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EC-60: International Economics > Midterm 3/4 > Flashcards

Midterm 3/4 Flashcards

1
Q

how does an increase in the money supply affect interest rate?

A

causes interest rate to decrease

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2
Q

how does a decrease in interest rate affect capital?

A

causes capital outflow

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3
Q

how does capital outflow affect value of currency?

A

causes it to depreciate

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4
Q

how does currency depreciation affect spot rate?

A

causes it to increase

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5
Q

examples of expansionary monetary policy

A

buying bonds and exchanging for currency

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6
Q

who enacts monetary policy

A

central banks

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7
Q

examples of contractionary monetary policy

A

buying currency and selling bonds

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8
Q

examples of expansionary fiscal policy

A

increase government spending and tax cuts

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9
Q

who enacts fiscal policy

A

government

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10
Q

examples of contractionary fiscal policy

A

decrease government spending and increase taxes

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11
Q

what happens to the money supply under monetary expansion? (floating exchange rate)

A

money supply increases

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12
Q

what happens to the interest rate under monetary expansion? (floating exchange rate)

A

interest rate decreases

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13
Q

what happens to the exchange rate under monetary expansion? (floating exchange rate)

A

exchange rate increases

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14
Q

what happens to the currency value under monetary expansion? (floating exchange rate)

A

currency depreciates

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15
Q

what happens to capital under monetary expansion? (floating exchange rate)

A

capital outflow

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16
Q

what happens to the trade balance/current account under monetary expansion? (floating exchange rate)

A

trade surplus

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17
Q

what happens to the money supply under monetary contraction? (floating exchange rate)

A

money supply decreases

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18
Q

what happens to the interest rate under monetary contraction? (floating exchange rate)

A

interest rate increases

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19
Q

what happens to the exchange rate under monetary contraction? (floating exchange rate)

A

exchange rate decreases

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20
Q

what happens to the currency value under monetary contraction? (floating exchange rate)

A

currency appreciates

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21
Q

what happens to capital under monetary contraction? (floating exchange rate)

A

capital inflow

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22
Q

what happens to the trade balance/current account under monetary contraction? (floating exchange rate)

A

trade deficit

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23
Q

what happens to income under fiscal expansion? (floating exchange rate)

A

income increases

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24
Q

what happens to the money supply under fiscal expansion? (floating exchange rate)

A

money supply increases

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25
what happens to the exchange rate under fiscal expansion? (floating exchange rate)
exchange rate decreases
26
what happens to the interest rate under fiscal expansion? (floating exchange rate)
interest rate decreases
27
what happens to currency value under fiscal expansion? (floating exchange rate)
currency depreciates
28
what happens to capital under fiscal expansion? (floating exchange rate)
capital inflow
29
what happens to the trade balance/current account under fiscal expansion? (floating exchange rate)
trade deficit
30
what happens to income under fiscal contraction? (floating exchange rate)
income decreases
31
what happens to the money supply under fiscal contraction? (floating exchange rate)
money supply decreases
32
what happens to the exchange rate under fiscal contraction? (floating exchange rate)
exchange rate increases
33
what happens to the interest rate under fiscal contraction? (floating exchange rate)
interest rate increase
34
what happens to currency value under fiscal contraction? (floating exchange rate)
currency appreciate
35
what happens to capital under fiscal contraction? (floating exchange rate)
capital outflow
36
what happens to the trade balance/current account under fiscal contraction? (floating exchange rate)
trade surplus
37
what happens to the money supply under a monetary expansion? (fixed exchange rate)
money supply increases
38
what happens to the interest rate under a monetary expansion? (fixed exchange rate)
interest rate decreases
39
what happens to the exchange rate under a monetary expansion? (fixed exchange rate)
exchange rate increases
40
what happens to the currency value under a monetary expansion? (fixed exchange rate)
currency depreciates
41
what happens after currency depreciates under a monetary expansion? (fixed exchange rate)
government sells bond, everything is back to original level
42
what happens to the money supply under a monetary contraction? (fixed exchange rate)
money supply decreases
43
what happens to the interest rate under a monetary contraction? (fixed exchange rate)
interest rate increases
44
what happens to the exchange rate under a monetary contraction? (fixed exchange rate)
exchange rate decreases
45
what happens to the currency value under a monetary contraction? (fixed exchange rate)
currency appreciates
46
what happens after currency appreciates under a monetary contraction? (fixed exchange rate)
government buys bonds, everything is back to original level
47
what happens to income under a fiscal expansion? (fixed exchange rate)
income increases
48
what happens to the money supply under a fiscal expansion? (fixed exchange rate)
money supply increases
49
what happens to the exchange rate under a fiscal expansion? (fixed exchange rate)
exchange rate decreases
50
what happens to the interest rate under a fiscal expansion? (fixed exchange rate)
interest rate decreases
51
what happens to the currency value under a fiscal expansion? (fixed exchange rate)
currency depreciates
52
what happens after currency depreciates under a fiscal expansion? (fixed exchange rate)
central bank buys bonds, everything is back to original level
53
what happens to income under a fiscal contraction?(fixed exchange rate)
income decreases
54
what happens to the money supply under a fiscal contraction?(fixed exchange rate)
money supply decreases
55
what happens to the exchange rate under a fiscal contraction? (fixed exchange rate)
exchange rate increases
56
what happens to the interest rate under a fiscal contraction? (fixed exchange rate)
interest rate increases
57
what happens to the currency value under a fiscal contraction? (fixed exchange rate)
currency appreciates
58
what happens after currency appreciates under a fiscal contraction?(fixed exchange rate)
central banks sells bonds, everything is back to original level
59
what happens to the currency value under a devaluation?
currency depreciates
60
what happens to the exchange rate under a devaluation?
exchange rate increases
61
what happens to the interest rate under a devaluation?
interest rate increases
62
what happens to the income under a devaluation?
income increases
63
what happens to capital under a devaluation?
capital outflow
64
what happens to the trade balance/current account under a devaluation?
trade surplus
65
what happens after a trade surplus under a devaluation?
central bank sells bonds, interest rates back to original level

EC-60: International Economics (1 decks)

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