1)Changes in aggregate demand_______ A)could be caused by changes in the spendin
ID: 1097368 • Letter: 1
Question
1)Changes in aggregate demand_______
A)could be caused by changes in the spending decisions of the households, businesses, the government, and foreigners.
B)are not affected by changes in government policies.
C)are unlikely to change quickly in response to economic events.
D)are primarily based on changes in firms' abilities to produce products.
E)are very uncommon.
2)Fiscal policy is_______
A)the selling of government bonds by the Treasury.
B)the deliberate manipulation of the money supply designed to affect the interest rate.
C)the deliberate manipulation of taxation and spending designed to affect the economy.
D)the selling of foreign exchange reserves designed to change the exchange rate.
E)All of the above.
3)Starting from a balanced budget, which of the following would NOT cause a deficit?_______
A)A decrease in taxes
B)An increase in spending of goods and services
C)An increase in transfer payments
D)A 50 percent increase in spending accompanied by a 40 percent increase in taxes
E)None of the above.
4)The impact of monetary policy on the exchange rate is ambiguous because_______
A)exchange rates are unresponsive to changes in the money supply.
B)only fiscal policy results in expenditure switches.
C)the income effect of monetary policy on the current account is offset by the exchange rate effect.
D)monetary policy only affects real exchange rates.
E)None of the above.
Use the national income identity Sp + (T - G) ( I + CA to answer the following question(s).
5)Given the above identity, which of the following would NOT be a result of an increase in the domestic interest rate?_______
A)An increase in demand for the domestic currency
B)An increase the supply of foreign currency
C)A rise in the exchange rate of the domestic country
D)A fall in the exchange rate of the domestic country
E)An appreciation of domestic currency
7)An exchange rate crisis is caused by______
A)the adoption of a fixed exchange rate system by a country or group of countries.
B)a sudden and an unexpected collapse in the value of a nation's currency.
C)the inability of the IMF to predict the immediate collapse of the currency of a country.
D)the adoption of a flexible exchange rate system by a country or group of countries.
E)Both C and D are correct.
8)A flexible exchange rate system crisis involves______
A)a revaluation of the currency.
B)a rapid and uncontrolled depreciation of the currency.
C)a sure political collapse of the ruling government.
D)a decrease in the dollar value of the country's international debt.
E)All of the above.
Explanation / Answer
1) A)could be caused by changes in the spending decisions of the households, businesses, the government, and foreigners.
2) C)the deliberate manipulation of taxation and spending designed to affect the economy.
3) D)A 50 percent increase in spending accompanied by a 40 percent increase in taxes
4) C)the income effect of monetary policy on the current account is offset by the exchange rate effect.
5) C)A rise in the exchange rate of the domestic country
6) D)T? ? Y? ? Md? ? i? ? R?
7) C)the inability of the IMF to predict the immediate collapse of the currency of a country.
8) D)a decrease in the dollar value of the country's international debt.
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