Expansionary fiscal policy increases income, which increases imports, and this in turn increases the size of the trade deficit.
Answer the following statement true (T) or false (F)
True
The increase in income produced by an expansionary fiscal policy causes consumers to purchase more imports, and higher imports increase the trade deficit.
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Starting from equilibrium and using the ISLM framework, a decrease in investment leads to
A) lower interest rates and higher income. B) higher interest rates and higher income. C) lower interest rates and lower income. D) higher interest rates and lower income.
Microeconomic models are used to
A) make predictions. B) explain real-life phenomena. C) evaluate policy alternatives. D) All of the above.
If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices will
A) increase total revenue. B) decrease total revenue. C) not change the elasticity of demand. D) not change total revenue.
When the credit demand curve is relatively steep:
A) the quantity of credit demanded is relatively sensitive to changes in the tax rates. B) the quantity of credit demanded is not very sensitive to changes in the real interest rate. C) the quantity of credit demanded is relatively sensitive to changes in the real interest rate. D) the quantity of credit demanded is not very sensitive to changes in the tax rates.