1)With which of the following statements would Keynes most agree?

a)Reducing the regulatory burden on firms is a good way to encourage growth.

b)Returning to the gold standard after World War I at the same levels of their pre-war suspension was a mistake.

c)The International Monetary Fund's imposition of austerity as a requirement in structural adjustment loans is the right policy for troubled economies.

d)Laissez faire policies should be followed as governments are poor allocators of capital.

1)Which of the following fiscal policies are thought to have the most immediate impact on spending (i.e. the highest fiscal money multiplier)?

a)Infrastructure projects

b)A decrease in FICA

c)Direct payments to individuals

d)Reducing the capital gains tax

1)When a country's sovereign debt burden becomes too much to re-pay, it may default on all or a portion of its debt.Why might a default be more likely in a situation where much of a country's debt is denominated in a foreign currency (i.e. cross-border loans)?

a)If a country is overborrowing on international markets, its currency has most likely appreciated significantly, making the external debt even bigger.

b)A country can default on cross-border loans more easily, as there is no downside to defaulting on debt owed to foreigners.

c)If a country is overborrowing on international markets, it is probably investing the funds wisely for future growth.

d)If a country is only borrowing in its domestic currency, it can print money to repay the debts. It cannot print money to repay cross-border loans.

1)Which of the following is true with regard to automatic stabilizers?

a)Funds for automatic stabilizers come from the discretionary portion of the budget.

b)Automatic stabilizers can't be used to make a budget deficit.

c)Once in place, automatic stabilizers kick in without any further action from Congress.

d)Income taxes, unemployment insurance and tariffs are all automatic stabilizers.