In Considering the Net Effect of Expansionary Fiscal Policy on the Trade

question 91

Multiple Choice

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

• A)income effect offsets the price effect.
• B)price effect offsets the income effect.
• C)income and price effects work in the same direction, so the trade deficit is decreased.
• D)income and price effects work in the same direction, so the trade deficit is increased.

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Definitions:

Rent-seeking Activity

Actions by individuals or firms to increase their own wealth without creating new wealth or value for society.

Taxing

The act of imposing charges on individuals or entities by the government in order to finance public spending and services.

Benefits

The advantages or positive outcomes that accrue from actions, activities, or projects, often used in evaluating decisions.

Shortsightedness Effect

The tendency of policy makers or individuals to prioritize immediate benefits or gains over long-term interests and consequences, often leading to suboptimal outcomes.