Author Question: Monetary expansion causes the current account balance to increase in the short run. Discuss. Is the ... (Read 81 times)

sc00by25

  • Hero Member
  • *****
  • Posts: 596
Monetary expansion causes the current account balance to increase in the short run. Discuss. Is the same the case for fiscal expansion?
 
  What will be an ideal response?

Question 2

What is the best explanation for why China and India have received so much international interest and foreign investment?
 
  A) Their large populations
  B) Their geographic location
  C) Their control over natural resources
  D) Government incentives provided to foreign firms



Jordin Calloway

  • Sr. Member
  • ****
  • Posts: 334
Answer to Question 1

Am increase in the money supply leads to an increase in Y and E (output increases and the currency depreciates, respectively). Because of the currency depreciation, domestic goods are now cheaper compared to foreign goods. Exports increase and imports decrease, therefore the CAB increases.
An expansion of fiscal policy actually reduces the CAB: the DD curve is shifted right. Therefore Y rises, but E falls (output rises but the currency appreciates.) Domestic goods are more expensive, and the CAB falls.

Answer to Question 2

A



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

The lipid bilayer is made of phospholipids. They are arranged in a double layer because one of their ends is attracted to water while the other is repelled by water.

Did you know?

When Gabriel Fahrenheit invented the first mercury thermometer, he called "zero degrees" the lowest temperature he was able to attain with a mixture of ice and salt. For the upper point of his scale, he used 96°, which he measured as normal human body temperature (we know it to be 98.6° today because of more accurate thermometers).

Did you know?

Atropine was named after the Greek goddess Atropos, the oldest and ugliest of the three sisters known as the Fates, who controlled the destiny of men.

Did you know?

Though newer “smart” infusion pumps are increasingly becoming more sophisticated, they cannot prevent all programming and administration errors. Health care professionals that use smart infusion pumps must still practice the rights of medication administration and have other professionals double-check all high-risk infusions.

For a complete list of videos, visit our video library