Contractionary fiscal policy may have a larger effect in reducing aggregate demand in an open economy than a closed economy

Refer to Figure 15-18 to answer the following questions

a. What quantity will this monopoly produce and what price will it charge? b. Suppose the government decides to regulate this monopoly and imposes a price ceiling of $25. Now what quantity will the monopoly produce and what price will it charge? c. Will every consumer who is willing to pay the ceiling price of $25 be able to buy the product? Briefly explain.

Imagine that the economy is at a point that is above both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?

A) The economy will stay at this level in the short run. B) The exchange rate will first drop to a point on the AA schedule. C) The exchange rate will first move to a point on the DD schedule. D) The AA-DD equilibrium will shift to the position of the economy. E) The exchange rate will first move left to a position on the AA schedule.