In the Short Run, with Prices Fixed, How Would an Increase

question 1

Multiple Choice

In the short run, with prices fixed, how would an increase in government spending affect the DD-AA equilibrium?

• A) It will increase output and appreciate the currency.
• B) It will increase output and depreciate the currency.
• C) It will decrease output and appreciate the currency.
• D) It will decrease output and depreciate the currency.
• E) It will increase output and have no effect on the currency.

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Definitions:

Risk Premium

The additional return expected by an investor for taking on a higher level of risk as compared to risk-free investments.

Risky Assets

Investments that carry a high degree of uncertainty with the potential for both high losses and high returns.

Reward

A benefit or return typically received after an investment or as a recognition of achievements or completion of tasks.

Insider Trading

The illegal buying or selling of a publicly-traded company's stock by someone who has non-public, material information about that stock.