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A rise in the domestic spending will most probably
a) Improve
b)Worsen balance of the trade
c)None of the above
Step by step
Solved in 2 steps
- A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports. True FalseHow does a fiscal expansion affect the real exchange rate and net exports?In the Keynesian balance of payments model A. The trade balance is not affected by income changes. B. An increase in income will increase exports. C. An increase in income will increase imports. D. An increase in income will increase the trade balance. E. An increase in income will increase both imports and exports.
- The equilibrium condition for GDP in an open economy is: Y = C + I + G + (X – M) GDP can be eitherspent, saved, or taxed away , so it is necessary that: Y = Substituting the second equation into the first equation and rearranging yields: X – M = The fundamental equation shows that an increase in the taxes will cause the budget deficit to , which should the trade deficit.What is the effect of a fiscal expansion on output and interest rates when exchange rates are fixed and capital is perfectly mobile?Turkey has run a trade deficit for almost every year during the past few decades. Which of the following is the main factor leading to this situation? a.The Turkish lira is overvalued against foreign currencies. b.International demand for Turkish goods and services is low. c.Domestic demand for foreign goods and services is high. d.National saving in Turkey is low relative to domestic investment.
- A real appreciation means that domestic goods become more expensive relative to foreign goods. Please explain. True or false ?Future U.S. deficits could be decreased by options: increasing transfer payments and decreasing interest payments on the debt increasing government expenditures and decreasing taxes decreasing current and future taxes decreasing government expenditures and increasing taxesIf a country’s exchange rate depreciates what would be the most likely impact on exports, imports and the trade balance of the country?
- In a small open economy, if the budget deficit increases, then which of the following is likely to be accurate? a. If private saving and domestic investment stay the same, then net exports increase. b. If private saving stays the same and net exports increase, then domestic investment decreases. c. If private saving decreases and domestic investment stays the same, then net exports increase. d. If private saving increases and net exports decrease, then domestic investment decreases.An economy is described by the following two equations. Y = C (Y – T) + I (r* ) + G – NX(e) M/P = L(r*, Y) If the taxes are raised in this economy, and assuming a floating exchange rate regime; explain what happens to: i. Aggregate income,Suppose the country of Lilliput exported $145 billion$145 billion worth of goods and imported $423 billion$423 billion worth of goods in the last calendar year. Calculate Lilliput's net exports. $$ billionbillion Lilliput is running neither a trade deficit nor a trade surplus. a trade surplus. a trade deficit.
