Explain how changes in foreign income can impact real GDP in a country
What will be an ideal response?
Changes in the income of any nation impact the level of exports and imports of all other nations trading with it. For example, in the United States aggregate demand increases if the income of our trading partners, such as Mexico and Canada, increases because some of the increase in Mexican and Canadian income translates into buying goods and services imported from the United States. As a result, U.S. aggregate demand increases, which means that U.S. real GDP increases. Thus increases in foreign income increase domestic real GDP while decreases in foreign income decrease domestic real GDP.
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The practice of making choices using generalizations based on observable characteristics like race, gender, or age is called:
A. discrimination. B. means-testing. C. conditional cash transfers. D. None of these is true.
If the demand for a product remains the same and the supply falls,
A. both the market clearing price and the equilibrium quantity will rise. B. the market clearing price will rise and the equilibrium quantity will fall. C. both the market clearing price and the equilibrium quantity will fall. D. the market clearing price will fall and the equilibrium quantity will rise.
A inflationary gap occurs in the economy when
A) Aggregate demand is perfectly elastic. B) Aggregate demand is greater than full employment output. C) Aggregate demand is greater than potential GDP. D) None of the above.
Which of the following statements concerning tariffs is NOT true?
A) A tariff results in a deadweight loss. B) A tariff creates revenue for the government. C) A tariff decreases international trade. D) A tariff leaves the price of imports unchanged.