Exam 17: Macroeconomic Policy and Floating Exchange Rates

In an open economy, a contractionary monetary policy:

With flexible exchange rates, any mixture of fiscal and monetary policies is always consistent with one another.

As government adopts a contractionary monetary policy:

When the government employs a combination of higher spending and lower taxes, this type of policy is called an:

The demand for loanable funds is directly related to the interest rate.

An expansionary fiscal policy in an open economy with freely mobile capital and flexible exchange rates is more effective in changing equilibrium output than in a closed economy.

An expansionary monetary policy leads to an appreciation of the country's currency.

The supply of loanable funds:

The balance between inflows and outflows in the current account is known as:

Government spending on goods and services is typically _____ percent of GDP.

In a closed economy, a contractionary monetary policy causes:

When the exchange rate changes, the price of imports and the price of exports immediately change to reflect the new exchange rate.

In an open economy, a contractionary monetary policy causes:

The "J curve":

An expansionary fiscal policy usually leads to a government budget deficit or a higher deficit if one already existed.

An expansionary monetary policy in an open economy with freely mobile capital and flexible exchange rates is more effective in changing real GDP than in a closed economy.

A contractionary fiscal policy entails some combination of lower taxes and/or lower government spending on goods and services.

Fiscal and monetary policy have predictable effects on all of the following except:

Expansionary monetary policy in the U.S. is determined by:

Describe a consistent mix of monetary and fiscal policies for a country with a current account deficit and a problem with inflation.