Balance of Payments: In vs Out

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

Monetarist theory, as the outline names it, favors managing the economy through which lever?

A. The money supply, set by steady rules rather than discretionary intervention B. Active government spending to replace lost demand in a downturn C. Direct control of the federal funds rate by Congress D. A fixed exchange rate maintained by the Treasury

How sure are you?

Sure Fairly sure Guessing

Correct: A. Monetarist theory favors managing the money supply, with policy set by steady rules rather than discretionary intervention.

B. That describes Keynesian theory, the competing named theory, not monetarist.

C. Congress does not set the federal funds rate under either named theory; the FOMC does.

D. Exchange-rate policy is a separate international factor, not monetarist theory's named lever.

Unit: SIE outline 1.3.2

Question 2Above the exam

A steelmaker's income statement shows falling revenue for the year just as a contraction deepens, while a utility company's income statement for the same year shows revenue nearly unchanged. Which is correct: the phase, and which company is behaving as expected for its stock type?

A. Contraction; both companies are behaving unexpectedly for their sectors B. Contraction; the steelmaker is behaving as a cyclical stock would, and the utility is behaving as a defensive stock would, both as expected C. Expansion; neither company's behavior fits its stock type D. Contraction; the utility is the cyclical one here, since its revenue barely moved

How sure are you?

Sure Fairly sure Guessing

Correct: B. A deepening contraction is the stated phase. Steel is a cyclical sector, so falling revenue in a downturn is exactly expected; utilities are a defensive sector, so nearly unchanged revenue is exactly expected too.

A. Both companies are behaving exactly as their stock type predicts, not unexpectedly.

C. Falling output and revenue describe a contraction, not an expansion.

D. Reverses the two labels; steady demand through a downturn is the defensive pattern, not the cyclical one.

Unit: SIE outline 1.3.2

Now answer