Macroeconomics

Multiple Choice Questions

Which one of the following statements is INCORRECT regarding the impact of depreciation on the level of output and income and the trade balance? Select one: O A. The increase in the relative price of imports causes switching of expenditure from foreign goods (which are now more expensive) to domestically produced goods. This results in a higher demand for domestic goods and a higher level of output and income. O B. There will be a downward movement along the NX curve, and a trade surplus occurs. O C. The lower price of exports causes an increase in exports, which, in turn, increases the demand for domestic goods as well as the level of output and income. O D. If the Marshall-Lerner condition holds, the positive effect of an increase in exports on the trade balance outstrips the negative effect of an increase in imports, which results from the increase in output and income.LOM 2 3 Which one of the following statements is correct? According to the Phillips curve, the negative slope indicates that ... Select one: O A. high unemployment leads to increasing inflation, and low unemployment leads to decreasing inflation. O B. high unemployment leads to decreasing inflation, and low unemployment leads to increasing inflation. O C. high unemployment leads to decreasing expected inflation, and low unemployment leads to increasing expected inflation. O D. low unemployment leads to decreasing employment, and high unemployment leads to increasing employment.Comparing the impact in the IS-LM model for a closed economy of a contractionary monetary policy with an expansionary fiscal policy on the money demand and the quantity of money, the result is: Select one: O A. In the case of monetary policy, the money demand and the quantity of money are higher. In the case of fiscal policy, the money demand and the quantity of money is higher. O B. In the case of monetary policy, the money demand and the quantity of money is lower. In the case of fiscal policy, the money demand and the quantity of money is higher. O C. In both cases, money demand and the quantity of money are lower. O D. In both cases, money demand and the quantity of money are higher.Qustrom 25 In deriving the IS curve, we assume that: Select one: O A. A decrease in the interest rate increases the level of investment spending, shifts the ZZ curve downwards, and increases the output and income level. O B. An increase in the rate of interest decreases the level of investment spending, shifts the ZZ curve downwards and decreases the level of output and income. O C. An increase in the interest rate decreases the level of investment spending, shifts the ZZ curve upwards, and decreases the level of output and income. O D. An increase in the interest rate increases the level of investment spending, shifts the ZZ curve upwards and increases the level of output and income