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Questions and Answers
What happens to the trade deficit when public savings decrease by 25 due to an increase in government spending by 25?
What happens to the trade deficit when public savings decrease by 25 due to an increase in government spending by 25?
- The trade deficit becomes zero
- The trade deficit decreases
- The trade deficit remains unchanged
- The trade deficit increases (correct)
Why is there no complete crowding out of investment spending in the open economy when government spending increases?
Why is there no complete crowding out of investment spending in the open economy when government spending increases?
- Because r is endogenous
- Because r is exogenous (correct)
- Because investment spending always increases government spending
- Because government spending always increases investment
What happens to the domestic real exchange rate when government spending increases, ceteris paribus?
What happens to the domestic real exchange rate when government spending increases, ceteris paribus?
- It decreases, making exports more attractive
- It decreases, making imports more attractive
- It increases, making exports less attractive (correct)
- It increases, making exports more attractive
What is the effect of the increase in government spending on the attractiveness of foreign goods to domestic consumers?
What is the effect of the increase in government spending on the attractiveness of foreign goods to domestic consumers?
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What happens to exports when government spending increases, ceteris paribus?
What happens to exports when government spending increases, ceteris paribus?
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