QuizMaster

A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?

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A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?

A. All of the reasons given in these answers are correct
B. real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible
C. workers will move from a country in which aggregate demand falls to other countries of the currency union, and so unemployment remains lower than it otherwise would
D. real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency

If two countries A and B are member of a currency union and there is a shift in consumer preferences away from the goods of country A and towards those of country B than which one of the following would help to offset the effect of the resulting changes in aggregate demand in A and B on inflation and unemployment in the tow countries ?

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If two countries A and B are member of a currency union and there is a shift in consumer preferences away from the goods of country A and towards those of country B than which one of the following would help to offset the effect of the resulting changes in aggregate demand in A and B on inflation and unemployment in the tow countries ?

A. A high degree of labour mobility between the tow countries
B. An increase in government spending in country (A)
C. A depreciation in the foreign exchange value of the common currency
D. A low degree of capital mobility between the two countries

Under financial repression ?

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Under financial repression ?

I- banks engage in non-price rationing of loans
II- banks face pressure for loans to those with political connections
III- banks charge a high premium on foreign investments
IV- banks depend on foreign banks to set interest rates
A. I and II only
B. III and IV only
C. I, II and III only
D. I, II , III and IV

Which of the following are costs of inflation ?

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Which of the following are costs of inflation ?

I- inflation weakens the creation of credit and capital markets
II- inflation distorts business behavior especially investment behavior
III- inflation increase the price of foreign goods relative to domestic goods
IV- Inflation imposes a tax on the holders of money
A. I and II only
B. III and IV only
C. I, II and IV only
D. I, II and III only

Central banks in LDCs generally have less effect on expenditure and output than in LDCs because of ?

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Central banks in LDCs generally have less effect on expenditure and output than in LDCs because of ?

I- an externally dependent banking system
II- a poorly developed securities market
III- a low percentage of demand deposits divided by the total money supply
IV- the relative insensitivity of investment and employment to monetary policies
A. I and II only
B. III and IV only
C. I, II and III only
D. I, II , III and IV

When the financial system lacks the capability of making judgement about investment opportunities due to asymmetric information leading to potentially bad credit risks lending is subject to ?

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When the financial system lacks the capability of making judgement about investment opportunities due to asymmetric information leading to potentially bad credit risks lending is subject to ?

A. adverse selection
B. moral hazard
C. social goods
D. hyperinflation

By using fiscal policy, i (e) varying ______ and/or _____ governments achieve goals for output and employment growth as well as price stability?

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By using fiscal policy, i (e) varying ______ and/or _____ governments achieve goals for output and employment growth as well as price stability?

A. demand pull inflation tax elasticity
B. interest rates, financial liberalization
C. interest rates, tax rates
D. tax rates, government spending

Demand pull inflation result from ?

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Demand pull inflation result from ?

A. demand for government spending on public goods goes due to lack of financial backup through tax collection
B. consumer business and government demand for goods and services in excess of an economy’s capacity to produce
C. a shortage of demand for goods and services in excess of supply during depression
D. demand for public goods is greater than demand for consumer goods