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Using an IS -LM diagram, show the effect of an expansionary fiscal policy on the aggregate demand curve.
Using an IS -LM diagram, show graphically that for a given LM curve, the flatter is the IS curve, the flatter or more elastic is the aggregate demand curve.
Using an IS -LM diagram, show graphically how a reduction in the general price level in a nation results in a movement down the aggregate demand curve.
Why is fiscal policy effective but monetary policy ineffective under fixed exchange rates? Why is the opposite true under flexible rates?
How does the effect of a real-sector shock on the nation's aggregate demand differ under fixed and flexible exchange rates?
How is an open economy's aggregate demand curve derived under flexible exchange rates? Why is this more elastic than if the nation were a closed economy?
Why must the Marshall-Lerner condition be satisfied for an open economy's aggregate demand curve to be more elastic than if the economy were closed?
How is an open economy's aggregate demand curve derived under fixed exchange rates? Why is this more elastic than if the nation were a closed economy?
Using an aggregate demand and an aggregate supply framework, explain why a nation must necessarily be in short-run equilibrium if it is in long-run equilibrium.
How can a nation's output temporarily deviate from its natural level? Why and how does a nation's output return to its long-run natural level?
What does the aggregate supply curve show? How does the long-run aggregate supply curve differ from the short-run aggregate supply curve?
How does an increase in government expenditures affect the AD curve? Why? To what kind of fiscal policy does this refer?
Why is a reduction in the general price level for a given money supply shown as a movement down a given aggregate demand curve.
What does the aggregate demand curve in a closed economy show? How is it derived? Why is it downward sloping?
Why is it important to examine the relationship between prices and output in our. How are prices incorporated into the analysis of open-economy macroeconomics?
Given C = 100 + 0.8Y and autonomous investment I = 100, draw a figure showing the equilibrium level of national income.
How do all the automatic adjustment mechanisms operate together to correct a deficit in nation. What is the disadvantage of each automatic adjustment mechanism?
What is meant by automatic monetary adjustments? How do they help to adjust balance-of-payments disequilibria?
What happens to the trade balance of a deficit nation if it allows its currency to depreciate or devalue from a position of full employment?
What is meant by the elasticity approach the absorption approach? In what way does the absorption approach integrate the automatic price and income adjustment?
What is the multiplier formula for an autonomous increase in investment in Nation 1? in Nation 2? How are foreign repercussions related to business cycles?
What is the multiplier formula for Nation 1 with foreign repercussions for an autonomous increase in its exports that replaces domestic production in Nation 2?
What is meant when we say that the automatic income adjustment mechanism brings about incomplete adjustment in the balance of trade or payments?
Analyze how is the equilibrium level of national income determined in a closed economy? How is the size of the closed economy multiplier (k) determined?
What is meant by a closed economy? by desired or planned investment, consumption, and saving? What is meant by investment being exogenous?