These are sample midterm questions they could really help me with my upcoming midterm.
1. - What are the uses of Balance of Payments data? Describe the Current and Capital accounts of the Balance of Payments. Is the trade balance sensitive to exchange rates? Is the current account useful for other macroeconomic purposes?
2. – How does the gold standard adjust trade deficits and surpluses? Give an example detailing all the steps that ensue after a trade deficit is incurred.
3. - What are the current advantages to member countries of the European Union? What are the disadvantages? What conditions are necessary to have a successful monetary and economic union?
5. – Given an initial $1.00 = 2DM fixed exchange rate, a price of $40,000 for U.S. cars, and DM 80,000 for German cars, show how a change in the exchange rate would help German car exports and hurt U.S. car exports. Can you relate this example to the dollar revaluation after World War II?
6. – Compare fixed and floating rates. What are managed rates? Which of these is most quickly affected by PPPT (inflation)?
7. – Discuss interest rate parity by describing the process initiated by arbitrageurs when it is violated – that is, what is involved in restoring equilibrium?
8. - What is the forward market? Central Bank intervention? Cross Exchange Rates? Forward Premiums?