Practice Quiz Fall 2021 Econ 3235

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This quiz reviews the ideas behind Figures 1 and 2, some questions are "check all that apply" you can tell because of the square "check" boxes, single answer questions have circles to the left of the answer...

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Figure 1: TNT Diagram

In Figure 1, production/consumption at C implies *

2 points

Full employment with more production of non-tradables

Full employment with production/consumption of tradables

An unattainable mix of traded and nontraded goods

An almost equal mix of tradable/nontradable output with unemployment

In Figure 1, production/consumption at point A implies *

2 points

Full employment with more production of non-tradables

Full employment with production/consumption of tradables

An unattainable mix of traded and nontraded goods

An almost equal mix of tradable/nontradable output with unemployment

Figure 1 the TNT PPF

Referring to the Figure 1, producing & consuming at point A implies *

1 point

Balance trade with full employment

balanced trade with unemployment

A trade surplus (capital outflows)

A trade deficit (capital inflows)

Referring to the Figure 1, production at point C consumption at point B implies *

1 point

Balance trade and full employment

balanced trade with unemployment

A trade surplus (capital outflows)

A trade deficit (capital inflows)

Referring to the Figures 1 and U-3, after Argentina fixed its exchange rate even after Brazil devalued in 1998 pushing it toward *

1 point

Point E in Figure 1 Balance trade and full employment

Point D with high unemployment trying internal devaluation

Referring to the Figures 1 and U-3, Argentina devalued dramatically in 2001 moving toward ___ after a deep recession ("shock treatment") *

1 point

Point E with a trade surplus and full employment as q rose with e

point D with balanced trade but still very high unemployment

Figure U-3 Argentina's unemployment rate

Figure 2 The Market for dollars

Referring to Figure 2, starting when q = 15 the country has a *

1 point

trade surplus of C minus B or 150 - 100 = $50

trade deficit B minus C or 100 - 150 = - $50

Referring to Figure 2, starting when q = 15 the country has a

1 point

trade surplus of C minus B or 150 - 100 = $50

trade deficit B minus C or 100 - 150 = - $50

Clear selection

Since q = ep*/p and ∆q = (∆e + π* - π) if e is fixed, the real exchange rate q appreciates *

1 point

when foreign inflation equals domestic inflation π* = π

when foreign inflation exceeds domestic inflation π* > π

when domestic inflation exceeds trading partners inflation π* < π

Since q = ep*/p and ∆q = (∆e + π* - π) assuming π* = π significant increase in e is referred to as a (check all that apply) *

2 points

external devaluation

internal devaluation

A beggar thy neighbor policy

A good neighbor policy...

Required

Right now the only Puerto Rico's only option for creating at trade surplus to pay down its debt is *

3 points

external devaluation

internal devaluation

Structural Adjustment or "supply side" policies (e.g. repeal the Jones Act)

Austerity or Stabilization: high unemployment that shifts D to the left..

Required

In Figure 2 structural adjustment ("supply side") adjustment moves PR toward point __ (check all that apply) *

2 points

C by lowering export shifting PRs export supply curve S to the right

Shifts PRs supply curve to the left toward point A in Figure 2

Move Puerto Rico down the import demand curve by lowering p* (the cost of imports)

Required

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