Choose the one alternative that best completes the statement or answers
running a current account deficit must either be ________ its indebtedness to
foreigners in the private sector or ________ its indebtedness to foreign governments.
A) decreasing, decreasing
C) increasing, decreasing
Suppose that U.S. and British inflation rates are equal, and $2 exchanges for 1 British pound.
Then if U.S. inflation slows down relative to British inflation, the PPP theory predicts ________ of
the dollar, so that the pound will cost ________ than $2.
A) an appreciation, more
a depreciation, less
C) a depreciation, more
an appreciation, less
Switching the U.S. policy mix to a tighter fiscal and easier monetary policy ________ the U.S.
interest rate, leading to ________ of the dollar, which puts ________ long-run pressure on the
U.S. foreign trade surplus.
A) lowers, appreciation, downward
B) lowers, depreciation, upward
C) raises, depreciation, upward
D) raises, depreciation, downward
E) raises, appreciation, upward
Keynes held out the possibility of "monetary impotence" causing the aggregate demand
curve to be ________ below the natural real GDP, which results in an economy with ________
A) horizontal, instant
C) vertical, no
Keynes discussed the possibility of a horizontal LM curve, which causes a ________, thus
the possibility of ________.