In the Monetary Small Open-Economy Model with a Fixed Exchange

question 57

Multiple Choice

In the monetary small open-economy model with a fixed exchange rate, a devaluation of the domestic currency in the absence of any other shocks

• A) increases the current account surplus and has no effect on the domestic money supply.
• B) decreases the current account surplus and has no effect on the domestic money supply.
• C) increases the domestic money supply and has no effect on the current account surplus.
• D) decreases the domestic money supply and has no effect on the current account surplus.
• E) decreases the current account surplus and increases the price level.

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Definitions:

Volcanic Fields

Regions of the Earth's crust that are prone to volcanic activity and are scattered with multiple volcanoes.

Magma

A molten or semi-molten rock material beneath the Earth's surface from which igneous rock is formed by cooling.

Continental Crust

The relatively thick part of the Earth's crust that forms the large landmasses. It is generally older and more complex than the oceanic crust.

Elevation

The height of a point or object above a reference level, typically above sea level.