Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this candidate's promise
An increase in the government budget surplus will cause U.S. interest rates to fall. The decline in interest rates will increase domestic investment, but it will also cause Americans to look for higher returns abroad, which means that net capital outflow rises rather than falls as promised. To take advantage of these higher returns, Americans will supply more dollars in the foreign-currency exchange market so the dollar will depreciate rather than appreciate as promised.
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Changes in which of the following shifts the aggregate supply curve? i. the price level ii. the money wage rate iii. potential GDP
A) i only B) ii only C) iii only D) ii and iii E) i, ii, and iii
Which of the following would cause a decrease in the supply of milk?
A) an increase the price of a product that producers sell instead of milk B) an increase in the price of cookies (assuming that milk and cookies are complements) C) an increase in the number of firms that produce milk D) a decrease in the price of milk