1. Which is not an effect of increases in gov. deficit spending? a) Capital inflow increase...
1. Which is not an effect of increases in gov. deficit spending?
a) Capital inflow increase
b)Increase in imports
c)Increase in interest rates
d)Decrease in exports
e)Decrease in the trade deficit
2. The twin deficits effects is used to describe simultaneous deficits in the USA gov. budget and:
a)International trade
b)Monetary policy
c)Gov. expenditures
d)unemployment
e)None of these
3. If an expansionary monetary policy increases the supply of US dollars, what effect will this have on the US dollar value in the international currency exchange market?
a)Dollars will cost more
b)Dollars will have no change in cost
c)Dollars will cost less
d)None of these
e)The effect cannot be determined with this info.
Homework Answers
1) e is correct
Increase in government spending leads to increase in income. Higher income leads to increase in imports which worsens the trade balance.
2) a is correct
Budget and international trade are called twin deficits.
3) c is correct
Increase in money supply in the economy will lead to depreciation of dollar which implies that dollar will cost less.
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