question 41 Starting from a balanced budget which of the fol

question 41

Starting from a balanced budget, which of the following would NOT cause a deficit?

Select one:

a. A decrease in taxes

b. An increase in spending of goods and services

c. An increase in transfer payments

d. A 50 percent increase in spending accompanied by a 40 percent increase in taxes

e. None of the choices.

Question 42

The J-curve effect of a currency depreciation results is due to

Select one:

a. the initial effect having positive effects on the current account balance.

b. the value of imports increasing by more than the value of exports at the time of devaluation.

c. exports and imports being totally unresponsive to changes in exchange rates.

d. decreases in the dollar price of imports.

e. None of the choices.

Question 43

Proponents of ISI assumed that governments

Select one:

a. were capable of identifying and correcting market failures.

b. were capable of identifying and correcting the excesses of economic populists.

c. should enact orthodox stabilization plans.

d. could control the terms of trade.

e. Both A and D.

Question 44

Raul Prebisch was an Argentine economist who argued that

Select one:

a. the terms of trade would decline for primary commodity exports.

b. the terms of trade would decline for manufactured goods exports.

c. imports substitution policies were a solution to export pessimism.

d. Both A and C.

e. Both B and C.

Question 45

One of the problems with excessive debt is that

Select one:

a. it worsens the central government\'s budget position by adding large debt service payments to other budget items.

b. it reduces the quantity of resources available to invest in economic development.

c. if debt service is substantial, schools, health clinics, roads, ports, other infrastructure, and social needs are less likely to be addressed.

d. it can intensify and spread a crisis.

e. All of the choices.

Solution

1. E none of these

none of the above causes the government spending more than it’s bringing in hence won\'t cause a deficit.

2. B.the value of imports increasing by more than the value of exports at the time of devaluation.

a currency\'s balance of trade may get worse before it gets better. The graph showing this effect is shaped the letter J, hence the name J-curve effect. in devaluation The higher exchange rate first corresponds to more costly imports and less valuable exports, leading to a bigger initial deficit or a smaller surplus and hence a j curve.

3.E both a and d

4. D both a and c

5. E all of the choices