0
Add your answer:
Earn +20 pts
Why a cut in government spending has a larger effect under a fixed exchange rate system and perfect capital mobility than in a closed economy?
fixed and floating exchange rates
What is the connection between an increase in government purchases and the trade deficit?
This is a question of the crowding effect of government spending. When the government increases purchases, it will increase the GDP by a multiplier effect, i.e., the change in GDP is the change in G times 1/(1-MPC). In an IS-LM model, the increased GDP will raise the interest rate and discourage the private investment. Such a "crowding out" effect will reduce the GDP increase. On the other hand, the increased interest rate will raise the international demand for domestic currency and, in turn, increase the exchange rate. A higher exchange rate makes the domestic products more expensive and foreign goods cheaper. Therefore, the export will be lowered while the import will be increased. As a result, the trade deficit will be enlarged.
What is the effect of a currency revaluation?
Currency revaluation is the equivalent of currency appreciation, except that it occurs under a fixed exchange rate regime and is mandated by the government.
What best describes the economic effect that results from the government having a budget-surplus?
Overall demand decreases, reducing the incentive for producers to increase production
What best describes the economic effect that results from a government budget surplus?
Overall demand decreases reducing the incentive for producers to increase production
Why a cut in government spending has a larger effect under a fixed exchange rate system and perfect capital mobility than in a closed economy?
fixed and floating exchange rates
What is the connection between an increase in government purchases and the trade deficit?
This is a question of the crowding effect of government spending. When the government increases purchases, it will increase the GDP by a multiplier effect, i.e., the change in GDP is the change in G times 1/(1-MPC). In an IS-LM model, the increased GDP will raise the interest rate and discourage the private investment. Such a "crowding out" effect will reduce the GDP increase. On the other hand, the increased interest rate will raise the international demand for domestic currency and, in turn, increase the exchange rate. A higher exchange rate makes the domestic products more expensive and foreign goods cheaper. Therefore, the export will be lowered while the import will be increased. As a result, the trade deficit will be enlarged.
What is the positive effect of RH bill?
It can lessen the burden of our Government and our economy will be able to increase
How does government involvement effect tourism?
It brings in tourists who stay in hotels and go sightseeing and all this brings in foreign exchange to the country.
What is it called when an aircraft is landing and it keeps alike 'floating' above the Runway before touching down?
An airplane begins its "Flare" once it enters "ground effect. Ground effect is what causes the airplane to float because of an increase in lift(what makes an airplane fly). This increase is caused by induced drag, created by the production of lift.
What is the effect of a currency revaluation?
Currency revaluation is the equivalent of currency appreciation, except that it occurs under a fixed exchange rate regime and is mandated by the government.
Why the government spending multiplier is different form the tax multiplier?
The government spending multiplier is different form the tax multiplier from the top of my head is because the government spending total effect ripples off. That is if government spending increase then the total income increases. When total income increase, consumption increases, when consumption increases total income increases further (as consumption is a factor of total income), and this pattern is carried forward. This is the the multiplier effect, such that an increase in government spending's final impact on income is much bigger than its initial increase. The tax multiplier on the other hand, has a much smaller effect than government spending. This is because tax is only a portion of the consumer income. That is, if there is a tax cut, consumers only save a fractional amount (specifically 1-MPC) of a tax cut. As a result of the smaller boost in spending form ma tax cut, the ripples/multiplier effect of a tax cut is much less than an increase in government spending.
Factor that effect budget?
financial resources,incessant increase in the prices of goods and services,political acceptability of a project,reputation of the government in power,government policy,political and cultural diversity
What deadly effect did the Columbian Exchange have?
Diseases
What is the effect of the medium light travels through on its speed and energy level?
floating
What is the best describes the economic effect that results from the government having a budget surplus?
Overall demand decreases reducing the incentive for producers to increase production
What best describes the economic effect that results from the government having a budget-surplus?
Overall demand decreases, reducing the incentive for producers to increase production
