Question 1
Suppose that an increase in the price level of one country drives up prices in other countries. This, in turn, increases the price level in the first country. This process is the
◦ J-curve effect.
◦ trade feedback effect.
◦ price feedback effect.
◦ balance of trade effect.
Question 2
In an open economy,[
C +
I +
G +
EX -
IM] equals
◦ the balance of trade.
◦ aggregate supply.
◦ unplanned inventories.
◦ planned aggregate expenditures.