Explain why the multiplier in an open economy is different from the multiplier in a closed economy
What will be an ideal response?
In a closed economy, the effects of any change in Y on demand all falls on domestic goods. In an open economy, some of the increased spending falls on imports. So, the final change in Y will be smaller in an open economy because of the existence of the marginal propensity to import.
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GDP measured using current prices is called ________.
A. real GDP B. deflated GDP C. nominal GDP D. constant GDP
The current account is the record of
A) changes in the government's holdings of foreign currency. B) the nation's exports but not its imports. C) payments for imports, receipts for exports, net interest, and net transfers. D) a nation's international trading, borrowing, and lending. E) foreign investment in the nation minus the nation's investment abroad.
The famous saying, "There is no such thing as a free lunch" means
A) we do not live in a free country. B) the value of our dollar keeps declining. C) people face tradeoffs. D) people do not care about others enough.
The General Motors Acceptance Company (GMAC) is a
A) sales finance company. B) consumer finance company. C) business finance company. D) public finance company.