What is the difference between an expenditure-changing policy and an expenditure-switching policy?
What will be an ideal response?
An expenditure-changing policy alters the level of the economy's total demand for goods and services. An expenditure-switching policy, on the other hand, induces an exchange rate adjustment and thus changes the direction of demand, shifting it between domestic output and imports.
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Faced with the evidence of poor working conditions and low wages in the border maquiladoras, economists
A) shrug their shoulders and ignore the issue. B) agree that trade theory is thus proven hollow and internally inconsistent. C) argue that U.S. consumers should not consume lettuce. D) argue that the poor conditions and low wages are actually improvements for the Mexican workers, and may be cited as gains-from-trade. E) argue that Mexico's generally high overall productivity offsets these conditions.
Under fixed exchange rates, domestic asset transactions by the central bank
A) can be used to alter the level of foreign reserves but not to affect the state of employment and output. B) cannot be used to alter the level of foreign reserves but only to affect the state of employment and output. C) can be used to alter the level of foreign reserves and to affect the state of employment and output. D) can be used to alter the domestic money supply and the level of foreign reserves. E) can raise output to full-employment level.
A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas. This transaction is
A) counted in the U.S. balance of payments as a current account item. B) counted in the U.S. balance of payments as a surplus item. C) counted in the U.S. balance of payments as an export item. D) none of the above.
When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent
a. a loss in total welfare. b. a transfer of benefits from the buyer to the seller. c. the higher marginal costs incurred by the monopolists in comparison to competitive firms. d. All of the above are correct.