Since the early 1980s, the U.S. current account has A) been in near-balance in e
ID: 1095232 • Letter: S
Question
Since the early 1980s, the U.S. current account has
A) been in near-balance in every year.
B) alternated between sizable deficits and surpluses.
C) been in deficit every year.
D) been in surplus every year.
Classical macroeconomists believed that a market-based economy has ________ self-correcting forces and thus ________ business cycles.
A) weak, mild and fleeting B) strong, violent and prolonged
C) strong, mild and fleeting D) weak, violent and prolonged
The first two years of the Great Depression were dominated by
A) rightward shifts of the LM curve.
B) upward shifts of the SAS curve.
C) leftward shifts of the IS curve.
D) leftward shifts of the LM curve.
E) rightward shifts of the IS curve.
The ________ effect is a destabilizing effect associated with a falling price level.
A) real balance B) expectations C) Keynes D) Pigou
Explanation / Answer
1. C) been in deficit every year.
Precisely after 1982, US has been in large Current A/C deficits largely due to foreign currency inflows.
2. C) strong, mild and fleeting
Classical economists believe in a free market, free of any intervention and believe that self correcting forces of a free market help to achieve pareto efficiency.
3. D) leftward shifts of the LM curve
This was due to heavy decline in money supply.
4. B) expectations
The economists believe that the theory of expected deflation was very destabilising.