Sorry

I am not able to get to put up sample multiple choice problems. You'll have to work from experience as to how such problems might look.

J

Answer Key to sample problems for test 3

I'm sorry that there are only a few multiple choice problems. My potential pool of problems is rather small.

Here is the key to the sample problems that are available on the I-drive (I hope it is correct):

1-C, 2-C, 3-C, 4-C, 5-A,
6-B, 7-A, 8-A, 9-B,
10-A, 11-D, 12-D. (Problem 11 is lousy. In our development of the monetary approach we ignored the demand side of money. But we certainly will be talking about it very soon!)

To be quite honest, I think some of the problems on the test have a little more difficulty.

Make sure you memorize the formulas for PPP and the quantity theory. (All monetary approach questions will involve the "Cambridge k" and not velocity. The only time that matters is if you have to calculate, say, an exchange rate. If you do, the k will be used.)

Two things I'll let you know for sure: You will be using one of my cheap calculators. You cannot use your own calculator. I know there are some important formulas but these are "definitional" in spirit. You need to memorize them, at least for now. (I'll say I was disappointed that those of you who were in my 421 class weren't able to rattle off what Py/M was equal to. I should have heard a chorus of "velocity".)

The other thing is there is ONE written problem. It involves a calculation and an explanation. You have no choice of two this time around.

I'll be online a little while tonight but I will be going to bed early. I may not be able to reply to late night emails. I have to be in Pittsburgh in the morning. Dr. Yaya Sissoko will be proctoring the test.

Good luck folks! There isn't that much material. And it only seems hard.

Mid term scores

I have calculated midterm scores and posted a distribution on the I-drive. It is sorted by the last 4 digits of your banner ID.

Keep up the good work.

JJ

Answer key to sample problems for test 2

Here's the key to the sample problems, I think.

1-A, 2-B, 3-A, 4-D, 5-C,
6-B, 7-B, 8-C, 9-E, 10-C 11-C,
12-C, 13-D, 14-C, 15-B,
16-C, 17-C, 18-D.

Interest parity documents on I-drive

I have placed two documents on the I-drive.

One is the handout from class on Friday, Feb. 18.

The other is the solutions for the first problem that we went over in class. It has some notes added for your benefit.

Problem 2, which is part of BOTH documents, is the problem that you can write up and turn in on Wednesday, February 23. You should be able to use the notes and the examples from the first problem to solve the second problem.

I'm sorry I had to miss class today.

Big Bad Oops

On problem 1 of the sample problems the answer should be D, not A. I'm such a dumbass. I even took that straight from an answer key from a previous test where the answer was properly marked.

Thanks Mason for bringing this to my attention (a little late, mind you).

My bad.

Answer key to sample problems for test 1 *updated*

Here is the key and some comments:

1-D (see above), 2-C, 3-A, 4-D, 5-A, 6-D, 7-A,
8-C, 9-D, 10-C, 11-C, 12-A, 13-D,
14-D, 15*-C, 16-C, 17-D, 18-B,
19-A, 20-D, 21-B, 22-D, 23-D, 24-D,
25-D, 26-D, 27-B, 28-A, 29-A, 30-B, 31-C,
32-C, 33-B, 34-D, 35-A, 36-C.



*On problem 15 I should have edited that question to refer to "financial account" rather than "capital account". The international finance literature is moving (some people faster than others) from calling the "bottom half" of the International Transactions the capital account (often referred to as KA) to financial account (FA). I try to use FA since there is an accounting line on the international transactions called "capital account". That line (line 39) has a specific and very narrow definition. I apologize for any confusion. I will try to make sure I consistently use the term "financial account" and when I wish to net out or subtract official transactions, I will make sure it is very clear.

In problems 19-23, it refers to a closed economy. Since all of these refer to savings (national, private, and public), it really does not matter if the economy is open or closed. Each of these savings definitions hold whether the economy is closed (no trade) or open (engages in trade).

If you have any questions or comments, please email me or send me a text message to my AIM account (screen name: CinciDood). I'm not likely to read comments on this post.

I will try to be online for a while this evening.

Remember, I'm giving you a copy of the International Transactions table with the test. It will be your only available "cheat sheet". I really don't think of it so much as a "cheating help" but there is just a high level of detail of some concepts or transactions. If you understand the table you should be able to thoughtfully formulate responses.

Good luck

************************************************

update comment:

Ok, I have received a few questions about 14-17. I will confess that this question came from a test bank from a text I used to use. These problems come from old tests. (That's all I got for ya, thanks for understanding.)

Here's what it all hinges on:

Re: above where I explain the "capital account" and the "financial account"

Well, given the text from which I pulled this problem, on problem 15, the "capital account" (which I said read as "financial account") is really asking for the full balance. So if all financial account transactions, including official, it should sum to 15 leaving us with a statistical discrepancy of -5.

We should be able to answer 16 from merely lines 9 and 10. If that sum is +5, then it would imply BoP = current account + non official financial account transactions + statistical discrepancy < 0 (or equals -5).

-10 + 10 - 5 < 0, where the +5 on the right hand side would equal lines 9+10.
And adding OR (+5) gives us a BOP =0

My wording of 15 should be more precise. It would make sense if it said "The balance on the financial account (official and non official)" it would = 15.

This is totally my bad. I am sorry for the confusion. I will try my best to present such a problem with more clarity. Thanks to all who inquired early as opposed to first thing in the morning so that I could clarify.

Alternatively, i could just say the answer to 15 would be B. ;-)

J

where 15 is the full financial account, of which