Exercise 2. A) Please decide whether the following statements are correct or not.

A) Please decide whether the following statements are correct or not.

Q1: Environmental damage results from the lax policies of nation-states and/or from their poor enforcement mechanisms. (p. 367) CORRECT

Q2: By raising taxes the government can stimulate the economy. (p. 369) INCORRECT

Q3: In principle, a budget surplus will decrease economic activity. (p. 369) CORRECT

Q4: Monetary policy works through its determination of the size and velocity of a nation’s budget deficit. (p. 369) INCORRECT

Q5: In case of the so-called irreconcilable trinity, a government cannot achieve three specific goals at the same time – one of them should be given up. (p. 370) CORRECT

Q6: If a nation wants to be capable of pursuing an autonomous macroeconomic policy, it can achieve that goal by abandoning fixed exchange rates for instance. (p. 370) CORRECT

Q7: Whereas export businesses prefer exchange rate stability, domestic-oriented businesses prefer flexible exchange rates. (p. 371) INCORRECT

Q8: Investors prefer the strict control of capital. (p. 371) INCORRECT

Q9: If an economy were isolated from the international arena, fiscal policy would be constrained by the cost of borrowing. (p. 373) CORRECT

Q10: In the decades prior to World War I, national governments had little effective control over their economies. (p. 375) CORRECT

B) Multiple choice questions (only one correct answer exists).

Q1: When did governments accept Keynesian economics? (p. 369) (c) in the early postwar era

Q2: What special tasks were undertaken by governments under Keynesian economics? (p. 369) (a) promoting national economic stability

Q3: According to Keynesian macroeconomics, what type of relationship existed between inflation and unemployment? (b) trade-off

Q4: What are the basic tools of macroeconomic policy? (p. 369) (b) fiscal policy and monetary policy

Q5: What are the principal instruments of fiscal policy? (d) taxation and government expenditure

Q6: What is the ultimate goal of the monetary authority if it increases the interest rate? (p. 369) (a) depressing economic activity

Q7: Which of the following three objectives are in a trade off with each other? (p. 370) (c) fixed exchange rates, national autonomy in macroeconomic policy and international capital mobility

Q8: How do we call the situation when it is impossible to follow the following three objectives at the same time: fixed exchange rates, national autonomy in macroeconomic policy and international capital mobility? (p. 370) (a) irreconcilable trinity

Q9: What does the USA prefer? (p. 370) (b) pursuing an independent macroeconomic policy

Q10: What does China prefer? (p. 371) (c) controlling capital flows

Q11: What do European advanced economies prefer? (p. 371) (a) maintaining a fixed exchange rate

Q12: What are the Fed’s or any other central bank’s primary means for managing the economy? (p. 371) (b) open market operations

Q13: Who can determine reserve requirements? (p. 372) (b) the central bank

Q14: What was the primary objective of the so-called Basle Agreement? (p. 373) (d) To make reserve requirements more uniform throughout the world.

Q15: An important constraint on monetary policy in a domestic economy is … (p. 374) (d) inflation

Дата добавления: 2015-07-10