What happens when a country runs a current account deficit?
What will be an ideal response?
When a country runs a current account deficit, it is analogous to what takes place when a single household spends more than it earns. To fund this extra spending, the household, and similarly the country, either borrows or spends down assets that had previously been accumulated.
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A price ceiling, such as a rent ceiling
A) always results in a surplus. B) always results in a shortage. C) results in a surplus if the ceiling price is less than the equilibrium price. D) results in a shortage if the ceiling price is less than the equilibrium price.
If the central bank targets the money stock, then a negative shock to money demand will
a. shift the LM schedule to the right and income will rise above the target level. b. shift the LM schedule up and income will fall below the target level. c. not shift the LM schedule and, therefore, will not displace income from the target level. d. None of the above
For each outcome below, tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve
(a) In the short run, the price level is unchanged and output rises. (b) In the long run, the price level declines and output is unchanged. (c) In the long run, the price level rises and output declines.
You love bananas. Due to a bad crop harvest, supply of bananas dropped in half. The price for bananas is expected to double in the near future. As a result,
a. your demand for banana will increase when the price doubles b. your demand for banana increases today. c. your demand for peanut butter decreases today d. it does not affect your demand as you love bananas