54

Which of the following best contrasts Keynesian and Classical philosophies on equilibrium and employment?

a.

Keynesian economists believe government needs to avoid managing the economy, whereas the Classical economists believe government needs to actively manage the economy

b.

Keynesian economists assert the government is unable to affect employment and equilibrium, whereas Classical economists assert government is able to affect employment and equilibrium

c.

According to Keynesian economists, equilibrium occurs under a situation of partial unemployment, whereas according to Classical economists, equilibrium occurs under a situation of full employment

d.

According to Keynesian economists, equilibrium occurs under a situation of full employment, whereas according to Classical economists, partial equilibrium occurs under a situation of full employment

55

Which of the following is among the arguments in support of free trade?

a.

It increases employment in all industries

b.

It makes larger global production possible

c.

It allows all producers to charge higher prices

d.

It allows the use of trade restrictions against foreign competitors

56

Which of the following best explains how the foreign exchange market operates?

a.

Imports of goods into a country immediately generate an increase in the supply of the currency used by the importing country

b.

Imports of goods into a country immediately generate an increase in the supply of the currency used by the exploiting country

c.

Imports of goods into a country immediately generate an increase in the demand for the currency used by the exporting country

d.

Imports of goods into a country immediately generate a decrease in the supply of the currency used by the exploiting country

57

Suppose that the value of imports exceeds the value of exports in a country. Which of the following statements is true?

a.

The current account of the balance of payments is balanced

b.

The capital account of the balance of payments has a surplus

c.

The capital account of the balance of payments has a deficit

d.

The current account of the balance of payments has a surplus