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Question
The Marshall-Lerner condition is less likely to hold when
A) imports and exports are very price-sensitive.
B) the trade deficit is large.
C) the marginal propensity to consume is very large.
D) the marginal propensity to consume if very small.
E) none of the above
Answer
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Related questions
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A) will cause investment to decrease.
B) will cause investment to increase.
C) may cause investment to increase or to decrease.
D) will have no effect on output.
E) will cause a reduction in output and have no effect on the interest rate.
Q:
Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.Answer: In this case, the LM curve shifts up and the IS curve shifts to the left. In this case, output will clearly fall. What happens to the interest rate depends on the relative magnitude of the two policies. The effects on I are again ambiguous.14) Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and increase in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
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Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
Q:
Suppose there is a simultaneous central bank sale of bonds and tax increase. We know with certainty that this combination of policies must cause
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Under the reasonable dynamic assumptions discussed in the text, a monetary contraction should result in
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B) an immediate rise in the interest rate, and then a fall in the interest rate over time.
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Suppose there is a simultaneous fiscal expansion and monetary contraction. We know with certainty that
A) output will increase.
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For this question, assume that policy makers are pursuing a fixed exchange rate regime. Now suppose that a reduction in stock market wealth causes a decrease in consumption. Which of the following will tend to occur in a fixed exchange rate regime?
A) a reduction in Y
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In a small country, the effect of a given change in government spending
A) on output is large and the effect on the trade balance is small.
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An increase in the marginal propensity to import will cause
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B) the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output.
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A) the domestic country's output to increase
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In an open economy, which of the following will cause an increase in the size of the multiplier?
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C) an increase in the marginal propensity to save
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Q:
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B) Demand for domestic goods is greater than the domestic demand for goods.
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Because the U.S. traditionally gives more foreign aid than it receives, the U.S. traditionally has a negative value for
A) the capital account balance.
B) the trade balance.
C) investment income.
D) net transfers received.
E) all of the above
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Suppose the interest parity condition holds. Also assume that the one-year interest rate in the United States is 6% and that the one-year interest rate in Canada is 5%. What does this imply about the current versus future expected exchange rate (for the U.S. and Canadian dollars)? Explain.
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Explain what factors determine the expected return on a foreign bond.
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Explain the difference between gross domestic product and gross national product.
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What are the primary causes of hyperinflations? Explain.
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A) the inflation rate is high but constant.
B) the inflation rate decreases over time.
C) the inflation rate increases over time.
D) the inflation rate first increases, and then remains constant.
E) the inflation rate increases over time, but then rapidly decreases on its own.
Q:
Given nominal money growth, the amount of seignorage will be greater when
A) tax revenues are higher.
B) real money balances are larger.
C) the inflation rate is higher.
D) foreign lending is higher.
E) none of the above
Q:
When the budget deficit is financed entirely through money creation, the real budget deficit is equal to which of the following?
A) ΔH
B) ΔH - ΔP
C) (ΔH)/P
D) (ΔH)/H
E) P[(ΔH)/H]
Q:
Based on our understanding of the U.S. budget, we know that
A) government accounts treat asset sales as revenues.
B) government accounts do not treat asset sales as revenues.
C) the NIPA accounts treat asset sales as revenues.
D) neither the government accounts nor the NIPA accounts treat asset sales as revenues.