldwide Governance Indicators? Select all that apply.
Secularism
Individualism
Voice and Accountability
Government Effectiveness
Rule of Law
week
4 - Module
4 Quiz :
1.
Question 1
Under optimal monetary policy, the central bank adjusts its policy based
on anticipated rather than current inflation and output gaps because:
It takes time for the central bank to implement its policy decisions.
Forecast errors are often rather large.
Monetary policy has a long outside lag.
It wants to avoid
time-inconsistency problems.
2.
Question 2
Under optimal fiscal policy, changes in public debt at each time should
strongly depend on:
The existing levels of debt
The average size of government
The average tax rate
All of the above
None of the above
3.
Question 3
When government expenditure is used for stabilization purposes, it makes
the changes in public debt:
More
countercyclical
Less countercyclical
More procyclical
Less procyclical
Acyclical
4.
Question 4
In oil exporting countries, where government budgets are significantly
financed by oil revenues, the governments can often borrow easily during oil
price booms and become credit rationed when oil prices drop very low. If the
government does not have large savings, this phenomenon is likely to make its
fiscal policy:
Countercyclical
Procyclical
Acyclical
5.
Question 5
Which one of the following is a reason why actual fiscal policies in
many countries deviate from the patterns deemed optimal?
Fiscal policy may be used to buy political support of interest groups.
Fiscal policy may suffer from the “tragedy of the commons."
Both of the above
None of the above
6.
Question 6
From the point of view of macroeconomic policymaking, separation of
powers:
Faces a tradeoff because it may reduce flexibility
Is always desirable because it reduces embezzlement
Is undesirable because it always leads to a deadlock
Is always desirable
because it increases flexibility
7.
Question 7
Which one of the following is an example of a rule-based monetary
policy?
Currency board with a fixed exchange rate
Determination of public debt by a non-political national debt board
Balanced budget laws
Fiscal golden rule
8.
Question 8
Under optimal fiscal policy, changes in public debt should be dependent
on the existing levels of public debt and government size.
True
False
9.
Question 9
Which of the following statements is true about monetary and fiscal
policies in developing countries?
Monetary policy is often procyclical while fiscal policy is often
countercyclical.
Monetary policy is often countercyclical while fiscal policy is often
procyclical.
Both monetary and fiscal policies are often countercyclical.
Both monetary and fiscal policies are
often procyclical.
10.
Question 10
The presence of automatic stabilizers like income taxes in the policy
framework can help reduce discretion while maintaining some policy
responsiveness to economic fluctuations.
True
False
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