1. Expenditure-switching policies designed to improve a current account deficit

Select one:

a. reduce the overall level of demand in the economy.
b. turn domestic spending towards foreign goods.
c. increase the overall level of demand in the economy.
d. turn domestic spending towards domestic goods.

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

Select one:

a. An increase in spending of goods and services
b. A 50 percent increase in spending accompanied by a 50 percent increase in taxes
c. An increase in transfer payments
d. A decrease in taxes

3. The 2007 subprime crisis spread easily because

Select one:

a. there was speculation against the U.S. dollar.
b. banks in other countries had purchased assets that depended on the U.S. housing market.
c. the Fed failed to act at the right time.
d. the United States is an important economy.

4. When aggregate demand meets aggregate supply in the horizontal portion of the aggregate supply curve,

Select one:

a. a decrease in demand will cause output to rise but no change in prices.
b. a decrease in demand will cause prices to fall but no change in output.
c. a decrease in demand will cause output to fall but no change in prices.
d. a decrease in demand will cause prices to rise but no change in output.

5. Which of the following is NOT a characteristic of a financial crisis caused by macroeconomic imbalances?

Select one:

a. Crises can be unpredictable.
b. Crises can be caused by budget surpluses.
c. Crises can be predictable.
d. Crises can by expansionary fiscal policies accompanied by high budget deficits.