When Taking into Account Foreign-Income Repercussions, the Spending Multiplier Is

question 6

Multiple Choice

When taking into account foreign-income repercussions, the spending multiplier is:

• A)smaller because an increase in domestic imports causes current account deficit.
• B)larger because an increase in domestic imports causes foreign income to rise and thus boosts domestic exports.
• C)smaller because an increase in domestic imports lowers the growth in the domestic exports.
• D)larger because an increase in domestic imports causes a surplus in the official settlements balance.

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Definitions:

Coefficient of Variation

A statistical measure of the dispersion of data points in a data series around the mean, used to assess the level of volatility relative to the mean.

Countercyclical

Describes economic policies or activities that move in opposition to the business cycle, aiming to stabilize the economy by reducing fluctuations.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values around the mean.

Capital Cost Allowance (CCA)

A tax deduction in certain jurisdictions for depreciation of property used in a business or for earning income.