Suppose the United States Is Entering a Recession at the Same

question 115

Multiple Choice

Suppose the United States is entering a recession at the same time that it has agreed to work toward eliminating its trade deficit. Considering the effect of monetary policy on trade through its impact on income only:

• A)an expansionary monetary policy would be the appropriate means of achieving both objectives.
• B)a contractionary monetary policy would be the appropriate means of achieving both objectives.
• C)an expansionary monetary policy would be appropriate to eliminate the trade deficit, but contractionary monetary policy is called for to deal with the recession.
• D)a contractionary monetary policy would be appropriate to eliminate the trade deficit, but expansionary monetary policy is called for to deal with the recession.

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Definitions:

Bond's Lifetime

The period from the issuance of the bond until it reaches its maturity date.

Registered Bonds

are bonds whose ownership is recorded by the issuing company, ensuring that only the registered owner receives interest payments and the principal back.

Bearer Bonds

Bonds that are owned by the holder rather than a registered owner, and the physical possession of the bond is the only evidence of ownership.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares, typically at the discretion of the bondholder.