The TB (i.e., X- M) is part of the short-run spending equation. With sticky prices, what would be the effect on the TB with an increase (depreciation) of the home nation's exchange rate?
a. Consumers in the home nation would find it more expensive to buy domestic goods compared to foreign goods, and the trade balance would decrease.
b. Consumers in the home nation would cut back on both domestic and foreign goods and the trade balance would decrease.
c. Consumers in the home nation would increase spending on both domestic and foreign goods, and the trade balance would be unchanged.
d. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.
Ans: d. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.
You might also like to view...
If a firm's total revenue just covers its implicit and explicit costs of production, then
A. the economic cost of production exceeds total revenue. B. accounting profit is zero. C. economic profit is zero. D. total revenue exceeds the economic cost of production.
According to the cost disease of the personal services, service activities that require direct personal contact
a. tend to fall in price relative to other goods and services. b. tend to rise in price relative to other goods and services. c. follow price patterns similar to other goods and services. d. tend to move up and down in price ignoring the rest of the market.
Eating a bag of sweets gives Rory 25 utils of satisfaction. How many additional utils would you expect Rory would get from eating a second bag of sweets?
(a) 25 utils. (b) Less than 25 utils. (c) More than 25 utils. (d) 50 utils.
Sensible buyers or sellers will want to continue acquiring information
A) as long as the additional information extends their choices. B) as long as the anticipated additional benefit exceeds the additional cost of doing so. C) as long as they can be assured of acquiring correct information. D) indefinitely, because more information is better than less.