Give 4 examples of situations that would cause the DD-curve to shift to the left
What will be an ideal response?
Correct answers include any situations that involve:
(1 ) an decrease in government spending (e.g., decrease in military spending)
(2 ) an increase in taxes
(3 ) a fall in Investment demand
(4 ) a price increase, which would lower net export demand (assuming E and P stay constant)
(5 ) a fall in foreign prices (assuming E and P stay constant)
(6 ) an autonomous fall in consumption demand (as long as it is not entirely a change in import demand)
(7 ) a shift to demanding more foreign goods at the expense of domestic good demand
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GDP understates the value of output produced by an economy because it
A) includes environmental degradation caused by increased output production. B) includes transactions that do not take place in organized markets, such as home-cooked meals. C) excludes value added from the underground economy, such as tips taken "under the table." D) excludes the value of the wages and benefits of government employees.
Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products. Which of the following is most likely to occur?
A) Mexico and the United States will not trade agricultural products or clothing. B) Mexico will sell clothing to the United States and the United States will sell agricultural products to Mexico. C) Mexico will sell agricultural products to the United States and Mexico will buy clothing from the United States. D) Mexico will sell clothing to the United States but not buy any agricultural products from the United States.