Question

All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth,

Select one:

a. the pressure on the dollar is to devalue.

b. the pressure on the dollar is to depreciate.

c. the pressure on the dollar is to appreciate.

d. the pressure on the dollar is to revalue.

Starting from a balanced budget, which of the following would NOT cause a government budget deficit?

Select one:

a. A 50 percent increase in spending accompanied by a 50 percent increase in taxes

b. An increase in transfer payments

c. An increase in spending of goods and services

d. A decrease in taxes

Which of the following is NOT likely to occur when a bank fails?

Select one:

a. Everyone that deposits money in the bank loses all or a portion of their money, unless the country has a functioning deposit insurance system.

b. Other banks make too many loans to make up for the loans not made by the failed bank, kicking off a cycle of stimulation and inflation.

c. The loss of savings (or the feared loss of savings) causes households to cut back on consumption, which spreads the recessionary effect wider through the country.

d. Unaffected banks may stop making loans as they take a cautious approach, slowing or stopping new investment.

Answer 1

Ans. 1.All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth,

b. the pressure on the dollar is to depreciate. This is because if the US experiences exceptionally strong growth, then it will begin to increase the supply of dollars to foreign countries, which will cause the dollar to diminish/depreciate in its value gradually.

2.Starting from a balanced budget, this would not cause a government budget deficit -

a. A 50 percent increase in spending accompanied by a 50 percent increase in taxes. Because, government budget deficit occurs when the expenses exceed the revenue. The above stated point wouldn't lead to govt. budget deficit.   

3.This is not likely to occur when a bank fails -

b. Other banks make too many loans to make up for the loans not made by the failed bank, kicking off a cycle of stimulation and inflation.

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