Exam 21: Open-Economy Macroeconomic Policy and Adjustment

Monetary policy is most effective at home when exchange rates are flexible.

If foreign countries simultaneously stimulate their economies rather than follow independent policies

Many economists argue that the sharp reduction in U.S. net exports in the mid 1980s was due to

This refers to an increase in government spending produces a reduction in private spending

Internal balance can be graphically represented as the intersection of the IS curve with the LM curve.

As interest rates rise, other things equal,

With fixed exchange rates, perfect asset substitutability, and perfect capital mobility

Complete crowding out occurs when

The BP curve is upward sloping if assets are perfectly substitutable.

The stimulation of a large economy aimed at increasing growth in the rest of the world is commonly known as

A point to the left of the LM curve would represent a situation in which

With flexible exchange rates, perfect asset substitutability, and perfect capital mobility, expansionary monetary policy will cause

The global financial crisis that began in 2008 was a great illustration of how interdependent national economies are.

With fixed exchange rates, a country

If the United States follows expansionary monetary policy relative to Japan and Germany, which of the following is not likely to occur?

The BP curve presents combinations of y and i that yield balance of trade equilibrium.

The LM curve will shift to the right when government expenditures increase.

Which of the following is not a necessary condition for a flat BP curve?

With fixed exchange rates, perfect asset substitutability, and perfect capital mobility