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Jacket
Economics, 7/e
David Begg, Birkbeck College, University of London
Rudiger Dornbusch
Stanley Fischer
Fiscal policy and foreign trade

Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1

Aggregate demand without a foreign sector is the sum of
A)C + I
B)C + G
C)I + G
D)C + I + G
2

If the government increases spending and raises taxes by just enough to finance this increase it will ________
A)leave output unchanged
B)increase output
C)reduce output
D)increase the MPC
3

Starting from a balanced budget, for a given tax rate, an increase in income will cause the government budget to
A)move into surplus
B)move into deficit
C)remain unchanged
4

For given government spending and taxation, the government budget deficit will grow in __________ and decline in ___________
A)booms, booms
B)recession, recession
C)booms, recessions
D)recessions, booms
5

Aggregate demand in an economy trading internationally with a government sector can be written as _______________
A)AD = C + I
B)AD = C + I + G
C)AD = C + I + G + X + Z
D)AD + C + I + G + X - Z
6

The total multiplier for the economy will reflect _________
A)MPC and MPT
B)MPT and MPZ
C)MPC and MPZ
D)MPC, MPT and MPZ
7

When the level of income _________ there will be a tendency for the trade balance to improve as imports __________
A)increases, increase
B)falls, increase
C)falls, fall
D)increases, fall
8

In an open economy leakages to imports ___________ the value of the multiplier
A)reduce
B)increase
C)do not change
9

Higher export demand _____________ output and a higher MPZ __________ output
A)reduces, reduces
B)reduces, increases
C)increases, reduces
D)increases, increases
10

In equilibrium, any surplus desired by the private sector must be offset by deficits in the _________ and _____________
A)company sector, commercial sector
B)government sector, company sector
C)commercial sector, government sector
D)government sector, foreign trade sector
11

The government budget is a good indicator of fiscal stance
A)TRUE
B)FALSE
12

When an open economy is in equilibrium it means that the trade deficit is zero
A)TRUE
B)FALSE






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