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Unformatted text preview: 5. Suppose policy makers want to reduce Y and reduce NX. Which of the following policies would most likely achieve this goal? A. a reduction in government spending. B. a decrease in the real exchange rate. C. an increase in taxes and a decrease in the real exchange rate. D. a real appreciation. 6. Which is a correct relationship between a trade balance and savings? A. NX = I - S – T – G. B. NX – (T – G) = I – S. C. NX = S + T – G – I. D. NX = S – I. 7. An increase in domestic demand will have a ____ effect on output in an open economy than in a closed economy, and will have a ____ effect on the trade balance. A. larger, positive. B. larger, negative. C. smaller, positive. D. smaller, negative. 8. Suppose that a nation has enough savings, more than enough to fund its investment (I). Does the nation run a trade deficit or a trade surplus? Explain your argument....
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This note was uploaded on 09/18/2008 for the course ECON 100B taught by Professor Rauch during the Winter '07 term at UCSD.
- Winter '07