Exam 17: The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

The equilibrium level of national income in an open economy is given by:

A benefit of automatic adjustment mechanisms is that they:

In the real world,the automatic income,price,and interest adjustment mechanisms,if allowed to operate,are likely to:

The income elasticity of imports is given by:

When S exceeds I,an open economy has a trade balance:

The foreign trade multiplier of nation 1 is largest:

The S-I function rises because:

In order to isolate the income adjustment mechanism,we assume that:

The marginal propensity to consume measures:

The improvement in a nation's balance of trade and payments resulting from a depreciation of its currency is:

If MPS=0.2 and MPM=0.3,the foreign trade multiplier is:

An autonomous increase in S from a condition of equilibrium in national income and in the trade balance results in the nation's income:

By itself,the automatic income adjustment mechanism is likely to bring about:

An autonomous fall in M from a condition of equilibrium in national income and in the trade balance results in the nation's income:

A depreciation of a deficit nation's currency from a condition of full employment: