Author Question: Suppose a country's output is below the policy makers' desired level of output and is experiencing a ... (Read 125 times)

soccerdreamer_17 · **on:** Jun 30, 2018

Suppose a country's output is below the policy makers' desired level of output and is experiencing a trade surplus. Assume that the policy makers' goals are to achieve the desired level of output (i.e., full employment output) and balanced trade. Given this information, what type of exchange rate and/or fiscal policy can be used to achieve simultaneously these two goals? Explain.

What will be an ideal response?

Question 2

Between 1950 and 2004, standards of living in the OECD countries

A) did not change at all.
B) were converging.
C) all increased at the same rate.
D) decreased at the same rate.
E) decreased, but at different rates.

recede · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Y must rise and NX must fall. A depreciation would cause Y to rise but NX would rise even more. In this case, a fiscal expansion would work. Y would rise causing imports to increase and NX to fall.

Answer to Question 2

B