10 Questions
What does the simple open-economy Keynesian model consist of?
Consumption spending, investment spending, government spending, and export spending
In the Keynesian income model, what is the focus on?
Aggregate spending and real income movements
What must be subtracted from desired expenditures to obtain the demand for home goods and services in the open-economy Keynesian model?
Import spending
Why is the economy assumed to not be at full employment in the Keynesian income model?
Because of downward money wage rigidity
What is assumed to be constant in the Keynesian income model?
Prices and wage rate
How does the incorporation of a foreign trade sector into a Keynesian income model impact the domestic saving/investment relationship and the multiplier?
It destabilizes the domestic saving/investment relationship and has an unpredictable impact on the multiplier
What did economist Catherine Mann suggest about the relationship between the U.S. economic boom and its trade deficit?
The economic boom will widen the U.S. trade deficit
What would lead to a temporary narrowing of the U.S. trade gap, according to economist Catherine Mann?
A decrease in the value of the dollar
Based on economist Catherine Mann's statement, what is expected if there are structural reforms encouraging faster global growth and boost in U.S. household savings rates?
The U.S. trade deficit will stabilize
What does economist Catherine Mann suggest is required to put the U.S. current account and trade deficits back on a sustainable path?
Structural reforms encouraging faster global growth and boost in U.S. household savings rates
Test your understanding of the incorporation of a foreign trade sector into a Keynesian income model, the relationship between domestic saving/investment, changes in the multiplier, national income equilibrium, and interdependence of income levels across countries.
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