Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the current international transactions balance and the monetary base in the context of the Three-Sector-Model?
a. The current
international transactions balance becomes more positive (or less negative) and monetary base rises.
b. The current international transactions balance becomes more negative (or less positive) and monetary base falls.
c. The current international transactions balance becomes more positive (or less negative) and monetary base falls.
d. The current international transactions balance and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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The economic way of thinking views government as a social institution
A) in which people do not compete. B) in which the public interest has priority over private interests. C) whose actions are controlled by the will of the majority. D) whose actions are determined by individuals' perceptions of their self-interest.
The central macroeconomic concept that is most clearly related to changes in the well-being of the average member of the economy is the
A) unemployment rate. B) inflation rate. C) productivity growth rate. D) None of the above is closely related.
The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows:
a. Unemployment is not possible in the short run. b. Demand and supply are never equal. c. Supply creates its own demand. d. Demand creates its own supply.
The economic theory that suggested an alternative to the rising unemployment and inflation that the static Phillips curve analysis could not explain was the:
a. new classical economic theory. b. monetarist economic theory. c. new Keynesian economic theory. d. classical economic theory. e. traditional Keynesian economic theory.