Test Bank for International Economics, 19th Edition by Robert Carbaugh

The chapters in this document are displayed in reversed order, with the last chapter appearing first.
This change ensures all chapters are included in the test bank.
Chapter 15 Macroeconomic Policy in an Open Economy
1. A nation experiences internal balance if it achieves
a. full employment.
b. price stability.
c. full employment and price stability.
Chap 1 to 15 Included ✅
d. unemployment and price instability.
ANSWER: c
FEEDBACK: a.
b.
c. The goal of internal balance has two dimensions: full employment and price
stability.
d.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Economic Objectives of Nations
KEYWORDS: BLOOM'S: Remember
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

2. A nation experiences external balance if it achieves
a. no net changes in its international gold stocks.
b. productivity levels equal to those of its trading partners.
c. a trade surplus.
d. neither deficits nor surpluses in its current account.
ANSWER: d
FEEDBACK: a.
b.
c.
d. The economic objective of external balance is current account equilibrium
(neither deficits nor surpluses in the current account).
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Economic Objectives of Nations
KEYWORDS: BLOOM'S: Understand
DATE CREATED: 1/21/2025 3:54 AM
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,DATE MODIFIED: 1/21/2025 3:54 AM

3. A nation experiences overall balance if it achieves
a. neither deficits nor surpluses in its current account, full employment, and price stability.
b. a trade surplus, full employment, and price stability.
c. full employment, price stability, and no change in its money supply.
d. full employment, price stability, and maximum productivity.
ANSWER: a
FEEDBACK: a. A nation realizes overall balance when it attains both internal and external
balance (neither deficits nor surpluses in its current account, full employment,
and price stability).
b.
c.
d.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Economic Objectives of Nations
KEYWORDS: BLOOM'S: Understand
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

4. Historically, most nations generally considered _________ as the most important economic goal.
a. external balance
b. internal balance
c. overall balance
d. exchange rate stability
ANSWER: b
FEEDBACK: a.
b. Since the 1930s, nations have actively pursued internal balance (full
employment without inflation) as a primary economic objective.
c.
d.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Economic Objectives of Nations

Page 2

,KEYWORDS: BLOOM'S: Understand
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

5. Which of the following are expenditure-changing policies?
a. currency devaluation and revaluation
b. import quotas and tariffs
c. monetary and fiscal policies
d. wage and price controls
ANSWER: c
FEEDBACK: a.
b.
c. Expenditure-changing policies are monetary and fiscal policies.
d.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Policy Instruments
KEYWORDS: BLOOM'S: Understand
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

6. Which of the following is an example of an expenditure-switching policy?
a. an increase in the money supply
b. a decrease in government spending
c. an increase in business taxes
d. a decrease in import tariffs
ANSWER: d
FEEDBACK: a.
b.
c.
d. Expenditure-switching policies modify the direction of demand, shifting it
between domestic output and imports. A decrease in import tariffs will divert
spending from domestically produced goods to foreign-produced goods.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
Page 3

, TOPICS: Policy Instruments
KEYWORDS: BLOOM'S: Understand
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

7. Which of the following is an example of an expenditure-increasing policy?
a. an increase in import tariffs
b. a decrease in import quotas
c. higher income taxes
d. an increase in the money supply
ANSWER: d
FEEDBACK: a.
b.
c.
d. Expenditure-changing policies include fiscal policy, (government spending and
taxes) and monetary policy (changes in the money supply and interest rates).
Depending on the direction of change, expenditure-changing policies are either
expenditure-increasing or reducing. An increase in the money supply is an
expenditure-increasing policy.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic
United States - BUSPROG1: - Reflective Thinking
STATE STANDARDS: United States - PA - DISC3: - International trade and finance
TOPICS: Policy Instruments
KEYWORDS: BLOOM'S: Analyze
DATE CREATED: 1/21/2025 3:54 AM
DATE MODIFIED: 1/21/2025 3:54 AM

8. Which of the following is an example of an expenditure-reducing policy?
a. a devaluation of the par value of a currency
b. a decrease in government spending
c. a decrease in import duties
d. a decrease in business taxes
ANSWER: b
FEEDBACK: a.
b. Expenditure-changing policies include fiscal policy (government spending and
taxes) and monetary policy (changes in the money supply and interest rates).
Depending on the direction of change, expenditure-changing policies are either
expenditure-increasing or reducing. A decrease in government spending is an
expenditure-reducing policy.
c.
d.
POINTS: 1
DIFFICULTY: Moderate
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