PART FOUR: OPEN ECONOMY MACROECONOMICS AND THE INTERNATIONAL MONETARY SYSTEM
Chapter 14: The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

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

2. The marginal propensity to consume measures:

3. The income elasticity of imports is given by:

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

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

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

7. The S-I function rises because:

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

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

10. The foreign trade multiplier of nation 1 is largest:

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

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

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

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

15. A benefit of automatic adjustment mechanisms is that they: