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:

Opportunity Cost

The denial of potential enhancements from other possibilities once one choice is made.

TV Commercials

Short advertisements broadcasted on television, designed to inform or persuade viewers about products, services, or ideas.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision or choosing to do one thing over another.

Tax Rebate

A refund on taxes when the tax liability is less than the taxes paid.