Suppose Policy Makers Want to Reduce Y and Keep NX

question 23

Multiple Choice

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

• A) A decrease in government spending and an increase in the real exchange rate.
• B) Encourage the country's trading partners to implement policies that will decrease foreign income.
• C) A real exchange rate depreciation.
• D) A decrease in government spending.
• E) A real exchange rate appreciation.

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating a firm's surplus beyond the normal profit level.

Price-Searcher Market

A market structure where sellers have the ability to control or influence prices due to a lack of perfect competition.

Fast Food Market

The sector of the food service industry that specializes in food that can be prepared and served quickly.

Market Analysis

The examination of the size, trends, and competition in a particular market, intended to inform business decisions and strategy development.