Monetary expansion causes the current account balance to increase in the short run. Discuss. Is the same the case for fiscal expansion?
What will be an ideal response?
Am increase in the money supply leads to an increase in Y and E (output increases and the currency depreciates, respectively). Because of the currency depreciation, domestic goods are now cheaper compared to foreign goods. Exports increase and imports decrease, therefore the CAB increases.
An expansion of fiscal policy actually reduces the CAB: the DD curve is shifted right. Therefore Y rises, but E falls (output rises but the currency appreciates.) Domestic goods are more expensive, and the CAB falls.
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a. the costs are even smaller. b. the costs balance out and there is no harm. c. the costs are the same but the potential gains are much smaller . d. then all nations gain.
Based on the figure above, the firm's marginal product curve slopes upward at levels of output between ________ and the firm's average product curve slopes upward at levels of output between ________
A) 4.0 and 7.0; 4.0 and 7.0 B) 0 and 7.0; 4.0 and 7.0 C) 4.0 and 7.0; 0 and 4.0 D) 0 and 4.0; 0 and 7.0 E) More information is needed to answer the question.