The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment
A. increases generated by higher interest rates are offset by net export decreases.
B. decreases generated by higher interest rates are coupled with net export decreases.
C. decreases generated by higher interest rates are offset by net export increases.
D. increases generated by higher interest rates are coupled with net export increases.
Answer: B
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A currency depreciation would _____ net exports, and therefore ___________ aggregate demand.
A. increase; increase B. increase; decrease C. decrease; decrease D. None of the above is correct.
How does an increase in taxes affect the expenditure schedule?
A. It causes movement to the left along the schedule. B. It causes the schedule to shift upward. C. It causes movement to the right along the schedule. D. It causes the schedule to shift downward.
Which of the following would be a legitimate government activity in the U.S. economy?
A. Enforcing child labor laws. B. The enactment of antitrust laws to protect consumers. C. The regulation of water pollution. D. All of the choices are correct.
In general, the production and use of capital ________ the productivity of labor and normally ________ wages.
A. has no effect on; has no effect on B. enhances; drives down C. diminishes; drives down D. enhances; drives up