A classical IS-LM model of the world economy can be used to show that in a flexible exchange-rate system, a temporary increase in government purchases will cause
A. output and the real interest rate to rise, which increases net exports but has an ambiguous effect on the real exchange rate.
B. output to rise and the real interest rate to fall, which reduces net exports and causes the exchange rate to depreciate.
C. the real interest rate to fall, which causes the exchange rate to rise, which reduces net exports.
D. output and the real interest rate to rise, which reduces net exports but has an ambiguous effect on the real exchange rate.
Answer: D
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A good is nonrival if:
A. there is no way to prevent a person from consuming or using it. B. more than one person can consume it at the same time without affecting its value to others. C. consumption of it involves perfect rivalry. D. consumption is completely excludable.
If the market price is $5 and you are currently producing at a level where average total cost is $3 and falling, you should
a. b or c, it doesn't matter b. shut down c. produce only enough to cover variable costs d. produce where MR = MC e. produce until the average total cost and average revenue are equal
A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for
the product will be A) A. B) B. C) C. D) D.
During a recession:
a. Government spending automatically falls and taxes automatically rise. b. Government spending and taxes automatically fall. c. Government spending and taxes do not tend to change. d. Government spending rises automatically and taxes fall automatically. e. None of the above.