For a small open economy with a fixed exchange rate: а. monetary policy is effective and fiscal policy is ineffective. b. monetary policy is ineffective and fiscal policy is effective. C. both monetary and fiscal policy are effective. d. · both monetary and fiscal policy are ineffective.
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- Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?Suppose that in the country of Mistania, investment spending increases from $1740 to $1940. There is no change in Mistania's private or public savings. According to the national saving and investment identity, what happens to the trade balance as investment spending increases? OTrade deficit goes up OTrade deficit goes down Ostays the sameThe US typically imports (M) more goods and services than it exports (X). a. Explain what this means for both the US Current Account (CA) and Capital Account (aka the Financial Account) and how the US net International Investment Position (IIP) will be affected. b. Why is a CA deficit referred to as an “excess spending” problem? Who is the US borrowing from when it engages in this “excess spending”? [Hint: use the twin-deficit identity.]
- Which of the following is a true statement describing expansionary fiscal policy’s impact in open and closed economies? Select one: a. Expansionary fiscal policy crowds out only investment spending and purchases of consumer durables in an open economy. b. Expansionary fiscal policy crowds out investment spending, purchases of consumer durables and net exports in an open economy. c. Expansionary fiscal policy crowds out investment spending, purchases of consumer durables and net exports in a closed economy. d. Expansionary fiscal policy does not crowd out investment spending and purchases of consumer durables in an open economy.A net exports deficit will become a surplus if _______. A. the country appreciates its currency B. the government budget deficit is turned into a surplus and the private sector has a surplus C. private saving and government saving exceed private investment D. the private sector surplus adjusts to equal the government sector deficitA government began 2019 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause: Oa) the exchange rate and the trade deficit to increase. b) the exchange rate and the trade deficit to decrease. c) the exchange rate to decrease and the trade deficit to increase. d) the exchange rate to increase and the trade deficit to decrease. Question 5 ( At the beginning of 2019, a government had a total debt of $540 billion dollars. It ended 2019 with a $16 billion dollar budget surplus. In 2020, it experienced a budget deficit of $7 billion dollars. What is the total debt of the government equal to at the end of 2020? a) $573 billion b) $563 billion Oc) $531 billion d) $517 billion
- "In a small open economy with perfect capital mobility, if the government implements a fiscal expansion policy, what is the likely impact on the national interest rate and net exports under a fixed exchange rate regime? A. Increase in interest rate, increase in net exports B. Increase in interest rate, decrease in net exports C. No change in interest rate, increase in net exports D. No change in interest rate, decrease in net exports"a. Explain why temporary and permanent fiscal expansions do not have different effects under fixed exchange rates, as they do under floating b. If you were in charge of macroeconomic policies in a small open economy, what qualitative effect would each of the following events have on your target for external balance? I. Large deposits of uranium are discovered in the interior of your country. II. The world price of your main export good, copper, rises permanently. III. The world price of copper rises temporarily. IV. There is a temporary rise in the world price of oil.Assuming that a country has a trade deficit of $50 billion, which of the following is true: A. The country's exports are $120 billion and its imports are $180 billion B. The country's exports are $100 billion and its exports are $150 billion c. The country's imports are $120 billion and its exports are $180 billion d. The country's exports are $150 billion and its imports are $100
- For a small, open economy when spending exceeds production then I. This country will run a trade deficit II. This country will be a net lender II. This country will export less than it imports a. Statements II and III are true O b. Statements I and III are true c. Statements I, Il and III are true O d. Statements I and II are true2. Graphically show the impact of the following on the real exchange rate and the trade balance (a) Biden's administration passes large spending bill (b) World governments engages in expansionary fiscal policy.Why would a country want to impose an exchange rate ceiling? a. A strong currency encourages imports and can be used to fight inflation. b. A strong currency stimulates an economy. c. A weak currency encourages imports and can be used to fight inflation. d. A weak currency will encourage exports and stimulate the economy.