Assume That the Left-Wing Party Always Had a Policy of High

question 53

Multiple Choice

Assume that the left-wing party always had a policy of high money growth whereas the right-wing party followed a policy of low money growth,and the economy had a standard Phillips curve.Then,if the two parties took regular terms in office:

• A) there would be no political business cycle,but inflation would be higher under the left-wing party.
• B) there would be no political business cycle,but inflation would be higher under the right-wing party.
• C) unemployment would be lower under the left-wing party but inflation would be higher.
• D) both unemployment and inflation would be higher under the left-wing party.

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Definitions:

Trade Policies

Laws and regulations enacted by governments to manage international trade, designed to protect domestic industries, control exports and imports, and foster economic growth.

Trade Balance

The variance between what a nation sells and buys from abroad in terms of goods and services.

National Saving

The total amount saved by a nation's households and businesses, plus government budget surplus, which can be used for investment.

Open-Economy Macroeconomic Model

A model that analyzes an economy that engages in international trade, considering the impact of exports, imports, and capital flows.