31. The __________ exchange rate is a weighted average of the market rates across a number of foreign currencies. a. Nominal bilateral b. Real bilateral c. Nominal effective d. Real effective

31. The __________ exchange rate is a weighted
average of the market rates across a number of foreign currencies.
a. Nominal bilateral
b. Real bilateral
c. Nominal effective
d. Real effective

32. The __________ exchange rate incorporates both
the market exchange rate and the product price levels for two countries.
a. Nominal bilateral
b. Real bilateral
c. Nominal effective
d. Real effective

33. The __________ exchange rate is a weighted
average of the real bilateral exchange rates across a number of foreign
countries.
a. Nominal bilateral
b. Real unilateral
c. Nominal effective
d. Real effective

34. Studies of exchange rate prediction models
conclude that:
a.
Structural
economic models cannot reliably out predict the naïve alternative of a random
walk for short forecast horizons.
b.
Structural
economic models reliably out predict the naïve alternative of a random walk for
short forecast horizons.
c.
Structural
economic models cannot out predict the naïve alternative of a random walk for
long forecast horizons.
d.
Structural
economic models are the cause of most exchange rate bubbles.

35. If the movement in the exchange rate appears
to be simply inconsistent with any form of economic fundamentals, it is called:
a.
Exchange
rate parity.
b.
A
speculative bubble.
c.
Overshooting.
d.
Uncovered
speculation.

36. There is more empirical evidence in the
literature to suggest that:
a.
Absolute
version of purchasing power parity holds in the short run.
b.
Relative
version of purchasing power parity holds in the short run.
c.
Absolute
version of purchasing power parity holds in the long run.
d.
Relative
version of purchasing power parity holds in the long run.

37. Absolute purchasing power parity applied to
all products in the economy does not perform well in the real world because of:
a.
Non-traded
products.
b.
Different
bundles of products used to measure inflation in different countries.
c.
Productivity
differences between countries.
d.
All of
the above.

38. According to the relative version of
purchasing power parity, when the foreign country inflation rate increases, the
home country’s:
a.
Currency
tends to depreciate.
b.
Currency
tends to appreciate.
c.
Inflation
rate tends to decrease.
d.
Inflation
rate tends to stay the same.

39. Exchange rate overshooting occurs:
a.
Because
interest rates are sticky.
b.
Because
product prices are slow to change.
c.
Only if
investors and speculators react irrationally to news.
d.
Both (b)
and (c).

40. Economists have some success in predicting
exchange rate movements in the:
a.
Short
run.
b.
Long run.
c.
Eurocurrency
markets.
d.
All of
the above.