Consider a small open economy in equilibrium with a zero current account balance. What happens to national saving, investment, and the current account balance in equilibrium if(a)future income rises?(b)business taxes rise?(c)government expenditures decline temporarily?(d)the future marginal product of capital rises?
What will be an ideal response?
| (a) | Saving curve shifts left, so S falls, I is unchanged, CA falls. |
| (b) | Investment curve shifts left, so S is unchanged, I falls, CA rises. |
| (c) | Saving curve shifts right, so S rises, I is unchanged, CA rises. |
| (d) | Investment curve shifts right, so S is unchanged, I rises, CA falls. |
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The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the
A) decrease in taxes will be saved by households and not spent, and some portion will be spent on imported goods. B) increase in government purchases will be saved by households and not spent, and some portion will be spent on imported goods. C) decrease in taxes will be saved by households and not spent, and some portion will be spent on consumer durable goods. D) increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.
Which of the following categories constitutes the majority of federal outlays in 2016?
a. National defense b. Interest on the federal debt c. Social Security, Medicare, and welfare d. Grants to states and localities e. Capital expenditures
When can two countries gain from trading two goods?
a. when the first country can only produce the first good and the second country can only produce the second good b. when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost c. when the first country is better at producing both goods and the second country is worse at producing both goods d. Two countries could gain from trading two goods under all of the above conditions.
An increase in future price expectations may act like a cost shock, shifting the aggregate supply curve to the left.
Answer the following statement true (T) or false (F)