Why is the multiplier for contractionary fiscal policy smaller in an open economy?
A) Contractionary fiscal policy reduces the deficit, which raises the interest rate, which raises the foreign exchange value of the dollar, which increases net exports.
B) Contractionary fiscal policy increases the deficit, which raises the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports.
C) Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which decreases net exports.
D) Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports.
D
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The nominal interest rate is approximately equal to the real interest rate minus the inflation rate
Indicate whether the statement is true or false
If Michelle can buy a woolen jacket for 40 yuan in China, and Rebecca pays $40 for the same jacket in the U.S., it implies that the exchange rate between these two nations is 10 yuan = $1
a. True b. False Indicate whether the statement is true or false
The perfectly competitive firm cannot influence the market price because
A) it has market power. B) its production is too small to affect the market. C) a few buyers have control over the market price. D) its costs are too high.
Refer to the graph. Which of the lines in the diagram represent(s) a regressive tax?
A. Both A and B.
B. D only.
C. C only.
D. B only.