8. For this question, assume that equilibrium output is determined in the zZ - Y diagram. Further assume that policy makers' goals are (1) to achieve balanced trade (i.e. NX =0); and (2) to achieve a target level of output, say Y'. Now, suppose that the initial level of equilibrium output is equal to Y' (ie.,Y = Y") and that a trade deficit exists at this initial level of output. Which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A. a reduction in government spending B. convince the country's trading partners to pursue policies what will cause an increase in foreign income (Y) C. a reduction in taxes D. a simultancous increase in government spending and reduction in the real exchange rate E. none of the above

8. For this question, assume that equilibrium output is determined in the zZ - Y diagram. Further assume that policy makers' goals are (1) to achieve balanced trade (i.e. NX =0); and (2) to achieve a target level of output, say Y'. Now, suppose that the initial level of equilibrium output is equal to Y' (ie.,Y = Y") and that a trade deficit exists at this initial level of output. Which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A. a reduction in government spending B. convince the country's trading partners to pursue policies what will cause an increase in foreign income (Y) C. a reduction in taxes D. a simultancous increase in government spending and reduction in the real exchange rate E. none of the above

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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14. For this question, assume that equilibrium output is determined in the zZ - Y diagram. Further assume that policy makers' goals are (1) to achieve balanced trade (i.e., NX = 0); and (2) to achieve a target level of output, say Y". Now, suppose that the initial level of equilibrium output is equal to Y' (i.e., Y = Y") and that a trade deficit exists at this initial level of output. Which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A) a reduction in government spending B) convince the country's trading partners to pursue policies that will cause an increase in foreign income (Y *) C) a reduction in the real exchange rate D) a reduction in taxes E) a simultaneous increase in government spending and reduction in the real exchange rate F) none of the above
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