When an international financial crisis occurs
A) financial lenders protect their investments by pouring money into the ailing country.
B) there are no serious financial effects that last more than a few months.
C) financial flows can slow to a trickle, influencing economic growth.
D) investors sell off bonds and restrict loans as a mechanism to help the country recover.
C
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The government wishes to close an inflationary gap by reducing real GDP by $400 billion. Assuming a tax multiplier of 4 and an income multiplier of 5, which of the following policy prescriptions would reduce the inflationary gap by $400 billion?
a. Decreasing government spending by $400 billion and increasing taxes by $400 billion. b. Decreasing government spending by $160 billion and decreasing taxes by $100 billion. c. Decreasing government spending by $40 billion and decreasing taxes by $40 billion. d. Decreasing government spending by $80 billion and keeping taxes the same. e. Doing absolutely nothing to the economy.
Countries that are unable to produce goods as efficiently as other countries will never be able to trade
a. True b. False Indicate whether the statement is true or false