Exam 16: Macroeconomic Policy in an Open Economy

A nation experiences external balance if it achieves:

Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.

Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic capital markets.The result would be

Expenditure-switching policies alter the level of total spending (aggregate demand)for goods and services produced domestically and those imported.

An expenditure-increasing policy would consist of an increase in:

Most industrial countries generally considered ____ as the most important economic goal.

A nation realizes overall balance when it achieves full employment and current account equilibrium.

Under a fixed exchange-rate system and high capital mobility,a contraction in the domestic money supply leads to a:

Given fixed exchange rates,assume Mexico initiates contractionary monetary and fiscal policies to combat inflation.These policies will also:

The appropriate expenditure-switching policy to correct a current account surplus is:

Given an open economy with high capital mobility,fiscal policy is strengthened under fixed exchange rates.

The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of: