Why is monetary policy more effective in an open economy than in a closed economy?
a. Trade deficits affect exchange rates, which can offset adverse interest rate effects.
b. Borrowers can choose to use foreign capital, so that interest rate effects are stronger than expected.
c. Interest rate changes affect exchange rates, so that capital flows reinforce the effect of monetary policy.
d. Banks can choose to lend to foreigners, so that interest rate effects are essentially nullified.
c
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The expansionary monetary and fiscal policies of the 1960s resulted in
A) low inflation rates and low rates of unemployment. B) high inflation rates and high rates of unemployment. C) high inflation rates and low rates of unemployment. D) low inflation rates and high rates of unemployment.
Which of the following statements is not true with regard to automatic stabilizers? a. The most important automatic stabilizer is the tax system
b. They act as shock absorbers to the economy. c. They require legislative action. d. Automatic stabilizers like government transfer payments change as business cycles conditions change.
According to some economists, the private sector is more efficient than the public sector mainly because:
The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will
A. decrease the quantity of education demanded by 3.5%. B. decrease the quantity of education demanded by 14%. C. increase the quantity of education demanded by 14%. D. increase the quantity of education demanded by 4%.