Using the ZZ/Y and NX graphs, illustrate graphically and explain what effect an increase in government spending will have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria
What will be an ideal response?
An increase in government spending will cause ZZ to shift up as demand rises. Y will increase causing an increase in C and S. As Y rises, imports will rise. Given that exports do not change, net exports will decrease.
You might also like to view...
When a macroeconomic aggregate is procyclical
A) it grows faster than GDP. B) its deviations from trend generally change before the deviations from trend in GDP do. C) its deviations from trend generally change more that the deviations from trend in GDP. D) its deviations from trend are more often of the same sign as the deviations from trend in GDP.
All things equal, the price elasticity of supply:
a. will be greater in the short run than in the long run. b. will be greater in the long run than in the short run. c. is the same for the short run and the long run. d. approaches zero in the long run.
The concept of economic rent can be applied to
A) land only. B) land and natural resources only. C) land, natural resources, and paintings by dead masters only. D) any resource that cannot be replicated exactly.
Over the post-war era, poorer countries grew
A) faster. B) slower. C) stayed the same. D) grew faster, then grew slower. E) No general tendency can be found.