Assume That Policy Makers Are Pursuing a Fixed Exchange Rate

question 58

Multiple Choice

Assume that policy makers are pursuing a fixed exchange rate regime. Now suppose a budget is passed that calls for a decrease in government spending. This government spending cut will cause which of the following to occur?

• A) No change in net exports.
• B) No change in output.
• C) An increase in imports.
• D) A decrease in the interest rate.
• E) A decrease in investment.

---

Definitions:

Pizza Producing Technology

The methods and equipment used in the production of pizzas, often incorporating advancements for efficiency and quality.

Marginal Product

The additional output that is generated by employing one more unit of input, such as labor or capital, in the production process.

Optimal Labor Employment

The level at which the addition of one more employee maximizes the organization's net productivity and profit.

Marginal Expenditure

The incremental cost associated with the purchase of an additional unit of a good or service.