Refer to Figure 16-10. In the graph above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C?
A) buy Treasury bills B) increase government spending
C) increase income taxes D) decrease the discount rate
Question 2
Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?
A) Most countries do not impose barriers to trade.
B) Some goods and services produced in any country are not traded internationally.
C) Consumer preferences for goods and services across countries are very similar.
D) Most countries have free markets with little, if any, government regulation.
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