Question 1

Which of the following is not discussed in the book as one of the important national economic goal or objectives?

Accepted Answer

A)  Internal balance
B)  A reasonable growth rate
C)  An equitable distribution of income
D)  A strong defense mechanismE) B) and C)
F) C) and D)

Question 2

Recession and inflation are the two types of internal imbalance.

Accepted Answer

A) True 
 B)False

Question 3

The current account deficit and the budget deficit move together; therefore,the budget deficit can be used to fully explain the account deficit.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true under fixed exchange rates?

Accepted Answer

A)  Monetary policy is totally ineffective
B)  Fiscal policy is totally ineffective
C)  Expansionary monetary policy improves overall balance-of-payment situation
D)  Expansionary fiscal policy reduces the interest rateE) B) and C)
F) None of the above

Question 5

What are the effects of running a high budget deficit,as the US does?

Accepted Answer

A)  Low interest rates,compared to those abroad
B)  Large capital outflows
C)  Overvaluation of the dollar
D)  Small trade deficitsE) A) and D)
F) None of the above

Question 6

Tariffs and quotas are used to restrict the flow of international trade and capital.These are examples of:

Accepted Answer

A)  expenditure-changing policies
B)  direct controls
C)  expenditure-switching policies
D)  indirect controlsE) A) and D)
F) None of the above

Question 7

A revaluation switches expenditures from foreign to domestic commodities and can be used to correct a deficit in the nation's balance-of-payments

Accepted Answer

A) True 
 B)False

Question 8

Inflation resulting from an oil price shock is classified as which of the following?

Accepted Answer

A)  Demand-pull inflation
B)  Supply-push inflation
C)  Cost-push inflation
D)  Price-pull inflationE) All of the above
F) B) and C)

Question 9

The longest boom on record for the US took place during which decade?

Accepted Answer

A)  1990s
B)  1980s
C)  1970s
D)  1960sE) A) and C)
F) B) and C)

Question 10

Which of the following is an example of an exchange control?

Accepted Answer

A)  Restrictions on international capital flows
B)  Intervention in forward markets
C)  Multiple exchange rates
D)  All of the aboveE) B) and D)
F) A) and B)

Question 11

What are the effects of running a high budget deficit,as the US does?

Accepted Answer

A)  High interest rates,compared to those abroad
B)  Large capital Outflows
C)  Overvaluation of the dollar
D)  Both A and CE) C) and D)
F) B) and C)

Question 12

External balance is usually a nation's most important economic objective.

Accepted Answer

A) True 
 B)False

Question 13

What effect do expansionary monetary and fiscal policies have on the economy?

Accepted Answer

A)  They reduce the severity of recessions
B)  They increase balance-of-payment surpluses
C)  They tend to decrease deficits
D)  They may take the economy into recessionE) A) and B)
F) A) and C)

Question 14

Which of the following represents a devaluation (or revaluation) of a nation's currency for the purpose of toggling the nation's expenditures between foreign and domestic goods?

Accepted Answer

A)  Expenditure-changing policies
B)  Direct controls
C)  Expenditure-switching policies
D)  None of the aboveE) C) and D)
F) B) and D)

Question 15

What objectives do nations undertake when facing cost-push inflation?

Accepted Answer

A)  Full employment
B)  Balance-of-payments equilibrium
C)  Price stability
D)  All of the aboveE) C) and D)
F) A) and B)

Question 16

Which of the following is an organization that works towards international economic development?

Accepted Answer

A)  GAB
B)  OECD
C)  GSP
D)  OPECE) A) and D)
F) A) and C)

Question 17

What actions should be taken under the internal-external imbalance of inflation and surplus?

Accepted Answer

A)  Expansionary fiscal policy to correct for excess deficit,and expansionary monetary policy to correct for inflation
B)  Expansionary fiscal policy to correct for inflation,and contractionary monetary policy to correct for deficit
C)  Contractionary fiscal policy to correct for inflation,and expansionary monetary policy to correct for deficit
D)  Contractionary fiscal policy to correct for excess inflation,and contractionary monetary policy to correct for deficitE) None of the above
F) All of the above

Question 18

Which of the following is not one of the consequences of running a high budget surplus,as Japan does?

Accepted Answer

A)  Low interest rates in Japan,compared to those abroad
B)  Large capital outflows
C)  Undervaluation of the yen
D)  Low interest rate in the US compared to JapanE) C) and D)
F) B) and D)

Question 19

By direct controls we mean all of the following except?

Accepted Answer

A)  Tariffs
B)  Quotas
C)  Taxes
D)  Voluntary Export RestrainsE) C) and D)
F) A) and B)

Question 20

What actions should be taken under the internal-external imbalance of recession and deficit?

Accepted Answer

A)  Expansionary fiscal policy to correct for the deficit,and expansionary monetary policy to correct for the recession
B)  Expansionary fiscal policy to correct for recession,and contractionary monetary policy to correct for deficit
C)  Contractionary fiscal policy to correct for the recession,and expansionary monetary policy to correct for deficit
D)  Contractionary fiscal policy to correct for the deficit,and contractionary monetary policy to correct for the recessionE) B) and C)
F) None of the above

Exam 14: Adjustment Policies

External balance is usually a nation's most important economic objective.

Correct AnswerverifiedShow Answer

Which of the following is not discussed in the book as one of the important national economic goal or objectives?

Correct AnswerverifiedShow Answer

What effect do expansionary monetary and fiscal policies have on the economy?

Correct AnswerverifiedShow Answer

The longest boom on record for the US took place during which decade?

Correct AnswerverifiedShow Answer

Which of the following represents a devaluation (or revaluation) of a nation's currency for the purpose of toggling the nation's expenditures between foreign and domestic goods?

Correct AnswerverifiedShow Answer

Which of the following is true under fixed exchange rates?

Correct AnswerverifiedShow Answer

Which of the following is an example of an exchange control?

Correct AnswerverifiedShow Answer

Which of the following is an organization that works towards international economic development?

Correct AnswerverifiedShow Answer

Which of the following is not one of the consequences of running a high budget surplus,as Japan does?

Correct AnswerverifiedShow Answer

What are the effects of running a high budget deficit,as the US does?

Correct AnswerverifiedShow Answer

What objectives do nations undertake when facing cost-push inflation?

Correct AnswerverifiedShow Answer

What actions should be taken under the internal-external imbalance of recession and deficit?

Correct AnswerverifiedShow Answer

A revaluation switches expenditures from foreign to domestic commodities and can be used to correct a deficit in the nation's balance-of-payments

Correct AnswerverifiedShow Answer

What actions should be taken under the internal-external imbalance of inflation and surplus?

Correct AnswerverifiedShow Answer

Tariffs and quotas are used to restrict the flow of international trade and capital.These are examples of:

Correct AnswerverifiedShow Answer

What are the effects of running a high budget deficit,as the US does?

Correct AnswerverifiedShow Answer

Recession and inflation are the two types of internal imbalance.

Correct AnswerverifiedShow Answer

Inflation resulting from an oil price shock is classified as which of the following?

Correct AnswerverifiedShow Answer

By direct controls we mean all of the following except?

Correct AnswerverifiedShow Answer

The current account deficit and the budget deficit move together; therefore,the budget deficit can be used to fully explain the account deficit.

Correct AnswerverifiedShow Answer

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