Using a figure, show how devaluation affects an economy
Answer: When a currency is devalued from E0 to E1, the equilibrium shifts from point 1 to 2. Both output and money supply increase. And international reserves increase.
cyxssbwhat happens when Germany’s current account surplus
Under the price-specie-flow mechanism, what happens when Germany’s current account surplus is greater than its non-reserve financial account deficits?A.German loans will finance a...
cyxssbThe “rules of the game” under the gold standard
The “rules of the game” under the gold standard can best be described as which of the following?A.Selling domestic assets in a deficit and buying assets in a surplusB.Slowing dow...
cyxssbBy internal balance, most economists mean
A.only fullB.only priceC.full employment and priceD.full employment and moderate increase inE.None of theAnswer: C
cyxssbBy external balance, most economists mean
A.avoiding excessive imbalances in internationalB.a balance between exports andC.a balance between trade account and serviceD.a fixed exchangeE.None of theAnswer: A
cyxssbExternal balance means
A.balance in the country’s currentB.balance in the country’s serviceC.balance in the country’s financialD.balance in the country’s tradeE.None of theAnswer: E
cyxssbA current account surplus
A.poses a problem if domestic savings are being invested more profitably abroad than they would be atB.may pose no problem if domestic savings are being invested more profitably ab...
cyxssbGovernments prefer to avoid excessive
Governments prefer to avoid excessive current account surpluses becauseA.the returns to domestic savings may be easier to tax than those on assets abroad.B.an addition to the home ...
cyxssbUnder the gold standard era of 1870 – 1914,
A.central banks tried to have sharp fluctuations in the balance ofB.central banks tried to avoid sharp fluctuations in the current account of the balance ofC.central banks tried to...
cyxssbA country is said to be in balance of payments
A country is said to be in balance of payments equilibrium when the sum of its current and itsA.non-reserved financial accounts equalsB.reserved financial accounts equalsC.non-rese...
cyxssbUnder the gold standard,
A.a perpetual surplus isB.a perpetual deficit isC.a perpetual surplus is impossible, but a perpetual deficit isD.a perpetual deficit is impossible, but a perpetual surplus isE.a pe...
cyxssbUnder the gold standard,
A.a shortage of currency leads to low domestic prices and a foreign payments surplus.B.a shortage of currency leads to high domestic prices and a foreign payments surplus.C.a short...
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