Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 13, Problem 3PA
To determine
The combination of the monetary and the fiscal policy to obtain the full employment.
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In the picture below is the full question. The highlighted one is my guess which is wrong.
If the U. S. dollar appreciates in the foreign exchange market, what is the most likely change in the balance of trade?
A)Trade deficit
B)Trade surplus
C)Balanced trade
D)No change
Would each of the following groups be happy or unhappy if the U.S. dollar appreciated?
Australian tourists planning a trip to the U.S.
An American firm trying to purchase property overseas.
Why does the decline in value of a certain currency cause imports to be expensive and exports cheaper, resulting in cost-push and demand-pull inflation?
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- In regulating the economy of a country, monetary and fiscal policies are needed to achieve economic balance. Based on this, explain how the two policies work to balance the economy in the targeted direction so that the similarities and differences between the two policies can also be seen.arrow_forwardIf an economy has a widening trade deficit, which of the following monetary policy option will worsen the external balance the most? a) Easing monetary policy by selling bondsb) Tightening monetary policy by buying bondsc) Easing monetary policy by cutting key interest rated) Tightening monetary policy by raising key interest ratearrow_forwardWhat are two ways in which monetary policies and tight budgets allow a fixed exchange rate system to be successful?arrow_forward
- Is trade deficit always a problem? Support your answer with proper reasoning.arrow_forwardPeople sometimes worry that American trade with other countries will lead to large U.S. trade deficits and the movement of massive amounts of American capital out of the country. This worry is unfounded because countries cannot a) have both current account and financial account deficits at the same time. b) increase savings at the same time that a trade deficit grows. c) spend more than they earn. d) invest more than they save.arrow_forwardHow is it necessary for a nation with a fixed exchange rate and open financial markets to renounce its independence in terms of monetary policy?arrow_forward
- How does a growing trade deficit affect a country's GDP? Explain your answer.arrow_forwardGraphically, when is the balance of trade equal to zero? Multiple Choice When the rising IM line intersects the horizontal X line. When the rising X line intersects the horizontal IM line. When the rising IM line intersects the horizontal axis. When the rising X line intersects the horizontal axis.arrow_forwardHow do government budget deficits affect the exchange rate and trade balance?arrow_forward
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