Explain why macroeconomic policies that are coordinated can enhance economic growth, but why policies that are not coordinated can increase global imbalances
What will be an ideal response?
If a group of industrial economies decide jointly to expand their economies with fiscal and monetary policies, then growth in their incomes raises incomes around the world as their demand for imports stimulates production in other countries. If all economies expand simultaneously, then no country is burdened by a sudden excess of imports over exports. Their exports grow along with their imports and with the growth in demand in their trading partners' economies. If a country uses expansionary policies when other countries are not doing the same, the country is likely to have a deterioration in their current accounts since their trading partners are not growing at the same rate. If expansionary fiscal policies cause interest rates to rise, then a further deterioration in the current account is likely due to the appreciation of the currency resulting from the inflow of foreign capital. Thus global imbalances increase.
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A. shifting Sf3 to Sf1 B. shifting Sf4 to Sf3 C. shifting Sf1 to Sf2 D. shifting Sf4 to Sf2
Which of the following is a liability of the Federal Reserve?
A) currency B) mortgage-backed securities C) U.S. government securities D) U.S. coins
The international debt crisis of early 1982 was precipitated when ________ could not pay its international debts
A) Russia B) Mexico C) Brazil D) Malaysia E) China
New classical economics
a. resulted from the high inflation and unemployment of the 1970s. b. developed in an era of high inflation and unemployment during the 1970s. c. resulted from the dissatisfaction associated with the prevailing Keynesian orthodoxy. d. Both b and c. e. all of the above.