The main purpose of economic policies is to attain internal and external economic balances simultaneously.
Internatıonal Economıcs II (ENG) — Ünite 6 Soru-Cevap
Internatıonal Economıcs II (ENG) (IKT320U) soru-cevapları.
What is the main purpose of economic policies?
What is the ultimate goal in an open economy?
In an open economy, simultaneously achieving internal and external balances is the ultimate goal.
What conditions define equilibrium in the goods market?
Equilibrium in the goods market occurs when domestic production equals total expenditures and aggregate demand equals aggregate supply.
What conditions characterize the equilibrium in the money market?
Equilibrium in the money market occurs when the real money supply and demand are in equilibrium, so there is no imbalance in the financial asset markets
What conditions must be met for macroeconomic equilibrium?
Macroeconomic (internal and external) equilibrium requires simultaneous balance in the economy’s three main sectors: the goods market, the money market and the balance of payments.
Which curve represents the equilibrium in the money market?
LM curve represents the money market equilibrium.
What relationship does the BP curve illustrate?
The BP curve shows the relationship between the interest rate and national income at the country’s balance of payments equilibrium.
What factors determine the slope of the BP curve?
The BP curve may be horizontal, vertical, or positively sloped depending on the degree of capital mobility in the economy.
What does it mean when a point is positioned to the right of the BP curve, and what about when it's to the left?
Every point to the right of the BP curve shows an external deficit, and each point to the left of the BP curve indicates an external surplus.
What is implied by achieving general equilibrium in an open economy?
General equilibrium in an open economy implies the simultaneous achievement of internal and external balances.
Which approach examines the effects of monetary and fiscal policies in fixed and flexible exchange rate systems under conditions of perfect capital mobility?
Mundell-Fleming Model: An approach that examines the effects of monetary and fiscal policies in fixed and flexible exchange rate systems under conditions of perfect capital mobility.
In what circumstances is fiscal policy ineffective in a fixed exchange rate system?
In the case of perfect capital immobility, fiscal policy is ineffective in a fixed exchange rate system.
In the case of perfect capital mobility, which policy is fully effective in a fixed exchange rate system?
In the case of perfect capital mobility, fiscal policy is fully effective in a fixed exchange rate system.
Which policy is fully ineffective regardless of the degree of capital mobility under fixed exchange rates?
Monetary policy is fully ineffective regardless of the degree of capital mobility under fixed exchange rates.
How does the effectiveness of fiscal policy change as the slope of the BP curve increases in a fixed exchange rate system?
As the slope of the BP curve increases, the effectiveness of fiscal policy decreases in a fixed exchange rate system.
What is the Impossible Trinity Hypothesis?
According to the Impossible Trinity Hypothesis, free capital mobility, independent monetary policy, and fixed exchange rate policy cannot be implemented simultaneously in an economy.
Who originally developed the impossible trinity hypothesis, and when?
The impossible trinity hypothesis was first developed by J. Frankel in 1999.
What does Mundell's Allocation Rule suggest regarding the appropriate policy changes for internal and external balance problems?
Mundell’s Allocation Rule: It expresses the view that it is appropriate to follow a fiscal policy change for internal balance problems and a monetary policy change for external balance problems.
According to perfect capital mobility, what is indicated at every point above the BP curve?
According to perfect capital mobility, there is an external surplus at every point above the BP curve and an external deficit at every point below it.
According to perfect capital mobility, what is indicated at every point below the BP curve?
According to perfect capital mobility, there is an external surplus at every point above the BP curve and an external deficit at every point below it.
Which rule expresses the view that it is appropriate to follow a fiscal policy change for internal balance problems and a monetary policy change for external balance problems?
Mundell’s Allocation Rule: It expresses the view that it is appropriate to follow a fiscal policy change for internal balance problems and a monetary policy change for external balance problems.