Expansionary Fiscal Policy in an Open Economy

question 11

Multiple Choice

Expansionary fiscal policy in an open economy

• A)leads to a balance of trade surplus.
• B)decreases America's capital account surplus and the current account deficit by the same amount.
• C)increases both America's capital account surplus and current account deficit by equal amounts.
• D)increases America's capital account surplus more than it increases the current account deficit.

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Definitions:

Positive Incentives

Rewards or benefits that motivate individuals to perform certain actions or behaviors.

Negative Incentives

Penalties or undesirable outcomes that are used to discourage certain behaviors or decisions.

Latent Learning

Learning that occurs without any obvious reinforcement at the time but that is apparent in a later situation.

Drive Reduction

A theory in psychology that explains behavior as driven by the need to reduce internal tensions caused by unmet biological needs.