Exam 17: The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

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In an open economy,the marginal propensity to consumer is 0.75,and the marginal propensity to import is 0.15.Calculate the change in equilibrium GDP if exports fall by $50 billion.

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Question 1

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-$100 billion (=2*-50)

What are some of the disadvantages of a freely flexible exchange rate system with respect to the adjustment process?

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The disadvantages may include overshooting and erratic fluctuations in exchange rates.Such behavior interferes with the flow of trade and imposes costly adjustment burdens to patterns of specialization and resource allocation which may only be temporary in nature.

When considering the impact of foreign repercussions relative to a scenario without such repercussions,for a large nation the foreign trade multiplier will be

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According to the absorption approach,under what conditions will a competitive devaluation fail to reduce a balance of payments deficit?

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Question 4

An autonomous increase in S from a condition of equilibrium in national income and in the trade balance results in the nation's income:

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Question 5

The S-I function is upward sloping because:

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Question 6

A benefit of automatic adjustment mechanisms is that they:

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Question 7

An open economy can be described by the following functions (all figures in millions of dollars): C = 500 + 0.8Y I = 600 X = 400 M = 200 + 0.05Y Calculate equilibrium income and the trade balance.

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Question 8

In the Keynesian model,in short-run equilibrium,the trade balance must be

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Question 9

In the real world,the automatic income,price,and interest adjustment mechanisms,if allowed to operate,are likely to:

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Question 10

A depreciation of a deficit nation's currency from a condition of full employment:

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Question 11

When considering the impact of foreign repercussions relative to a scenario without such repercussions,for a small nation the foreign trade multiplier will be

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Question 12

By itself,the automatic income adjustment mechanism is likely to bring about:

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Question 13

The United States current account deficit as a percentage of GDP has generally

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Question 14

The equilibrium level of national income in an open economy is given by:

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Question 15

Why is the foreign trade multiplier smaller in a large nation relative to small nation?

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Question 16

If MPS=0.2 and MPM=0.3,the foreign trade multiplier is:

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Question 17

Why is the foreign trade multiplier smaller than the corresponding multiplier in a closed economy?

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Question 18

In order to isolate the income adjustment mechanism,we assume that:

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Question 19

An autonomous fall in M from a condition of equilibrium in national income and in the trade balance results in the nation's income:

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Question 20

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Exam 17: The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

In an open economy,the marginal propensity to consumer is 0.75,and the marginal propensity to import is 0.15.Calculate the change in equilibrium GDP if exports fall by $50 billion.

What are some of the disadvantages of a freely flexible exchange rate system with respect to the adjustment process?

When considering the impact of foreign repercussions relative to a scenario without such repercussions,for a large nation the foreign trade multiplier will be

According to the absorption approach,under what conditions will a competitive devaluation fail to reduce a balance of payments deficit?

An autonomous increase in S from a condition of equilibrium in national income and in the trade balance results in the nation's income:

The S-I function is upward sloping because:

A benefit of automatic adjustment mechanisms is that they:

An open economy can be described by the following functions (all figures in millions of dollars): C = 500 + 0.8Y I = 600 X = 400 M = 200 + 0.05Y Calculate equilibrium income and the trade balance.

In the Keynesian model,in short-run equilibrium,the trade balance must be

In the real world,the automatic income,price,and interest adjustment mechanisms,if allowed to operate,are likely to:

A depreciation of a deficit nation's currency from a condition of full employment:

When considering the impact of foreign repercussions relative to a scenario without such repercussions,for a small nation the foreign trade multiplier will be

By itself,the automatic income adjustment mechanism is likely to bring about:

The United States current account deficit as a percentage of GDP has generally

The equilibrium level of national income in an open economy is given by:

Why is the foreign trade multiplier smaller in a large nation relative to small nation?

If MPS=0.2 and MPM=0.3,the foreign trade multiplier is:

Why is the foreign trade multiplier smaller than the corresponding multiplier in a closed economy?

In order to isolate the income adjustment mechanism,we assume that:

An autonomous fall in M from a condition of equilibrium in national income and in the trade balance results in the nation's income:

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

Open Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, present, and Future Answers to Selected Problems on Web

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