ECO 336 Chapter 11 Questions and Detailed Verified Solutions
A common response to stop a depreciation of a currency is to use contractionary monetary
policy, which could lead to a recession. - ✔✔True Contractionary fiscal policy attempts to
shift aggregate demand to the right. - ✔✔False Expansionary monetary policy is likely to
lead to a depreciation of the nation's currency. - ✔✔True Government spending and taxes -
✔✔are a major determinant of aggregate demand. Fiscal policy is - ✔✔the deliberate
manipulation of taxation and spending designed to affect the economy. Changes in
aggregate demand - ✔✔could be caused by changes in the spending decisions of the
households, businesses, the government, and foreigners. Which of the following is NOT a
reason why the effects of tax cuts on government spending dissipate and each additional
change in consumption and income becomes smaller and smaller? - ✔✔Some of the
increase is used for business investment. Intermediate inputs are - ✔✔goods purchased
by one business from another to use in production. Expansionary monetary policy involves
an increase in the money supply and a fall in interest rates, leading to a positive expansion
in income. - ✔✔True Along the aggregate supply curve - ✔✔the middle,
upwardminus−sloping part of the aggregate supply curve would be associated with a
growing economy that experienced increased prices from resources that are becoming
relatively scarce. It is more certain how expansionary monetary policy will affect the
current account than how expansionary fiscal policy will affect it. - ✔✔False An example of
expansionary fiscal policy would be - ✔✔an increase in government spending on
infrastructure to create jobs and improve the economy. When a central bank sells bonds,
cash reserves throughout the financial system increase, interest rates fall, and investment
spending increases. - ✔✔False Contractionary fiscal policy can lead to a depreciation of
the nation's currency. - ✔✔True Which of the following may NOT serve as a possible chain
reaction for either fiscal or monetary policy? - ✔✔M↑ → i↓ → I↓ → Y↓ → C↓.... Expenditure
switching refers to - ✔✔a switching back and forth between domestic and foreign goods in
response to changes in the exchange rate. Which of the following would NOT be a reason
why developed nations would try to coordinate their macroeconomic policies? - ✔✔To
coordinate retaliatory policies on developing countries' trade barriers Suppose the Asian
financial crisis decreased U.S. exports. In the aggregate demand/aggregate supply model,
this would be represented as - ✔✔a shift to the left of aggregate demand, leading to less
spending and production in the U.S. economy. The recent trend internationally has been
for the executive and legislative branches of elected governments to get more control over
monetary policy, as has been the case in countries such as the United States. - ✔✔False
Economic growth would be illustrated by - ✔✔a rightward shift of aggregate supply. When
A common response to stop a depreciation of a currency is to use contractionary monetary
policy, which could lead to a recession. - ✔✔True Contractionary fiscal policy attempts to
shift aggregate demand to the right. - ✔✔False Expansionary monetary policy is likely to
lead to a depreciation of the nation's currency. - ✔✔True Government spending and taxes -
✔✔are a major determinant of aggregate demand. Fiscal policy is - ✔✔the deliberate
manipulation of taxation and spending designed to affect the economy. Changes in
aggregate demand - ✔✔could be caused by changes in the spending decisions of the
households, businesses, the government, and foreigners. Which of the following is NOT a
reason why the effects of tax cuts on government spending dissipate and each additional
change in consumption and income becomes smaller and smaller? - ✔✔Some of the
increase is used for business investment. Intermediate inputs are - ✔✔goods purchased
by one business from another to use in production. Expansionary monetary policy involves
an increase in the money supply and a fall in interest rates, leading to a positive expansion
in income. - ✔✔True Along the aggregate supply curve - ✔✔the middle,
upwardminus−sloping part of the aggregate supply curve would be associated with a
growing economy that experienced increased prices from resources that are becoming
relatively scarce. It is more certain how expansionary monetary policy will affect the
current account than how expansionary fiscal policy will affect it. - ✔✔False An example of
expansionary fiscal policy would be - ✔✔an increase in government spending on
infrastructure to create jobs and improve the economy. When a central bank sells bonds,
cash reserves throughout the financial system increase, interest rates fall, and investment
spending increases. - ✔✔False Contractionary fiscal policy can lead to a depreciation of
the nation's currency. - ✔✔True Which of the following may NOT serve as a possible chain
reaction for either fiscal or monetary policy? - ✔✔M↑ → i↓ → I↓ → Y↓ → C↓.... Expenditure
switching refers to - ✔✔a switching back and forth between domestic and foreign goods in
response to changes in the exchange rate. Which of the following would NOT be a reason
why developed nations would try to coordinate their macroeconomic policies? - ✔✔To
coordinate retaliatory policies on developing countries' trade barriers Suppose the Asian
financial crisis decreased U.S. exports. In the aggregate demand/aggregate supply model,
this would be represented as - ✔✔a shift to the left of aggregate demand, leading to less
spending and production in the U.S. economy. The recent trend internationally has been
for the executive and legislative branches of elected governments to get more control over
monetary policy, as has been the case in countries such as the United States. - ✔✔False
Economic growth would be illustrated by - ✔✔a rightward shift of aggregate supply. When
