During a recession:
a. Government spending automatically falls and taxes automatically rise.
b. Government spending and taxes automatically fall.
c. Government spending and taxes do not tend to change.
d. Government spending rises automatically and taxes fall automatically.
e. None of the above.
Question 2 - If a nation has flexible exchange rates and its current and capital accounts equal zero, then the:
a. Financial account must be positive
b. Financial account can be positive or negative depending on the size of the budget deficit and exchange rate.
c. Reserves account can be positive or negative depending on the size of the budget deficit and exchange rate.
d. Financial account minus the reserves account must equal zero.
Question 3 - During a recession:
a. Government spending automatically rises and taxes automatically rise.
b. Government spending automatically falls and taxes automatically rise.
c. Government spending and taxes automatically fall.
d. Government spending and taxes do not tend to change.
e. Government spending rises automatically and taxes fall automatically.
Question 4 - If a nation is running current account surpluses, then it must be:
a. Financing them with surpluses in the rest of the balance of payments.
b. Running deficits in the rest of the balance of payments.
c. In good economic health.
d. Sliding into a recession.
e. Having its central bank intervene in the foreign exchange market to lower the value of the currency.
Question 5 - Which of the following is correct? When the expected amount supplied exceeds the expected amount demanded, then:
a. Inventories rise, unemployment tends to rise, and prices tend to fall.
b. Inventories rise, unemployment tends to fall, and prices tend to rise.
c. Inventories fall, unemployment tends to rise, and prices tend to rise.
d. It is impossible for these two to be unequal.
e. You are mixing apples and oranges. These two macroeconomic variables should not be compared.
Question 6 - Taken as a whole the balance of payments:
a. Is usually positive when a nation is healthy and negative when it is weak.
b. Is usually negative when the nation is healthy and positive when it is weak.
c. Must equal zero.
d. Must equal GDP minus personal consumption expenditures.
e. Can be positive or negative. It does not depend on the health of the country.
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