How would you define a DD schedule?
A) the combinations of output and the exchange rate that must hold when the home money market and the foreign exchange market are in equilibrium
B) the combinations of output and the exchange rate that must hold when the output market is in short-run equilibrium
C) factors of production in the long run
D) the aggregate demand in relation to the foreign market value
E) the currency depreciation in relation to the exchange rate
B
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Refer to the above figure. Government policy that moved the economy from A to B would be accomplished by
A) a contractionary fiscal policy combined with an expansionary monetary policy. B) an expansionary fiscal policy combined with a contractionary monetary policy. C) a contractionary policy that would reduce the rate of inflation and would cause workers to remain unemployed longer than they were before. D) raising the minimum wage.
If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is
a. monetizing the debt. b. neutralizing the effects of the deficit. c. correcting the deficit for inflation. d. resisting the effects of the deficit.