Exam 17: Macroeconomic Policy and Floating Exchange Rates

When exchange rates are flexible, expansionary fiscal policy indirectly leads to a capital inflow and a current account surplus.

When exchange rates are flexible, an expansionary monetary policy indirectly leads to a capital inflow and a current account surplus.

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

As a government adopts a contractionary fiscal policy:

Government spending and taxes are examples of a government's:

In an open economy, an expansionary monetary policy:

In a closed economy, contractionary fiscal policy causes:

Describe what the term "J-curve" means. Why is this concept important?

The supply of loanable funds is directly related to interest rates.

External balance refers to the government balancing the inflows and outflows included in the current account.