Suppose Policy Makers Want to Reduce Y and NX

question 68

Multiple Choice

Suppose policy makers want to reduce Y and NX. Which of the following policies would most likely achieve this?

• A) An increase in taxes and a decrease in the real exchange rate.
• B) An increase in taxes.
• C) A decrease in government spending.
• D) A decrease in the real exchange rate.
• E) A real exchange rate appreciation

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Definitions:

Extinction

In behavioral psychology, the gradual weakening and eventual disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.

Conditioned Stimulus

An initially impartial stimulus which, upon association with an unconditioned stimulus, gradually brings about a conditioned response.

Unconditioned Stimulus

A stimulus that naturally triggers a reflexive response without the need for prior learning.

Stimulus Generalization

A learning process in which the conditioned response is evoked by stimuli that are similar to the conditioned stimulus.