ECS2602 ASSIGNMENT 3 SEMESTER 1 2024 (MCQ ANSWERS)

4/13/24, 6:35 AM Assessment 3 (page 1 of 30)




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QUIZ




Question 1

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Which one of the following statements is INCORRECT regarding the IS and LM relations in an open economy?


Select one:
A. An increase in the interest rate has a negative impact on the exchange rate.

B. Given the domestic interest rate and the interest parity relation, the equilibrium interest rate determines the
equilibrium exchange rate.

C. The LM relation is the same in an open and closed economy and is a horizontal line.

D. The interest parity relation shows (given i*, Ēe) the following relationship: i↑ → E↑ and i↓ → E↓.

Clear my choice




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,4/13/24, 6:35 AM Assessment 3 (page 2 of 30)




UNISA  2024  ECS2602-24-S1  Welcome to the module ECS2602-24-S1  Assessment 3

QUIZ




Question 2

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In the IS-LM model for an open economy, when a contractionary monetary policy is applied, the _____


Select one:
A. interest rate decreases, the LM curve shifts downwards and the level of output increases in the goods market.

B. interest rate decreases, the LM curve shifts downwards and the demand for goods decreases in the goods market.

C. interest rate increases, the LM curve shifts upwards and the level of output decreases in the goods market.

D. interest rate increases, the LM curve shifts upwards and investment spending increases in the goods market.

Clear my choice




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,4/13/24, 6:35 AM Assessment 3 (page 3 of 30)




UNISA  2024  ECS2602-24-S1  Welcome to the module ECS2602-24-S1  Assessment 3

QUIZ




Question 3

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The following question refers to an IS-LM model in an open economy.

Which of the following statements is correct regarding the impact of an increase in taxes in an open economy?


Select one:
A. The trade balance improves since imports are lower and exports are higher.

B. The LM curve is upward-sloping, and an appreciation of the exchange rate occurs.

C. On the financial market, the interest rate declines since the demand for money is lower.

D. The IS curve will shift to the left. In the goods market, the demand for goods decreases and the level of output and
income declines.

Clear my choice




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, 4/13/24, 6:35 AM Assessment 3 (page 4 of 30)




UNISA  2024  ECS2602-24-S1  Welcome to the module ECS2602-24-S1  Assessment 3

QUIZ




Question 4

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This question is based on the following diagram of an IS-LM model for an open economy.




Which one of the following statements is correct?


Select one:
A. The diagram above illustrates the impact of an expansionary monetary policy on the exchange rate.

B. The diagram above illustrates the impact of a contractionary fiscal policy on the exchange rate.

C. The diagram above illustrates the impact of a contractionary monetary policy on the exchange rate.

D. The diagram above illustrates the impact of an expansionary fiscal policy on the exchange rate.

Clear my choice




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