Refer to the diagram. Assume that G and T 1 are the relevant curves, the economy is currently at A, and the full-employment GDP is B. This economy has a(n):

An increase in government expenditure on goods and services

A) increases aggregate demand. B) increases the aggregate quantity demanded. C) decreases the aggregate quantity demanded. D) decreases aggregate demand.

In the foreign exchange market, the quantity supplied of dollars is 300 whereas the quantity demanded of dollars is 500 results in a:

A) balance of payments surplus of 200. B) balance of payments deficit of 200. C) balance of payments surplus of -200. D) balance of payments deficit of -200.