Consider a Simple Macro Model with Demand-Determined Output

question 84

Multiple Choice

Consider a simple macro model with demand-determined output.Suppose the level of exports decreases unexpectedly by $6 billion.If the government wants to restore the initial equilibrium level of output it could,all other things equal,

• A)increase its purchases by more than $6 billion.
• B)increase its net tax revenues by $6 billion.
• C)increase its net tax revenues by less than $6 billion.
• D)increase its purchases by $6 billion.
• E)decrease its purchases by $6 billion.

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Definitions:

Obligation

A duty or commitment to fulfill a requirement, such as repayment of a debt or adherence to a contract.

End-of-month Payments

Payments made at the end of the billing month, often related to loans, utilities, or subscriptions.

Compounded Monthly

Interest calculation on the principal and any previously earned interest, which is applied once a month.

Withdrawal

The act of removing funds from an account, plan, or deposit.