A. Describe how a contractionary monetary policy impacts a nation's international trade. Be sure to discuss the value of that nation's currency, the price of goods produced in that nation, and its trade balance. (10 points)
B. Describe the effect of expansionary economic policies on a nation's trade deficit. Be sure to consider both monetary and fiscal policy. (10 points)
C. According to the twin deficits effect, an increase in the government budget deficit will also increase that nation's trade deficit. Explain why this effect is expected to occur. (7 points)
A. Describe how a contractionary monetary policy impacts a nation's international trade. Be sure to discuss the value of that nation's currency, the price of goods produced in that nation, and its trade balance. (10 points)
B. Describe the effect of expansionary economic policies on a nation's trade deficit. Be sure to consider both monetary and fiscal policy. (10 points)
C. According to the twin deficits effect, an increase in the government budget deficit will also increase that nation's trade deficit. Explain why this effect is expected to occur. (7 points)
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Related questions
You hear on the nightly news that the president has vowed to decrease the nation's debt. Both the government and private citizens will have to buckle down and learn to do without, he says.
In order to reduce its debt, a nation must:
| A. | run lower deficits. |
| B. | decrease tax rates. |
| C. | run lower surpluses. |
| D. | increase in government spending. |
Debt reduction will result in:
| A. | more public works projects, higher transfer payments, and more money available for households to spend. |
| B. | fewer public works projects, higher transfer payments, and more money available for households to spend. |
| C. | more public works projects, lower transfer payments, and less money available for households to spend. |
| D. | fewer public works projects, lower transfer payments, and less money available for households to spend. |
A friend of yours looks at the state of the U.S. debt in 2011 and tells you, Since the debt is so high, we must be running an incredibly large deficit every year. Your friend's analysis is:
| A. | not valid, because the debt is always changing even when deficits are the same. |
| B. | not valid, because the debt can be high even when the deficit for an individual year is small. |
| C. | valid, because the debt is always changing even when deficits are the same. |
| D. | valid, because the public debt is the sum of all deficits and surpluses run by the government over time and can be high even when the deficit for an individual year is small. |
Assume that the government in some nations intended to respond to low employment via fiscal policy.
a. What type of policy would this require?
| A. | A contractionary fiscal policy designed to decrease the aggregate demand curve. |
| B. | An expansionary fiscal policy designed to decrease the aggregate demand curve. |
| C. | An expansionary fiscal policy designed to increase the aggregate demand curve. |
| D. | A contractionary fiscal policy designed to increase the aggregate demand curve. |
b. Assume that this policy ended up having an undesirable outcome. How could this happen in terms of formulation and implementation lags?
| A. | This could happen if the implementation lag exceeded the formulation lag. |
| B. | This could happen if the formulation lag exceeded the implementation lag. |
| C. | This could happen if the formulation lag and the implementation lag exceeded the expansion. |
| D. | This could happen if the formulation lag and the implementation lag exceeded the recession. |
Econo Nation started 2008 with no national budget debt or surplus. By the end of 2008, it had a budget surplus of $286 million; in 2009, it had a budget deficit of $-425 million; in 2010, it had a budget surplus of $100 million, and the amount of its budget deficit or surplus in 2011 is unknown. If at the end of 2011 Econo Nation's national debt totalled $52 million, determine the deficit or surplus in 2011.
Instructions: Enter your answer as a whole number and include a negative sign if there is a deficit.
| Period | Deficit (-) or surplus (+) |
| Beginning of 2008 | $0 |
| End of 2008 | $286 million |
| 2009 | $-425 million |
| 2010 | $100 million |
| End of 2011 | _______ million |
Macroeconomics
| A | B | Answer | ||
| Which one of the following will be an automatic stabilizer | A. Board of Governors and the 12 Federal Reserve Banks | |||
| GDP is the market value of | B. Structural | |||
| A decrease in government spending will cause | C. Real GDP is adjusted for changes in the price level. | |||
| An increase in aggregate demand is most likely to be caused by a decrease in | D. Price of one nation's currency in terms of another nation's currency | |||
| Which is one of the three types of unemployment | E. Two countries are comparatively able in producing what they need, however choices to engage in international trade | |||
| The Federal Reserve System consist of how many members and how many locations | F. People receive loans from their banks. | |||
| Foreign exchange rates refer to the | G. Real GDP. | |||
| Money is "created" when | H. Discount Rate | |||
| Fiscal policy is enacted through changes in | I. Private investment is crowded out by public spending | |||
| The tools of monetary policy for altering the reserves of commercial banks are the | J. All final goods and services produced in an economy in a given year. | |||
| The Federal funds rate is the rate that banks pay for loans from? |
| |||
| What is meant by the crowding out effect | L. Decrease in aggregate demand. | |||
| The goal of expansionary fiscal policy is to increase | M. Unemployment insurance | |||
| Nominal GDP differs from real GDP because | N. Discount rate, reserve ratio, open market operations, and term auction | |||
| What is meant by comparative advantage | O. Taxation and government spending. |
