Which of the Following Will Occur in a Small Country

question 49

Multiple Choice

Which of the following will occur in a small country with a high marginal propensity to import?

• A) Changes in government spending will cause large changes in the income balance.
• B) A depreciation will cause only small changes in the trade balance.
• C) Changes in government spending will cause large changes in output.
• D) Changes in government spending will cause large changes in the trade balance.
• E) There is no combination of policies that can eliminate the trade deficit.

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Definitions:

Operating Lease

A leasing agreement for short-term use of an asset, where the lessor retains risks and benefits of ownership.

Lessor

The owner of an asset that is leased to another party, referred to as the lessee.

Depreciated Historical Cost

The original cost of an asset minus accumulated depreciation, representing its value over time for accounting purposes.

Residual Value Guarantee

A promise that at the end of a lease, the asset being leased will have a certain value, often used in finance and leasing agreements.