Author Question: Suppose the rest of the world experiences an expansion that causes an increase in foreign income ... (Read 33 times)

tsand2 · **on:** Jun 30, 2018

Suppose the rest of the world experiences an expansion that causes an increase in foreign income (Y). From the domestic economy's perspective, this increase in foreign income will cause which of the following as the domestic economy adjusts to the rise in Y?

A) an increase in domestic income
B) an increase in imports
C) an increase in net exports
D) all of the above
E) both A and C

Question 2

For this question, assume that the economy is initially operating at the natural level of output. A reduction in taxes will cause

A) an increase in the real wage in the medium run.
B) a reduction in the real wage in the medium run.
C) no change in the nominal wage in the medium run.
D) ambiguous effects on the real wage in the medium run.
E) none of the above