1. All else equal (held constant), how do the fact that Norway is open to trade and capital flows affect its interest rate (relative to if it were closed to trade and capital flows)?
Its interest rate is higher than if it were closed to trade and capital flows.
Its interest rate is lower than if it were closed to trade and capital flows.
Its interest rate is the same as it would be if Norway were closed to trade and capital .
2. The Norwegian central bank, Norges Bank, currently has an inflation rate target of 2%. Inflation in the past few years has been lower than this (and is currently below this), so the population is expecting the Norges Bank to undertake policies to boost inflation.
The central bank (Norges Bank) can achieve this objective by using which of the following policies?
Increase tax rates.
Buy government securities.
Sell government securities.
Increase government spending.
3. The Norwegian central bank, Norges Bank, currently has an inflation rate target of 2%. Inflation in the past few years has been lower than this (and is currently below this), so the population is expecting the Norges Bank to undertake policies to boost inflation.
The Norwegian public has been expecting these policies for the past few years, and they will expect these policies for years in the future. How does this affect the effectiveness of these policies?
It makes the policies more effective at achieving the Norges Bank inflation goals.
It makes the policies less effective at achieving the Norges Bank inflation goals.
It does not change the effectiveness of the policies in achieving the Norges Bank inflation goals.
4. Over the past few years, Norway has experienced disinflation. This has resulted in _____ demand for money, resulting in _____ pressure on interest rates.
5. Today, the krone is free-floating. As a result of the decreased global demand for oil (which is one of Norway’s main exports), the krone has _____. In response to the crisis, the Norges Bank has substantially increased its lending to Norwegian commercial banks. This has caused the krone to _____.
depreciate; depreciate further.
appreciate; appreciate further.
6. Before the Norges Bank allowed the krone to float, there was an increase in speculative demand for the krone. This caused the krone to _____. In order to maintain the fixed exchange rate, the Norges Bank had to _____ krone, resulting in inflationary pressure.
7. In an attempt to help the economy during the current crisis, the Norwegian government has increased its spending, causing a deficit. This deficit has caused the krone to _____, _____ the effect of the fiscal stimulus.
depreciate; dampening. For more information on Macroeconomics check on this: https://en.wikipedia.org/wiki/Behavioural_genetics
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