Practise Quiz 6 Flashcards
Q1 - In a small open economy, starting from a position of balanced trade, if the government increases the income tax, this produces a tendency toward a trade ______ and ______ net capital outflow.
A - Deficit; negative
B - Surplus; positive
C - Deficit; positive
D - Surplus; negative
B - Surplus; positive
Q2 - If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal?
A - Increasing taxes
B - Increasing government spending
C - Increasing investment tax credits
D - Imposing protectionist trade policies
A - Increasing taxes
Q3 - The adoption of an investment tax credit in a small open economy is likely to lead to:
A - no change in either domestic investment or domestic saving in the small open economy.
B - an increase in both domestic investment and domestic saving in the small open economy.
C - an increase in domestic saving but no change in domestic investment in the small open economy.
D - an increase in domestic investment but no change in domestic saving in the small open economy.
D - an increase in domestic investment but no change in domestic saving in the small open economy.
Q4 - In a small open economy, if the government adopts a policy that lowers imports, then the quantity of exports:
A - Remains unchanged
B - Decreases but not as much as the quantity of imports decreases
C - Decreases by exactly the same amount as the quantity of imports decreases
D - Decreases by more than the quantity of imports decreases
C - Decreases by exactly the same amount as the quantity of imports decreases
Q5 - The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate plus the:
A - Foreign inflation rate minus the domestic inflation rate
B - Domestic inflation rate minus the foreign inflation rate
C - Foreign exchange rate minus the domestic exchange rate
D - Domestic interest rate minus the foreign interest rate
A - Foreign inflation rate minus the domestic inflation rate
Q6 - One consequence of high inflation is a(n):
A - Appreciating nominal exchange rate
B - Decrease in the price of goods measured in terms of money
C - Depreciating nominal exchange rate
D - Decrease in the price of foreign currencies measured in terms of the domestic currecncy
C - Depreciating nominal exchange rate
Q7 - If the real exchange rate between the United States and Japan remains unchanged, and the inflation rate in the United States is 6 percent and the inflation rate in Japan is 3 percent, the:
A - Dollar will appreciate by 3% against the Yen
B - Yen will appreciate by 3% against the dollar
C - Yen will appreciate by 6% against the dollar
D - Yen will appreciate by 9% against the dollar
B - Yen will appreciate by 3% against the dollar
Q8 - Business cycles are:
A - Regular and predictable
B - Irregular but predictable
C - Regular but unpredictable
D - Irregular and unpredictable
D - Irregular and unpredictable
Q9 - Over the business cycle, investment spending ___ consumption spending
A - Is inversely correlated with
B - Is more volatile than
C - Has about the same volatility as
D - Is less volatile than
B - Is more volatile than
Q10 - Long-run growth in real GDP is determined primarily by ______, while short-run movements in real GDP are associated with ______
A - variations in labor-market utilization; technological progress
B - technological progress; variations in labor-market utilisation
C - Money supply growth rates; changes in velocity
D - Changes in velocity; money supply growth rates
B - Technological progress; variations in labour market utilisation
Q11 - A difference between the economic long run and the short run is that:
A - The classical dichotomy holds in the short run but not in the long run
B - Monetary and fiscal policy affect output only in the long run
C - Demand can affect output and employment in the short run, whereas supply us the ruling force in the long run
D - Prices and wages are sticky in the long run
C - demand can affect output and employment in the short run, whereas supply is the ruling force in the long run.
Q12 - Along the aggregate demand curve, which of the following are held constant?
A - Real output and prices
B - Nominal output and velocity
C - The money supply and real output
D - The money supply and velocity
D - The money supply and velocity
Q13 - In the long run, the level of output is determined by the:
A - Interaction of supply and demand
B - Money supply and the levels of GOVT spending and taxation
C - Amounts of capital and labour and the available technology
D - Preferences of the public
C - Amounts of capital and labour and the available technology
Which of the following is NOT an example of a supply shock?
A - A large oil price increase
B - The introduction and greater availability of credit cards
C - A drought that destroys agricultural crops
D - Unions obtain a substantial wage increase
B - The introduction and greater availability of credit cards
Q15 - Which of the following is an example of a demand shock?
A - A large oil price increase
B - The introduction and greater availability of credit cards
C - A drought that destroys agricultural crops
D - Unions obtain a substantial wage increase
B - the introduction and greater availability of credit cards
