国际经济学316754TB14文档格式.docx

国际经济学316754TB14文档格式.docx

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1 EssayQuestions

1.Whatarethemainfunctionsofmoney?

Answer:

Moneyservesingeneralthreeimportantfunctions:

amediumofexchange;

aunitofaccount;

andastoreofvalue.Asamediumofexchange,moneyavoidsgoingbacktoabartereconomy,withtheenormoussearchcostsconnectedwithit.Asaunitofaccount,theuseofmoneyeconomizesonthenumberofpricesanindividualfaces.ConsideraneconomywithNgoods,thenoneneedsonly（N–1）prices.Asastoreofvalue,theuseofmoneyingeneralensuresthatyoucantransferwealthbetweenperiods.

2.Whatarethefactorsthatdeterminetheamountofmoneyanindividualdesirestohold?

Threemainfactors:

first,theexpectedreturntheassetofferscomparedwiththereturnsofferedbyotherassets;

second,theriskinessoftheasset’sexpectedreturn;

andthird,theasset’sliquidity.

3.Whatarethemainfactorsdeterminingtheaggregatemoneydemand?

interestrate,thepricelevelandrealnationalincome.Ariseintheinterestratecauseseachindividualintheeconomytoreduceherdemandformoney.Ifthepricelevelrises,individualhouseholdsandfirmswillspendmoremoneythanbefore.Whenrealnationalincome（GNP）risesthedemandformoneywillrise.

4.Explainwhyonecanwritethedemandformoneyasfollows:

MdPL（R,Y）

Theaggregatemoneydemandisproportionaltothepricelevel.Imaginethatallpricesinaneconomydoubled,buttheinterestrateandeveryone’srealincomesremainedunchanged.Then,themoneyvalueofeachindividual’saveragedailytransactionswouldthensimplydouble,aswouldtheamountofmoneyeachwishestohold.

5.Whatwillbetheeffectsofanincreaseinthemoneysupplyontheinterestrate?

Anincreaseinthemoneysupplywillcauseinterestratetodecrease.Thisshouldincreaseinvestmentandpossiblyconsumptionofdurablegoods.Thereductionintheinterestratewillcauseadepreciationofthedollar.

6.Whatwillbetheeffectsofanincreaseinrealnationalincomeontheinterestrate?

Anincreaseinrealnationalincomewillincreasetheinterestrate.Ifinvestmentdependsonlyoninterestrate,thiswillcauseinvestmenttogodown.Theincreasesinterestratewillcauseanappreciationofthedollar.

7.AnalyzetheeffectsofanincreaseintheEuropeanmoneysupplyonthedollar/euroexchangerate.

Themainpointsare:

AnincreaseintheEuropeanmoneysupplywillreducetheinterestrateontheeuro,andthuscausestheeurotodepreciatesagainstthedollar.TheU.S.moneydemandandmoneysupplyarenotgoingtobeaffected,andthustheinterestrateintheU.S.willremainthesame.

8.Explainhowthemoneymarketsoftwocountriesarelinkedthroughtheforeignexchangemarket.

ThemonetarypolicyactionsbytheFedaffecttheU.S.interestrate,changingthedollar/euroexchangeratethatclearstheforeignexchangemarket.TheEuropeanSystemofCentralBanks（ESCB）canaffecttheexchangeratebychangingtheEuropeanmoneysupplyandinterestrate.

9.“Althoughthepricelevelsappeartodisplayshort-runstickinessinmanycountries,achangeinthemoneysupplycreatesimmediatedemandandcostpressuresthateventuallyleadtofutureincreaseinthepricelevel.”Discuss.

（Seepages3479–380）.Thestatementistrue.Thepressurescomefromthreemainsources:

excessdemandforoutputandlabor;

inflationaryexpectations;

and,rawmaterialprices.

10.ExplaintheeffectsofapermanentincreaseintheU.S.moneysupplyintheshortrunandinthelongrun.AssumethattheU.S.realnationalincomeisconstant.

Anincreaseinthenominalmoneysupplyraisestherealmoneysupply,loweringtheinterestrateintheshortrun.Themoneysupplyincreaseisconsideredtocontinueinthefuture;

thus,itwillaffecttheexchangerateexpectations.Thiswillmaketheexpectedreturnontheeuromoredesirableandthusthedollardepreciates.InthecaseofapermanentincreaseintheU.S.moneysupply,thedollardepreciatesmorethanunderatemporaryincreaseinthemoneysupply.

Now,inthelongrun,priceswillriseuntiltherealmoneybalancesarethesameasbeforethepermanentincreaseinthemoneysupply.Sincetheoutputlevelisgiven,theU.S.interestrate,whichdecreasedbefore,willstarttoincrease,untilitwillmovebacktoitsoriginallevel.Theequilibriuminterestratemustbethesameasitsoriginallongrunvalue.Thisincreaseintheinterestratemustcausethedollartoappreciateagainsttheeuroafteritssharpdepreciationasaresultofthepermanentincreaseinthemoneysupply.Soalargedepreciationisfollowedbyanappreciationofthedollar.Eventually,thedollardepreciatesinproportiontotheincreaseinthepricelevel,whichinturnincreas