For this question, assume that equilibrium output is determined in the ZZ-Y diagram. Further assume that policy makers' goals are (1 ) to achieve balanced trade (i.e., NX = 0); and (2 ) to achieve a target level of output, say YT. Now, suppose that the initial level of equilibrium output is equal to YT (i.e., Y = YT) and that a trade deficit exists at this initial level of output. Which of the
following policy actions would most likely enable the policy makers to achieve their two goals simultaneously?
A) a reduction in government spending
B) convince the country's trading partners to pursue policies that will cause an increase in foreign income (Y)
C) a reduction in the real exchange rate
D) a reduction in taxes
E) a simultaneous increase in government spending and reduction in the real exchange rate
F) none of the above
B
You might also like to view...
When a firm produces output,
A) The value of the output produced is included in GDP B) The firm's output contributes to GDP only to the extent that there is value-added. C) The firm's output will not count as GDP if it is stored as inventory. D) The firm's output will not count as GDP if it is exported.
A budget will
A) improve your credit standing so you can use borrowing to increase your current consumption. B) All of the above. C) help you focus on those expenditures that you value highly relative to cost. D) make it more attractive for you to buy a car every couple of years.
The largest component of GDP is:
A. government purchases. B. net foreign factor income earned in the United States. C. gross private domestic investment. D. personal consumption expenditures.
If a firm in a perfectly competitive market is currently producing the output where price = marginal cost > average total cost, the firm is:
A. earning a positive profit. B. earning a zero profit. C. suffering an economic loss. D. All of these