27.

28.

29.

30.

Which of the following statements is/are correct in the case of an Open-economy Keynesian
model under a fixed exchange rate system?

൫ In this model, the government does not allow money supply to adjust to the demand for
money as money supply is exogenously determined.

(1) In this model, the government allows the money supply to adjust to the demand for
money.

(ii) Any change in exports will shift the IS curve leading to an increase in income only if
interest rate remains unchanged.

(iv) Any change in exports will cause income to rise if interest rate varies in accordance
with the movement in other variables.

(^) Only (0) and (iv) (B) Only Gii) and (iv)
(C) Only (ii) and (iii) (D) Only 06) and (iii)

An increase in net wealth due only to a net increase in the real value of the money supply is
known as:

(^) Wealth Effect (B) Keynes’ Effect
(C) Real Balance Effect (D) None of these

Which of the following is/are True in the case of Balance of official Financing (BOF) = 0 in an
Open Economy Model:

0) For BOF = 0 to prevail Marshall Lerner condition should hold good and domestic prices
do adjust completely to a change in the exchange rate.

(1) A depreciation (appreciation) of the domestic currency will shift the BOF = 0 function to
the right (left).

(ii) For BOF = 0 to prevail, Marshall Lerner condition should hold good and domestic prices
do not adjust completely to a change in the exchange rate.

(iv) An appreciation (depreciation) of the domestic currency will shift the BOF = 0 function
to left (right)
(^) Only (ii) and (iv) (B) Only @ and (ii)
(C) Only Gi) and (ii) (D) Only Gi) and (iv)

Real interest rate is:
(A) Nominal interest rate divided by rate of Inflation
(B) Nominal interest rate minus the rate of inflation
(C) Nominal interest rate plus the rate of inflation

(D) Nominal interest rate multiplied by the rate of inflation

087/2023 10 A