From an Initial Equilibrium Position for the Economy (At the Three-Way

question 5

Multiple Choice

From an initial equilibrium position for the economy (at the three-way intersection of the IS, LM, and BP curves) , and if the LM curve is steeper than the BP curve, expansionary fiscal policy initially leads to a balance-of-payments (BOP) __________, and expansionary monetary policy __________.

• A) deficit; also initially leads to a BOP deficit
• B) deficit; initially leads to a BOP surplus
• C) surplus; initially leads to a BOP deficit
• D) surplus; also initially leads to a BOP surplus

Recognize the representation and outcomes of binding price floors and ceilings in supply and demand models.

Analyze the impact of subsidies and government interventions on international markets and domestic producers.

Evaluate reasons behind the implementation of price controls and their political and economic implications.

Identify examples of black market transactions resulting from price controls.

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