Question 21 Suppose the Asian financial crisis decreased U.S. exports. In the ag

Question

Question 21

Suppose the Asian financial crisis decreased U.S. exports. In the aggregate demand/aggregate supply model, this would be represented as

Select one:

a. a shift to the left of aggregate supply, which would result in less production for the U.S. economy.

b. a shift to the right of aggregate demand, leading to more spending and production in the U.S. economy.

c. a shift to the right of aggregate supply, which would result in more production for the U.S. economy.

d. a shift to the left of aggregate demand, leading to less spending and production in the U.S. economy.

Question 22

Which of the following may NOT help avoid a financial crisis?

Select one:

a. Disclosure of timely information to lenders, investors, and depositors about key economic variables such as the central bank's holding of international reserves

b. Regulation and supervision of the financial system

c. Immediately bailing out financial intermediaries and standing ready to bail out others in case a financial crisis occurs

d. Maintaining credible and sustainable fiscal policies

e. Maintaining credible and sustainable monetary policies

Question 23

One area of labor issues that the labor side agreement to NAFTA does not open to foreign consultation or investigation is

Select one:

a. minimum wages.

b. worker exposure to toxic hazards.

c. the use of child labor.

d. worker's rights to organize.

e. worker exposure to unsafe conditions.

Question 24

Which of the following is NOT a characteristic of a financial crisis caused by macroeconomic imbalances?

Select one:

a. Crises can be unpredictable.

b. Crises can be caused by budget surpluses.

c. Crises can be predictable.

d. Crises can by expansionary fiscal policies accompanied by high budget deficits.

Question 25

Which of the following was NOT one of the causes of the Asian financial crises of 1997 and 1998?

Select one:

a. The use of exports as an engine of economic growth by the countries involved

b. China's 1994 devaluation of its fixed exchange rate

c. A current account deficit and financial account surpluses

d. Crony capitalism

e. The appreciation of the U.S. dollar and depreciation of the Japanese yen

Explanation / Answer

Question 21

Net exports is calculated by subtracting imports from exports.

If imports remain same and exports decrease then in that case net exports also decrease.

Net export is a component of aggregate demand.

So, decrease in net export will lead to decrease in aggregate demand and will shift the aggregate demand curve to the left.

Thus, decrease in US exports will lead to a shift to the left of aggregate demand, leading to less spending and production in the US economy.

Hence, the correct answer is the option (d).

Question 22

Financial crisis would not be avoided if government or regulator remain available to bail out the financial intermediaries in case of crisis and immediately bail out firms in case crisis occurs.

This kind of behavior promotes moral hazard and will only leads to frequent financial crisis.

Hence, the correct answer is the option (c).

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