Question 1

An $\underline {   \text { expenditure-increasing } }$ policy would consist of an increase in:

Accepted Answer

An expenditure-increasing policy aims to increase the money supply which will lead to an increase in demand and expenditure by consumers and firms. This can be achieved through expansionary monetary policies such as lowering interest rates, reducing reserve requirements, or purchasing government securities on the open market. The other options listed would potentially restrict the flow of money in the economy, leading to a decrease in expenditure and a contraction in economic activity.

Question 2

Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil $\underline {  \text { devalue }  }$ its currency, one would expect the:

Accepted Answer

A

Question 3

A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:

Accepted Answer

Monetary or fiscal policies aimed at the domestic sector also have impacts on both trade flows and capital flows. For example, a reduction in interest rates in a country may lead to an increase in domestic demand, which in turn can raise import levels and create a balance of trade deficit. Additionally, lower interest rates can make a country's investments less attractive to foreign investors, leading to a reduction in capital inflows. Therefore, economic policy makers need to be mindful of the impact of their policies on both the domestic economy and the international economy when promoting both internal and external balance.

Question 4

Most industrial countries generally considered ____ as the most important economic goal.

Accepted Answer

Internal balance, also known as macroeconomic stability, is the most important economic goal for industrial countries. This means achieving a balance between full employment and price stability. The government uses monetary and fiscal policies to maintain this balance and ensure a stable economy. While external balance (A) and efficiency for business (C) and labor (D) are important, they are secondary goals and are often achieved as a result of internal balance.

Question 5

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy

Accepted Answer

The answer of Given an open economy with high capital...

Question 6

Which policy is an $\underline {  \text { expenditure-switching }  }$ policy?

Accepted Answer

Expenditure-switching policies are aimed at encouraging a shift in spending from foreign goods to domestic goods. Decreasing import tariffs makes foreign goods relatively more expensive, thus incentivizing consumers to shift their spending to domestically produced goods.

Question 7

A nation experiences$\underline { \text { internal }   }$balance if it achieves:

Accepted Answer

Internal balance refers to the achievement of full employment and price stability. Full employment means that everyone who is willing and able to work is employed, whereas price stability means that the general level of prices in the economy does not experience significant fluctuations. Together, these two conditions create a stable economic environment that supports sustainable economic growth and prosperity. Unemployment and price instability, as mentioned in choice D, do not contribute to internal balance and can lead to economic instability and uncertainty.

Question 8

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy

Accepted Answer

In an open economy with high capital mobility and floating exchange rates, an expansionary fiscal policy usually leads to an increase in interest rates, attracting foreign capital and causing an appreciation of the currency. This appreciation leads to a decrease in net exports, which causes a decrease in aggregate demand. Therefore, the initial effect of the policy is expansionary, but the secondary effect of the exchange rate appreciation is contractionary, resulting in conflicting effects on aggregate demand and weakening the policy's expansionary effect on real output.

Question 9

Given fixed exchange rates, assume Mexico initiates $\underline {   \text { expansionary } }$monetary and fiscal policies to combat recession. These policies will also:

Accepted Answer

The answer of Given fixed exchange rates, assume Mexico initiates...

Question 10

In a closed economy, which of the following will cause the economy's aggregate demand curve to shift to the right?

Accepted Answer

Decreases in income taxes for households will increase disposable income, leading to an increase in consumption and thus an increase in aggregate demand.

Question 11

Given fixed exchange rates, assume Mexico initiates $\underline { \text { contractionary }  }$ monetary and fiscal policies to combat inflation. These policies will also:

Accepted Answer

Contractionary monetary and fiscal policies aim to reduce domestic demand, which in turn leads to a reduction in imports. This, in turn, helps to reduce a balance-of-payments deficit.

Question 12

A nation experiences $\underline {  \text { external }  }$ balance if it achieves:

Accepted Answer

External balance refers to the balance of payments of a nation, which includes its trade balance, capital flows, and changes in reserves. Achieving equilibrium in the balance of payments means that a nation's international transactions are in balance and there is no net outflow or inflow of currency. This is the most comprehensive and accurate measure of external balance. The other options may contribute to achieving external balance, but they do not capture the full picture.

Question 13

Which policies are $\underline {   \text { expenditure-changing } }$ policies?

Accepted Answer

Only monetary and fiscal policy are expenditure-changing policies, as they affect government spending and taxes. Currency devaluation and revaluation affect exchange rates, while import quotas and tariffs, as well as wage and price controls, affect the supply and demand in specific markets, but they do not directly impact government spending.

Question 14

The appropriate expenditure-$\underline {   \text { switching } }$ policy to correct a current account $\underline {   \text { deficit } }$ is:

Accepted Answer

Currency devaluation can make exports cheaper and imports more expensive, which can help reduce a current account deficit by increasing net exports. Contractionary monetary policy and currency revaluation would likely have the opposite effect, making exports more expensive and imports cheaper, which would worsen the current account deficit. Expansionary fiscal policy may also be effective in increasing exports, but it could lead to higher inflation and further widen the current account deficit if not implemented carefully.

Question 15

An $\underline {  \text { expenditure-reducing }  }$ policy would consist of a decrease in:

Accepted Answer

Expenditure-reducing policies aim to decrease aggregate demand and reduce inflationary pressures. Government expenditures directly contribute to aggregate demand, thus decreasing them would reduce overall demand and help bring down inflation. The other options would have a different effect: decreasing the par value of a currency would make exports cheaper, increasing demand for them and potentially increasing inflation; decreasing import duties could increase demand for foreign products, again increasing overall demand and potentially increasing inflation; decreasing taxes would give households and businesses more disposable income, leading to increased spending and potentially increasing inflation.

Question 16

A nation experiences $\underline {  \text { overall }  }$ balance if it achieves:

Accepted Answer

Overall balance refers to a situation where a country has achieved balance-of-payments equilibrium, which means its inflows and outflows of currency are equal, thereby preventing any crisis. Full employment is also achieved, indicating that all members of the workforce can find jobs, and are contributing to the economy's growth. Price stability is the third requirement, which ensures that prices for goods and services remain stable and predictable. Therefore, Option A is the best choice as it includes all three significant factors that are essential for a nation's economic stability.

Question 17

Suppose the United States faces domestic inflation and a current account surplus. Should the United States $\underline {  \text { revalue }  }$ the dollar, one would expect the:

Accepted Answer

If the United States revalues the dollar, it will become stronger relative to other currencies, which will make US exports more expensive and less attractive to foreign buyers. This will cause the current account surplus to become less severe. At the same time, a stronger dollar will make imports cheaper, which will reduce inflationary pressures. Therefore, we would expect inflation to become less severe as well.

Question 18

The appropriate expenditure-$\underline { \text { switching }  }$ policy to correct a current account surplus is:

Accepted Answer

The answer of The appropriate expenditure-\(\underline { \text { switching...

Question 19

Suppose Brazil faces domestic recession and a current account surplus. Should Brazil $\underline {  \text { revalue }  }$ its currency, one would expect the:

Accepted Answer

If Brazil revalues its currency, it would become more expensive for foreign countries to import Brazilian goods, leading to a decrease in exports and an increase in imports. This would result in a decrease in the current account surplus. However, the domestic recession would become more severe as the increase in imports would decrease the demand for domestic goods and potentially lead to unemployment.

Question 20

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

Accepted Answer

The answer of Suppose the United States faces domestic recession...

Quiz 16: Macroeconomic Policy in an Open Economy

An $\underline { \text { expenditure-increasing } }$ policy would consist of an increase in:

Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil $\underline { \text { devalue } }$ its currency, one would expect the:

A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:

Most industrial countries generally considered ____ as the most important economic goal.

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy

Which policy is an $\underline { \text { expenditure-switching } }$ policy?

A nation experiences $\underline { \text { internal } }$ balance if it achieves:

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy

Given fixed exchange rates, assume Mexico initiates $\underline { \text { expansionary } }$ monetary and fiscal policies to combat recession. These policies will also:

In a closed economy, which of the following will cause the economy's aggregate demand curve to shift to the right?

Given fixed exchange rates, assume Mexico initiates $\underline { \text { contractionary } }$ monetary and fiscal policies to combat inflation. These policies will also:

A nation experiences $\underline { \text { external } }$ balance if it achieves:

Which policies are $\underline { \text { expenditure-changing } }$ policies?

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account $\underline { \text { deficit } }$ is:

An $\underline { \text { expenditure-reducing } }$ policy would consist of a decrease in:

A nation experiences $\underline { \text { overall } }$ balance if it achieves:

Suppose the United States faces domestic inflation and a current account surplus. Should the United States $\underline { \text { revalue } }$ the dollar, one would expect the:

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account surplus is:

Suppose Brazil faces domestic recession and a current account surplus. Should Brazil $\underline { \text { revalue } }$ its currency, one would expect the:

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

Quiz 16: Macroeconomic Policy in an Open Economy

An expenditure-increasing ‾\underline { \text { expenditure-increasing } } expenditure-increasing ​ policy would consist of an increase in:

Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil devalue ‾\underline { \text { devalue } } devalue ​ its currency, one would expect the:

A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:

Most industrial countries generally considered ____ as the most important economic goal.

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy

Which policy is an expenditure-switching ‾\underline { \text { expenditure-switching } } expenditure-switching ​ policy?

A nation experiences internal ‾\underline { \text { internal } } internal ​ balance if it achieves:

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy

Given fixed exchange rates, assume Mexico initiates expansionary ‾\underline { \text { expansionary } } expansionary ​ monetary and fiscal policies to combat recession. These policies will also:

In a closed economy, which of the following will cause the economy's aggregate demand curve to shift to the right?

Given fixed exchange rates, assume Mexico initiates contractionary ‾\underline { \text { contractionary } } contractionary ​ monetary and fiscal policies to combat inflation. These policies will also:

A nation experiences external ‾\underline { \text { external } } external ​ balance if it achieves:

Which policies are expenditure-changing ‾\underline { \text { expenditure-changing } } expenditure-changing ​ policies?

The appropriate expenditure- switching ‾\underline { \text { switching } } switching ​ policy to correct a current account deficit ‾\underline { \text { deficit } } deficit ​ is:

An expenditure-reducing ‾\underline { \text { expenditure-reducing } } expenditure-reducing ​ policy would consist of a decrease in:

A nation experiences overall ‾\underline { \text { overall } } overall ​ balance if it achieves:

Suppose the United States faces domestic inflation and a current account surplus. Should the United States revalue ‾\underline { \text { revalue } } revalue ​ the dollar, one would expect the:

The appropriate expenditure- switching ‾\underline { \text { switching } } switching ​ policy to correct a current account surplus is:

Suppose Brazil faces domestic recession and a current account surplus. Should Brazil revalue ‾\underline { \text { revalue } } revalue ​ its currency, one would expect the:

Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:

An $\underline { \text { expenditure-increasing } }$ policy would consist of an increase in:

Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil $\underline { \text { devalue } }$ its currency, one would expect the:

Which policy is an $\underline { \text { expenditure-switching } }$ policy?

A nation experiences $\underline { \text { internal } }$ balance if it achieves:

Given fixed exchange rates, assume Mexico initiates $\underline { \text { expansionary } }$ monetary and fiscal policies to combat recession. These policies will also:

Given fixed exchange rates, assume Mexico initiates $\underline { \text { contractionary } }$ monetary and fiscal policies to combat inflation. These policies will also:

A nation experiences $\underline { \text { external } }$ balance if it achieves:

Which policies are $\underline { \text { expenditure-changing } }$ policies?

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account $\underline { \text { deficit } }$ is:

An $\underline { \text { expenditure-reducing } }$ policy would consist of a decrease in:

A nation experiences $\underline { \text { overall } }$ balance if it achieves:

Suppose the United States faces domestic inflation and a current account surplus. Should the United States $\underline { \text { revalue } }$ the dollar, one would expect the:

The appropriate expenditure- $\underline { \text { switching } }$ policy to correct a current account surplus is:

Suppose Brazil faces domestic recession and a current account surplus. Should Brazil $\underline { \text { revalue } }$ its currency, one would expect the: