Suppose a country switches from a fixed to a flexible exchange rate. Which of the following will occur as a result of this change?
A) Monetary policy will become a less effective tool for changing output.
B) A given change in government spending will now have a greater effect on output.
C) Both fiscal and monetary policy will become more effective in changing GDP.
D) Both fiscal and monetary policy will become completely ineffective in changing GDP.
E) none of the above
E
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Inflation was a major problem in the United States during the early years of the Great Depression
a. True b. False Indicate whether the statement is true or false
Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to real GDP and the monetary base in the context of the Three-Sector-Model? a. Real GDP rises and monetary base rises
b. Real GDP rises and monetary base falls. c. Real GDP and monetary base fall. d. Real GDP and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Given two economic systems, A and B, if economy A has an absolute advantage in the production of widgets, then
A) fewer inputs are necessary to produce widgets in economy A than in economy B. B) economy A must give up less of all other goods to produce widgets than economy B. C) economy A is less efficient in the production of widgets than economy B. D) economy A would not benefit from the specialization of production.
Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher