Compare the effectiveness of fiscal policy in an open economy with mobile international capital to fiscal policy in a closed economy. Why is it different? Use an appropriate diagram to illustrate your answer
An appropriate diagram should resemble Figure 20-6 in the text. Fiscal policy is less effective (that is, it has less effect on real GDP) in an open economy than it is in a closed economy. A budget deficit that is intended to increase aggregate demand to counteract a recession will often raise interest rates. An increase in interest rates will trigger a currency appreciation, which will have a contractionary effect on the economy since net exports will fall (exports will become more expensive to foreigners and imports will become cheaper). The foreign exchange effects will, therefore, at least partially offset the expansionary effects of stimulative fiscal policy.
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Markets that require workers with similar human capital:
A. vie for the same workers, who can interchange one type of employment for another. B. often have similar wages, because they employ similar workers. C. are more connected than others. D. All of these statements are true.
Which one of the following will cause the production possibilities curve to shift outward?
a. improved public education b. improved health care systems c. larger budgets for research, development, and exploration d. all of the above
An economy experiences economic growth whenever
A. Long-run real GDP rises. B. The unemployment rate falls. C. Nominal GDP rises. D. Base-year GDP rises.
The loss of total market share of steel in the world market for steel can be blamed on steel producers' decisions to not adopt the latest steel technology
The producers in other countries that adopted it gained market share at the expense of the U.S. Indicate whether the statement is true or false