Fear of floating is:
A) when the benefits of floating exchange rates outweigh the costs.
B) when the attractions of fixed exchange rates are large relative to those of floating.
C) when countries adopt the gold standard.
D) when countries say they are floating, but fix their exchange rates in practice.
Ans: B) when the attractions of fixed exchange rates are large relative to those of floating.
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Suppose that the federal government had a budget deficit of $80 billion in year 1 and $10 billion in year 2, but it had budget surpluses of $140 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have
A) increased by $250 billion. B) decreased by $70 billion. C) decreased by $62.5 billion. D) increased by $70 billion.
The practice of the ECB and national central banks of preventing massive bank failures after the financial crisis of 2008 had what effect on the affected economies?
A) Prevention of bank failures greatly reduced the pain of the crisis for taxpayers. B) Prevention of bank failures ended up not saving most banks anyway. C) Banks resisted the takeover by the ECB and refused to make additional credit available. D) Governments financed the bailouts by issuing more domestic debt, which caused extreme fiscal problems.