Please answer if your are sure since I\'m doing a test. Please please!! 1. If a
ID: 1145324 • Letter: P
Question
Please answer if your are sure since I'm doing a test. Please please!!
1. If a change in investment spending causes inflation, which fiscal policy would be most appropriate?
Increase personal taxes
Decrease personal taxes
Increase transfer payments
Increase government spending
Increase funding for banks
2. The table above lists the number of acres it takes to produce one cargo container of oranges and one cargo container of bananas in the united states and costa Rica. Which of the following is true?
The U.S has comparative advantage in producing oranges
Costa Rica has comparative advantage in producing oranges
The U.S has comparative advantage in producing bananas
Costa Rica has comparative advantage in producing banana
I and III only
I and IV only
II and III only
II and IV only
I, III, and IV only
3. Suppose interest rates rise in the United States, but they don’t rise in other nations. As a result of this change
The U.S. dollar appreciates
The U.S. dollar depreciates
U.S. exports will increase
U.S. imports will decrease
Price levels in the unites states will increase
4. Suppose interest rates rise in the United States, but they don’t rise in other nations, what is the impact of flow of the financial capital, the value of the dollar, and U.S. net export (based on the changing value of the dollar)?
Capital flow/ Value of the U.S. dollar/ Net exports
Inflow/ Appreciate/ Increase
Inflow/ Appreciate/ Decrease
Inflow/ Depreciates/ Increase
Outflow/ Depreciates/ Increase
Outflow/ Appreciates/ Decrease
5. If the supply of the Czech Republic koruna decreases relative to the U.S dollar, then
The U.S. dollar will appreciate
The U.S. dollar will depreciate
The quantity demanded of Czech koruna would increase
The quantity demanded of U.S. dollars would increase
The Czech koruna will depreciate
Oranges Bananas United Statesl4 acres 5 acres Costa Rica 3 acres 2 acresExplanation / Answer
Answer : 1) Option a is correct.
Consumer's buying power decrease if personal tax rate increase and which tend to decrease the aggregate demand . As aggregate demand decreases, the inflation rate decreases automatically.
2) Option a is correct.
According to the given table, in case of orange production the U.S. takes 4 ares where Costa Rica takes 3 acres, i.e., oranges are cheaper in U.S. and costlier in Costa Rica. Therefore, for Orange production the U.S. has comparative advantage.
Similarly, bananas are cheaper in U.S. and costlier in Costa Rica as U.S. takes 5 acres and Costa Rica takes 2 acres in producing bananas. Therefore, for banana production the U.S. has comparative advantage.
3) Option a is correct. The higher interest rate attract more investment, i.e., capital inflow. This appreciate the value of currency in that country. According to the question, the U.S. has higher interest rate. Therefore, dollar appreciates in U.S.
4) Option b is correct.
Higher interest rate in U.S. attract more capital to inflow which appreciate the dollar and decrease the net exports but increase the imports.