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Which curve shows all combinations of nominal exchange rates and national income that clear foreign trade?
AIS Curve
BBP (Balance of Payments) Curve
CLM Curve
DYield Curve
The Mundell-Fleming Model extends the classic IS-LM framework by incorporating:
AAn open economy with international trade and capital mobility
BLong-term technological growth rates
CMonopoly market pricing
DDemographic population shifts
Under flexible exchange rates and perfect capital mobility, which policy instrument is completely ineffective according to Mundell-Fleming?
AMonetary Policy
BCommercial Policy
CTariff Policy
DFiscal Policy
The term ‘Liquidity Trap’ in Keynesian economics describes a situation where:
ACommercial banks have zero liquid reserves
BInterest rates are so low that people hoard cash and monetary expansion fails to lower interest rates further
CInflation reaches hyperinflationary levels
DThe central bank runs out of gold reserves
Automatic stabilizers in fiscal policy include which of the following without requiring new legislation?
AAd-hoc discretionary infrastructure projects
BProgressive income taxes and unemployment compensation benefits
CCentral bank open market operations
DForeign exchange intervention
The principle of public expenditure which suggests government spending should benefit society as a whole rather than a small group is:
ACanon of Excess Profit
BLaw of Diminishing Marginal Returns
CPrinciple of Maximum Social Advantage
DPrinciple of Subsidiarity
Adolph Wagner’s Law of Increasing State Activities asserts that:
AGovernment spending always shrinks relative to national income
BTax revenues decline during economic expansions
CPublic debt causes immediate hyperinflation
DAs industrial economies grow, public expenditure naturally grows as a proportion of GDP
The concept of ‘Benefit Principle’ of taxation implies that individuals should pay taxes according to:
ATheir total income levels
BThe value of public benefits and services they receive from government
CTheir accumulated physical wealth
DTheir family size
The ‘Ability to Pay Principle’ of taxation is primarily justified on the basis of:
AEqual sacrifice (horizontal and vertical equity)
BCost of service provided to each taxpayer
CEncouraging higher luxury consumption
DMinimizing overall export costs
Which economist introduced the concept of the ‘Multiplier-Accelerator Interaction’ to explain business cycle fluctuations?
AJohn Hicks
BJoseph Schumpeter
CPaul Samuelson
DNicholas Kaldor