Question

1. Expain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy’s marginal propensity to consume is .75. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion?

2.Explain what is meant by a built-in stabilizer and give two examples.

3.Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy.

4.What does the “standardized budget” measure and of what significance is this concept?

5.What are political business cycles and how could they be created?

6.Explain the crowding-out effect.

7.What are the three functions that a commodity must fulfill to be useful as money?

8.Why can’t food be used as a form of money?

9.Why is money considered to be debt?

10.Why are financial institutions required to keep reserves?

11.Explain what is meant by fractional reserve banking.

12.Cite three important reasons why nations trade.

13.Which is more effective in blocking imports, a tariff or a quota? Explain!

14.Do protectionist policies benefit producers, consumers, workers, or the government? Explain.

15.Why is a trade war like shooting yourself in the foot?

16.Who gains and who loses from a protective tariff? Explain.

17.What is the official reserves account and how is it used in the balance of payments?

18.Distinguish between a balance-of-payments surplus and a balance-of-payments deficit in terms of payments of official reserves.

19.Explain how a nation might persistently import more than it exports and still maintain an equilibrium in its balance of payments.

20.Explain how an increase or decrease in demand and supply will affect the value of a nation’s currency.

21.Explain how changes in relative real interest rates affect the value of a nation’s currency.

22.Describe how changes in tastes affect the value of a nation’s currency

23.How does speculation in currencies affect the value of a nation’s currency?

Answer 1