Bundle: Managerial Economics, 4th + Mindtap Economics, 1 Term (6 Months) Access Code
4th Edition
ISBN: 9781305618572
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 6, Problem 7MC
To determine
The relationship between complementary goods.
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In a small open economy with a floating exchange rate, the supply of real money balances is fixed and a rise in government spending ______
Group of answer choices
Raises the interest rate so that net exports must fall to maintain equilibrium in the goods market.
Cannot change the interest rate so that net exports must fall to maintain equilibrium in the goods market.
Cannot change the interest rate so income must rise to maintain equilibrium in the money market
Raises the interest rate, so that income must rise to maintain equilibrium in the money market.
Suppose a country with a fixed exchange rate decides to implement a devaluation of its currency and commits to maintaining the new fixed parity. This implies (A) ______________ in the demand for its goods and a monetary (B) _______________.
Group of answer choices
(A) expansion ; (B) contraction
(A) contraction ; (B) expansion
(A) expansion ; (B) expansion
(A) contraction ; (B) contraction
Assume a small open country under fixed exchanges rate and full capital mobility. Prices are fixed in the short run and equilibrium is given initially at point A. An exogenous increase in public spending shifts the IS curve to IS'. Which of the following statements is true?
Group of answer choices
A new equilibrium is reached at point B.
The TR curve will shift down until it passes through point B.
A new equilibrium is reached at point C.
Point B can only be reached in the absence of capital mobility.
Chapter 6 Solutions
Bundle: Managerial Economics, 4th + Mindtap Economics, 1 Term (6 Months) Access Code
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