Open-Economy Macroeconomics Quiz

What is the primary goal of internal balance?

• High economic growth

• Full employment

• Equilibrium in balance of payments

• Low inflation

Which policy is considered an expenditure-changing policy?

• Fiscal policy

• Quotas

• Tariffs

• Direct controls

What does the EE curve in the Swan diagram represent?

• External balance

• Government expenditure

• Private-sector balance

• Internal balance

What is the main disadvantage of using direct controls to achieve balance?

• They are easy to implement

• They can interfere with market mechanisms

• They are always effective

• They require no government intervention

Which of the following is a characteristic of the IS curve?

• Vertical

• Horizontal

• Negatively inclined

• Positively inclined

What does the LM curve represent?

• Equilibrium in the goods market

• Equilibrium in the money market

• Equilibrium in government spending

• Equilibrium in the balance of payments

What is the effect of expansionary fiscal policy on the IS curve?

• Shifts it to the right

• Shifts it to the left

• Makes it vertical

• Keeps it unchanged

What is the primary focus of monetary policy?

• Changing government spending

• Adjusting interest rates

• Implementing tariffs

• Controlling inflation directly

In the context of the chapter, what does external balance refer to?

• Low inflation

• Equilibrium in the balance of payments

• High economic growth

• Full employment

What is the principle of effective market classification?

• Focusing solely on fiscal policy

• Ignoring market responses

• Pairing policies with their most effective objectives

• Using one policy for all objectives