Crowding Out in Open Economy
5 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

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?

  • 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?

  • 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?

    <p>They become more attractive</p> Signup and view all the answers

    What happens to exports when government spending increases, ceteris paribus?

    <p>They decrease, making the trade deficit increase</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Browser